Gold Struggles as It Heads into Weekend

In spite of early-day trading optimism, gold turned negative after noontime, even as a weaker U.S. dollar gave it some underpinning and is off about $4.00 at 4PM in New York.

The softer dollar is due to unexpected weakness in consumer retail spending, data that was released this morning. Retail spending had been forecast to rise by 0.40%; rather it was flat. Additionally, producer prices fell.

Both reports give wings to the idea that it will be next to impossible for the Federal Reserve to raise rates this year unless there is some dramatic development we cannot now foresee. (The Fed is due to release the minutes from the July FOMC meeting this coming Wednesday, August 17.) a steady interest rate at current low levels would suppress dollar gains.

Equities in the U.S. did not overreact to the retail spending news, but slipped a bit lower as we head into what promises to be a hot summer weekend in the northeast. That tells us some people squared up positions early in the day then fled the heat of New York.

The Dow was off not quite 0.20%, the S&P by 0.10% and the resilient NASDAQ up a whisker. Europe, too, was mixed too lower while Asia, which did not have time to react to the U.S. data was up across the board with Shanghai leading the chase.

Crude oil touched $44.50 per barrel but then fell back considerably, dipping below $44.00. As the afternoon wore on it bounced back up nicely to an approximate 2.70% gain. That wasn’t quite enough to sway equities much, possibly because much of today’s oil strength was from dollar weakness.

But we have to remember that yesterday we saw a triple all-time high in the three major New York indexes, so a bit of exhaustion, especially in a Friday is not a complete surprise.

The retail print should not have been much of a surprise, either. The closing of 100 stores by Macy’s is reflective of an uncertain consumer who wants either high-end or middle-low-to-low end merchandise. Macy’s is in between. We would love to see an interactive map of closings and income + unemployment by stores in their areas of dominant influence.

Everything has to circle back around to the Federal Reserve’s next move now that this new data is in release.

"If you look at Fed funds expectations [before] those releases, December was a coin-flip. Now a rate hike isn't priced in until May, said, Jon Adams, senior investment strategist at BMO Global Asset Management.

Maybe by then we’ll see some fiscal policies from a new Congress and president that will expand the economy the way it should have expanded six years ago.

Summer’s almost gone.

Wishing you as always, good trading,