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Can Gold Continue to Rally?

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What’s in Today’s Report:

  • Market Multiple Price Chart: S&P 500
  • A Quick Note on Coronavirus Data
  • Can Gold Continue Higher? Yes, Here’s Why

International markets were mixed o/n and U.S. stock futures are little changed in choppy trade as investors continue to look for clarity on infection and death statistics related to COVID-19 while digesting a volatile start to the week.

Economically, Japanese Machine Orders rose 2.3% in Feb. vs. (E) -2.7, underscoring the resilience of the manufacturing sector as the coronavirus outbreak began to accelerate.

There are no economic reports due to be released today but the Treasury will hold a 30-Yr Bond Auction at 1:00 p.m. ET and then the Minutes of the most recent FOMC Meeting will be released at 2:00 p.m. ET.

With investors still primarily focused on any developments regarding the coronavirus pandemic, it is unlikely that those two catalysts will move markets today however if there are any surprises, we could see a reaction as volatility remains elevated amid an uncertain macro backdrop.

Was That The Bottom? If Not, How Long Can the Bounce Last?

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What’s in Today’s Report:

  • Was That The Bottom?  If Not, How Long Can The Bounce Last?
  • Gold Update – Can The Rally Continue?
  • March Flash PMIs:  Not As Bad As Feared (Although Still Bad)

Futures were modestly higher all morning but have since turned slightly negative, as the White House and Senate agreed on the stimulus bill and it is expected to be signed into law in the next day or so.

The details of the stimulus bill met expectations so much of this was priced in yesterday, but importantly, the bill is large enough to provide a limited “bridge” to the economy.

Economic data was sparse and the only notable report was the German Ifo Survey, where Business Expectations missed estimates, falling to 79.7 vs. (E) 82.0.

Today there is one traditionally notable economic report, Durable Goods (E: -0.6%), but it’s a February report so the market will largely ignore it.  We also get FHFA House Price Index (E: 0.4%) but that won’t move markets, either.

So, focus will remain on Washington to ensure there are no last minute hiccups on the stimulus bill, and on the virus count, where there are some potential rays of hope (more on that tomorrow).

Commodities Update and Powell Preview

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What’s in Today’s Report:

  • Powell Testimony Preview
  • Commodity Bears and a Gold Bull

Stock futures and most international equity markets are higher today as the spread of the coronavirus reportedly slowed to a two week low in China and investors looked ahead to Powell’s testimony before Congress today.

Economically, the NFIB Small Business Optimism Index rose 1.6 points to 104.3 vs. (E) 103.2 in January underscoring continued positive sentiment among U.S. business owners.

Today, there is just one economic report: JOLTS (E: 6.775M) which will leave investors primarily focused on Powell’s Testimony before the House Financial Services Committee at 10:00 a.m. ET and it will be important for the markets that he remains decidedly dovish with his commentary.

In addition to Powell, both Quarles (12:15 p.m. ET) and Bullard (1:30 p.m. ET) will speak in the early afternoon, Wall Street time.

Lastly, there is a 3-Yr Note Auction at 1:00 p.m. today and the results could affect the yield curve (specifically the 10s-2s) and as has been the case over the last 9 months, any significant moves in the curve could impact equity markets.

Tyler Richey, Co-editor at Sevens Report Research Quoted in MarketWatch on February 6th, 2020

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“While stocks are hitting new all-time highs and bond yields are moving…investors remain wary of the broader macroeconomic backdrop for the financial markets, and gold is still a favorite safe haven destination…” said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in MarketWatch in

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“The pace of the drop in copper prices is a growing concern as futures are down more than 10% from the January highs and beginning to suggest that there…” analysts at Sevens Report Research wrote in Tuesday’s newsletter. Click here to read the full article.

Gold Bullions

Sevens Report co-editor Tyler Richey Quoted in MarketWatch on October 24, 2019

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The “dismal durable goods number is helping boost gold prices as recession fears are again on the rise,” said Tyler Richey, co-editor at Sevens Report Research…Click here to read the full article.

Gold Bar

Tyler Richey Quoted in MarketWatch on September 24, 2019

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“Gold has fallen into a broad, near-term trading range between support at $1,500 and resistance above at $1,560. There are multiple influences on gold right now that could trigger…” said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Gold Bars

Tom Essaye Quoted in CNBC on August 7, 2019

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“Although gold futures remain near-term overbought, momentum is decidedly higher. Fundamentally, the sharp downtrends in bond yields…” said Tom Essaye, founder of the Sevens Report, in a note.

Weighing Gold

 

Tom Essaye Quoted in Fortunly

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“Although gold futures remain near-term overbought, momentum is decidedly higher. Fundamentally, the sharp downtrends in bond yields firmly support the bullish case for gold.” said Tom Essaye. Click here to read the full article.

Gold Bars

Reading the Rate Cut

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What’s in Today’s Report:

  • How the Bond Market Will Tell Us Whether the Fed Rate Cut is Preventative or “Too Late”
  • Key Levels to Watch in Gold Today

Futures are tentatively higher ahead of the Fed this morning as AAPL earnings beat (shares up 4%+), economic data was mixed, and there were no real trade war updates o/n.

Economically, China’s CFLP Manufacturing PMI was slightly better than feared at 49.7 but importantly still below 50 pointing to contraction while EU data remained “Goldilocks” with in-line growth metrics but soft inflation readings.

Today, investors will clearly be keenly focused on the Fed but there are some other catalysts to watch. On the earnings front, GE ($0.12) reports before the bell while QCOM ($0.75) results will be released after the close.

Economically, the first look at July jobs data will hit this morning with the ADP Employment Report (E: 155K) and then Q2 Employment Cost Index (E: 0.7%) will be released shortly after.

Turning to the Fed, the FOMC Announcement will print at 2:00 p.m. ET, (E: -25 bp cut to 2.00-2.25%) and Powell’s Press Conference follows at 2:30 p.m. ET. The market has high expectations for the Fed today and even a mildly hawkish disappointment could trigger significant volatility as valuations remain as stretched as they have been in years.