Gold is mildly defensive following some mixed U.S. economic data. Additionally, the Fed commenced their two-day FOMC meeting today. The policy statement will be released tomorrow at 2:00PM ET.
U.S. durable goods orders tumbled 4.3% in December, unwinding the positive print from November, and then some. November was negatively revised from +2.6%, from +3.5% previously.
The Case-Shiller home price index for 20-cities posted it’s first monthly decline in more than a year, albeit a small one. However, that comes on the heels of yesterday’s big new home sales miss. New home sales dropped 7% in December to 414k, versus a negative revised 445k (was 464k) in November.
January consumer confidence on the other hand beat expectations, rising to 80.7 from a negative revised 77.5 (was 78.1) in December. It was the highest print since August last year. However, that doesn’t quite reconcile with the miss in the University of Michigan reading on consumer confidence for December that came out last week.
While it is widely expected that the Fed will announce an additional $10 bln reduction in asset purchases tomorrow, the latest round of data will likely factor into the FOMC deliberations over the next two days. If they hold asset purchases at $75 bln per month, it could be construed as the Fed blinking; that they are not fully committed to winding down QE. On the other hand, if they do taper further — particularly in light of the terrible December employment data and today’s durable goods print — it may be seen as further acknowledgement of the decline efficacy of QE.
The latter scenario could contribute to the current risk-off environment, providing further support to safe-haven assets like gold. If the Fed holds asset purchases steady, rumblings about the prospects of the Fed having to ‘un-taper’ will intensify. That will in turn lend credence to the ‘QE-ternity’ scenario, which would likely be favorable for gold as well.