By: Treasure Coast Bullion Group -

Gold Edges Lower Weighed on by Gains in the U.S. Dollar

Gold bullion prices edged lower this week, as the dollar gain traction weighing on the price of the yellow metal. Inflation data was in line with expectations, but the softer than expected U.S. retail sales, had economists scrambling to reduce their growth projections. The dollar also gained ground this week against most major currencies, as inflation in Euroland remains soft, allowing U.S. yields to outpace their European counterparts. Larry Kudlow was appointed the chair of the NEC, which could also benefit the U.S. dollar.

U.S. CPI Was In line with Expectations

The U.S. Labor Department reported on Tuesday that U.S. headline CPI rose 0.2% in February. The core CPI which excludes food and energy also increased by 0.2%. There were no revisions to the January gains. The year over year increases showed that CPI increased by 2.2% up from 2.1% year over year previously in January. The core year over year rate was unchanged at 1.8%. Energy costs nearly unchanged in February versus a robust rise of 3.0% in January. The biggest winner was apparel prices which increased by 1.5% following a 1.7% surge in January. Housing costs increased 0.3% versus 0.2%, and the biggest detractor was personal computers where prices dropped 1.2%.

Wholesale Prices Were Also in Line with Expectations

Before prices make it to the consumer level, they are first measured at the wholesale level. There were no surprises revealed by the Department of Labor’s Producer Price Index report. U.S. February PPI increased 0.2% and after removing food and energy, the PPI increased 0.2% as well. There were no revisions to January. The year over year growth rates rose by 2.8% for the headline PPI, from 2.7% year over year in January. The core increased by 2.2% year over year. Sub-components that detracted were food costs which slid another 0.4% from -0.2%. Energy prices declined 0.5% after surging 3.4%, in January.

Import Prices Were Stronger than Expected

Import prices rose more than expected in February, climbing 0.4% compared to expectations of 0.2%. The increase was likely a function of a weaker dollar. Export prices were in line with expectations rising 0.2%. January import prices were revised lower down to 0.8% from the surprising 1% rise. Import prices rose to by 3.5% year over year, compared to the January rise of 3.4%. The decline in export price was also likely a function of a weaker dollar. Excluding petroleum prices increased 0.5%, while food and beverage import increased by 1.1%.

Retail Sales Were Soft

Following a softer than expected retail sales reports, economists immediately reduce their U.S. Q1 growth expectations. The Atlanta Fed model dropped to 1.8% for Q1 down from a high of 3.2% initially expected at the beginning of February. The U.S. Commerce Department reported that U.S. retail sales declined by 0.1 % in February but was up 0.2% excluding automobiles. Expectations were for a rise of 0.1%. The January figure was revised higher to -0.1%. The control group which measures retail sales excluding autos, gas and building materials rose by 0.1% which is not much of a gain. Motor vehicles and parts dropped 0.9% following the 0.9% January drop. The auto sector is under pressure which is weighing on total retail sales. What appears not be captured is the continued surge in e-commerce sales.

Larry Kudlow is Bullish the Dollar

Mid-week, President Trump announced that CNBC economic commentator, Larry Kudlow would become the next director of the National Economic Council. Kudlow is very eloquent and believes in free trade and a strong dollar. This could have been one of the catalysts that elevated the dollar this week and capped gold bar prices.

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Good Investing,

Treasure Coast Bullion Group



