Gold remains firm, underpinned by a softer dollar and lower Treasury rates in the wake of the recent disappointing jobs data. After three consecutive daily gains — and closes above the 50-day moving average — gold's buoyancy is encouraging.
Rates And The Taper
With the 10-year yield once again comfortably below the 3% level (2.85% today), the market seems to think the Fed is unlikely to proceed with further tapering for the time being. There are certainly still many that believe the Fed will continue tapering, despite the weak jobs data, but the former seem to have a higher level of conviction at this point.
Jobs Guidance
As we discussed yesterday, the central bank will almost assuredly revise their unemployment guidance lower to 6% at a minimum, and I wouldn’t be surprised if they pulled it back all the way to 5.5%. The constant moving of the goalpost will deal a further blow to Fed credibility, so I think the mixed signal of revised guidance and further tapering would be too much of a mixed signal.
Retail sales came in at +0.2% in December. Not a great number, but not bad. However, the solid +0.7% print from November got revised back to +0.4%.
Import prices were unchanged in December, on expectations of +0.2%. This remains reflective of ongoing negative price pressures, although export prices beat expectations by rising 0.4%. Nonetheless, there’s still no incentive for the Fed to tighten in any way based on their ‘price stability’ mandate.