Gold is showing strength ahead of the two day Fed meeting, plus a look at silver and miners as inflation remains strong.
Gold
January 25 (King World News) – Graddhy out of Sweden: Gold is showing strength here, making a new high this late in the daily cycle (day 27) and with Fed FOMC tomorrow. Fed manages expectations/behaviour, they do not tell what they actually plan to do. Can this strength in Gold mean that Fed is about to reverse stance already?
Looking at larger time frame cycles, this week ought to be the end of the road for US dollar. That might be the reason why Gold is showing strength here this late in the daily cycle…
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Silver & Gold
Graddhy out of Sweden: Been posting on many mega backtests for leading, precious metal producers for many months now, here are a few of them. As said all long, these big picture patterns should not be over-looked. Still holding their mega backtests. Ought to be good clues for direction.
Pan American Silver Holding (BLUE LINE)
Inflation Remains Strong
Peter Boockvar: If you have a microscope, home price inflation moderated ever so slightly in November according to S&P CoreLogic. Their home price index saw an 18.8% y/o/y increase vs 19% in October, and it’s the 3rd month in a row of modest deceleration.
House Prices Continue To Inflate
The m/o/m gain for the 20 city index was also up 1.2%.
A 32% increase in the Phoenix area led the way, followed by Tampa, Miami, Las Vegas and Dallas. DC, Minneapolis, Chicago, Boston and NY saw the slowest gains in the low teens.
Highest Inflation Rate
Bottom line, the highest inflation rates seen happens to be in the biggest ticket item of them all, housing. It sure is great for those that own. But, thanks to zero rates, the Fed has managed to lay again the tinder of the mid 2000’s aggressive price increases and thus has made homeownership more unaffordable for many individuals and families again.
The January Conference Board consumer confidence index fell 1.4 pts m/o/m to 113.8 but that was above the estimate of 111.2.
The two main components were mixed as the Present Situation rose 3.4 pts while Expectations fell almost 5 pts. One year inflation expectations fell one tenth to 6.8%. For perspective, over the past 5 years this has averaged 5.3%. It’s peak was 7.7% in May 2008 and was 7.3% in November. So still elevated but good to see it off the boil.
The answers to the labor market questions were mixed as those that said jobs were Plentiful and Hard to Get both slipped with ‘not so plentiful’ up. Both employment and incomes expectations were lower with the latter at the lowest since May 2021 which is surprising but maybe people are comparing their wage gains with what they see on inflation.
Spending intentions improved with plans to buy an auto, a home and/or a major appliance all up and we have to wonder whether people are trying to lock in current interest rates as these are of course all big ticket items where many finance the purchase of them.
Bottom Line
Bottom line, the current level of confidence is about the middle range of where it was in February 2020 and where it bottomed in April 2020. Stretching out more, the 113.8 print compares with the 5 yr average of 118.5. The Conference Board said:
“Concerns about the pandemic increased slightly, amid the ongoing omicron surge. Looking ahead, both confidence and consumer spending may continue to be challenged by rising prices and the ongoing pandemic.”
Consumer confidence numbers are never market moving but it’s clear that higher inflation and lower real wages have been a drag and is directly impacting economic activity.
Lastly, the January Richmond manufacturing index fell to 8 from 16 and that was below the estimate of 14.
New orders, backlogs, and inventories all fell. Supplier lead times jumped as did both prices paid and received which rose to record highs dating back to 1997.
A Wee Bit More Transitory Inflation As
“Prices Paid” Hits All-Time Record!
“Prices Received” Also Hits All-Time Record!
2nd Highest On Record
Wages were up too to the 2nd highest on record while employment fell as “firms continued to report challenges finding the skills that they need.” Capital spending plans were mixed.
Bottom line, this number follows the flat reading from NY and better one from Philly. I think we’re pretty clear on the current state of supply challenges, cost pressures and inventory issues but what happens in coming months and quarters is really tough to forecast. While inventories in many places need to normalize, it’s possible that due to over ordering that others might have too much.
With Christmas over and being almost past the Chinese new year, how will supply chains and transportation costs settle out? On the flip side, what’s consumer demand going to look at as while wages are going up, will they keep up with inflation and to what extent will the fiscal hangover hurt and savings rates get draw down?
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