Gold is modestly higher as the dollar continues to consolidate recent gains and stocks turn defensive. Outflows from gold indexed ETPs continues as well, but physical buying now seems to be counteracting those sales.
The EUR/CHF rate remains defensive just above the 1.20 floor established by the Swiss National Bank, as the FX market seems inclined to test the SNB’s resolve in the days leading up to the Swiss gold referendum on 30-Nov. SNB President Jordan reiterated the central bank’s opposition to Constitutionally mandated gold repatriation and purchases.
Jordan warned that the cap for the franc is essential for preventing deflation and will remain in place for the foreseeable future. However, if the gold initiative passes, the SNB is going to have to go all-BoJ in order to defend that cap.
It is absolutely startling that deflation remains the big concern among global central bankers, even after they created trillion and trillions in liquidity over the past several years. And while I’ve reported this in the past, it may still be surprising to some that the SNB’s ‘balance sheet expansion’ as been one the most prolific on a percentage basis.
The dollar has been consolidating since last week’s NFP disappointment, which pushed tightening expectations further into the future. Yields dropped accordingly and have been hovering around 2.30% for the ten-year note. October retail sales is the next significant U.S. data. The report comes out on Friday and expectations are for a tepid +0.2% print.
Additionally, the polar vortex is back with a vengeance, with record cold temperatures covering a large swath of the upper mid-west. The temp here in Denver this morning was 3° and the high is supposed to be 8°. The previous record for this day was 9° in 1916.
You may recall that last year’s dismal Q4 GDP data were blamed on the fact that it was cold and snowy in the winter-time. I find myself wondering when those excuses will begin anew.