KITCO NEWS/Todd ‘Bubba’ Horwitz

Gold steadies near 1-month peak as recession risks rise

April 14, 2020

gold chartGold printed a new high overnight and has pulled back to Monday’s levels. The high in the June futures was $1,785 Monday night around 11 p.m. EDT. Gold since has pulled back, trading as low as $1,758. Our first target of $1,790-$1,800 in the June futures is in play, which includes a run over $1,800.

Silver and platinum are charging higher this morning, with July silver futures trading at $16.25, around the high of the overnight trade. July platinum is breaking out with July futures trading $791 on the way to $800. Silver and platinum remain strong and could reach our targets today. The metals all look strong and are showing no sign of weakness. The patterns are powerful, and we see no issue in reaching our first objectives. Things can change at a moment’s notice, but based on what we can see now, we expect the rally across the board to continue. We remain long and look for new highs to continue.”

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CNBC/Elliot Smith

The ‘wind is very likely in gold’s sails’ as it hits a seven-year high

April 14, 2020

on a boat at sunset“Gold prices surged to seven-year highs on Tuesday as rising fears over the scale of the impending economic downturn continue to drive investors away from risk. Spot gold climbed 1.5% to surpass $1,739 per troy ounce (/oz) during afternoon trade in Europe, its highest point since October 2012. The precious metal has now recaptured all of the ground it lost during the initial broad market meltdown as the coronavirus pandemic spread rapidly last month. This latest resurgence, according to AJ Bell Investment Director Russ Mould, could perhaps ‘lay the groundwork for a return to the all-time high of $1,900 reached in autumn 2011.’

Gold tends to benefit from stimulus measures by central banks, which have been abundant in recent weeks as monetary policymakers scramble to cushion the economic blow from prolonged lockdowns around the world. ‘I think it’s important to say now that the wind is very likely in gold’s sails,’ Rick Rule, president and CEO of Sprott, said, suggesting that the macro factors strongly favor gold … A second factor driving prices, Rule told investors, was the increasing U.S. federal debt burden.”

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BLOOMBERG/Eric Martin

IMF Sees Great Lockdown Recession as Worst Since Depression

April 14, 2020

deep global recession chart“The International Monetary Fund predicted the ‘Great Lockdown’ recession would be the steepest in almost a century and warned the world economy’s contraction and recovery would be worse than anticipated if the coronavirus lingers or returns. In its first World Economic Outlook report since the spread of the coronavirus and subsequent freezing of major economies, the IMF estimated that global gross domestic product will shrink 3% this year.

That compares to a January projection of 3.3% expansion and would likely mark the deepest dive since the Great Depression. It would also dwarf the 0.1% contraction of 2009 amid the financial crisis. While the fund anticipated growth of 5.8% next year, which would be the strongest in records dating back to 1980, it cautioned risks are tilted to the downside. Much depends on the longevity of the pandemic, its effect on activity and related stresses in financial and commodity markets, it said.”

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MARKET WATCH/Raymond Scheppach

States are facing a fiscal crisis as brutal as that of the Great Recession

April 14, 2020

masked helper“When former governors Ronald Reagan, Bill Clinton and George W. Bush later became president and had to work with the U.S Congress, they wished they still had the line-item veto powers they had as governors, which allowed them to cut individual items in the budget. Today, as governors continue to provide leadership on the coronavirus crisis they’re about to confront a second crisis, as their state’s fiscal positions will rapidly deteriorate. In my view, it will be as bad as the Great Recession and its aftermath. The magnitude of the crisis that governors and their states will have to face is starting to emerge. And that crisis will affect states’ abilities to do everything from paying teachers to paving roads to providing social services.

Total state spending in 2019 was about $2.1 trillion. In national summary figures, the largest state program is Medicaid, which is about 28.9% of total spending, substantially above the 19.5% for elementary and secondary education and the 10.1% for higher education. The other major spending is for transportation, which is about 8.1%. The remaining 33.4% is for a catch-all category of smaller programs like the environment and economic development. On the revenue side of the equation, which is also about $2.1 trillion, the three major taxes on sales, personal income and corporate income make up 40.8% of the total. Special fees and other taxes represent 28.5%. The federal government, through grants and contracts, contributes 30.7%. There are five key components in understanding the seriousness of the challenge to states and their governors. They reflect the complex interplay between the federal and state levels of government, commercial activity and a state’s need for money to operate and provide services … 1. Rainy day funds will quickly evaporate. 2. Revenues will collapse. 3. Medicaid spending will explode. 4. Governors will cut spending and increase taxes. 5. Federal action will be required.”

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THE WALL STREET JOURNAL/Eric Morath, Harriet Torry and Gwynn Guilford

A Second Round of Coronavirus Layoffs Has Begun. No One Is Safe.

April 14, 2020

“The first people to lose their jobs worked at restaurants, malls, hotels and other places that closed to contain the coronavirus pandemic. Higher skilled work, which often didn’t require personal contact, seemed more secure.  That’s not how it’s turning out. A second wave of job loss is hitting those who thought they were safe. Businesses that set up employees to work from home are laying them off as sales plummet. Corporate lawyers are seeing jobs dry up. Government workers are being furloughed as state and city budgets are squeezed. And health-care workers not involved in fighting the pandemic are suffering.

The longer shutdowns continue, the bigger this second wave could become, risking a repeat of the deep and prolonged labor downturn that accompanied the 2007-09 recession. The consensus of 57 economists surveyed this month by The Wall Street Journal is that 14.4 million jobs will be lost in the coming months, and the unemployment rate will rise to a 13% in June, from a 50-year low of 3.5% in February. Already nearly 17 million Americans have sought unemployment benefits in the past three weeks, dwarfing any period of layoffs recorded since World War II. Gregory Daco, chief economist of Oxford Economics, projects 27.9 million jobs will be lost, and industries beyond those ordered to close will account for 8 to 10 million, a level of job destruction on a par with the 2007-09 recession.”

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THE NEW YORK TIMES/Peter Eavis and Matt Phillips

How Bad Will the Economy Get? Companies Will Provide Clues

April 14, 2020

airlines“The coronavirus pandemic has pushed the economy into a slowdown of unknown severity. It could be a long, drawn-out recession, or a sharp dip followed by a swift recovery. The stock market, which has soared 23% from its low, is signaling that many investors expect a quick rebound. But that optimism will be tested over the coming weeks when large companies report their quarterly financial results for the first three months of the year and predict the pandemic’s effect on their business. ‘Earnings season,’ as it’s known on Wall Street, usually fascinates only professional investors. And corporate executives, always reluctant to discuss problems, may be even less forthcoming about them now. But with millions of jobs on the line and businesses shuttering every day, this deluge of company information, and any light it sheds, will take on a new importance.

Investors are already anticipating several epicenters of economic pain. Oil companies, airlines, hotels, restaurants, retailers and automakers will report steep losses and issue forecasts for the coming months. Ford Motor, for example, said on Monday that it would lose $600 million in the first quarter — not counting some expenses like interest and taxes — down from a $2.4 billion profit in the first three months of 2019 … If earnings disappoint investors and management’s forecasts are worse than expected or vague, share prices could plunge back toward their recent lows. That would add to the gloom about the economy and cast doubts on the government’s ability to revive the economy

If bank executives fear that a recession will make it harder for borrowers to pay back loans, they will not lend as much money in the coming months, which would, in turn, further weaken the economy.”

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