Weak US Data Drives Dollar Down And Gold Up

The dollar turned lower after the Conference Board reported that consumer confidence slumped to 95.2 in April, well below a forecast of 102.5 and down significantly from 101.4 in March.

Additionally, inflation-rate expectations were the lowest since February 2007.

The report said deterioration in confidence was due to the recent lackluster performance in employment and worry about short-term outlooks.

Investors are also looking ahead to Wednesday’s FOMC rate statement for any fresh signals on the timing of a rate hike by the Fed.

Disappointing reports in the first quarter of 2015 on employment, retail sales and industrial production have prompted investors to scale back expectations for higher interest rates.

Yet early Tuesday contradicting data showed that U.S. home prices rose in February from a year earlier. That itself was contradicted when it was revealed that home ownership levels were at their lowest since 1990.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last down 0.68% at 96.23.

Gold could be the continued beneficiary of low interest rates since the precious metal has no yield, per se. Non-interest-bearing investments prosper when interest rates are low and suffer when interest rates go higher.

What the Fed says tomorrow isn’t half as important as how they say it. We believe they will still identify the long, cold winter in the U.S. as crucial to the current stall in the economy. They might also begin to consider the impact of the drought in California.

U.S. equities markets were modestly higher today, although not enough to hinder the upward movement in the price of gold.

While there was a small boost in haven demand because of a shipping-lane contretemps in the Straits of Hormuz, that confrontation seems to be simmering down and the haven effect is waning.

The energy sector was also up on the same Gulf region news. That tiny uptick also seems to be under pressure as the situation resolves.

Let’s remind ourselves that regardless of today’s temporal issues, tomorrow’s comments from the FOMC meeting should be paramount.

While we’re waiting, our advice is to buckle up.

Wishing you as always, good trading,