REUTERS/Brijesh Patel

Gold drops as dollar rises, investors book profits

April 15, 2020

“Gold slipped on Wednesday as the dollar strengthened and some investors locked in profits from a surge in prices, but mounting fears of a global recession kept bullion firm above $1,700 per ounce. Spot gold was down 0.7% at $1,714.88 per ounce. In the previous session, it jumped as much as 1.9% to its highest level since November 2012 at $1,746.50.  U.S. gold futures dropped 1.4% to $1,744.10. ‘It’s a small correction. We’re seeing some profit-taking … Also, a stronger dollar is not helping gold prices,’ UBS analyst Giovanni Staunovo said.

‘However, we still believe there is some upside from here. So, we now target the move up to $1,800 an ounce and essentially believe aggressive monetary stimulus by central banks, such as the U.S. Federal Reserve, will keep real assets like gold supported.’ Gold tends to benefit from widespread stimulus measures from central banks, as it is often seen as a hedge against inflation and currency debasement …The Fed last week announced a broad, $2.3 trillion effort to bolster local governments and small and mid-sized businesses hit by coronavirus outbreak. Gold prices have risen nearly 9%, or more than $130, so far this month after many countries have extended lockdowns and central banks around the world have rolled out a flood of fiscal and monetary measures.”

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CNBC/Keris Lahiff

Gold could reach $2,000 this year, but it’s not a buy until this level, analyst says

April 15, 2020

gold chartGold is on a tear this month. The precious metal is up 11% in April, its best month since 2011, and has reached levels not seen in nearly eight years. Bill Baruch, president of Blue Line Capital, says its technical setup suggests even more upside. ‘I love gold, and you need some in your portfolio,’ Baruch said Tuesday on CNBC. The charts show ‘an inverse head and shoulders pattern — a beautiful technical pattern that played out through March into April and we’re now breaking out above. It broke out above it.’

An inverse head and shoulders pattern forms when an asset makes a low, a lower low, and a higher low – it implies a bottoming and change in trend direction. ‘I do believe gold over the rest of this year will get to $2,000. I think it should be in your portfolio. The massive liquidity injected by the Federal Reserve, it’s going to support asset prices like equities, but it’s also going to support gold,’ said Baruch … A move to $2,000 represents 13% upside and would take gold to record highs.”

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MARKET WATCH/Jeffry Bartash

Retail sales plunge a record 8.7% in March as coronavirus crisis freezes U.S. economy

April 15, 2020

retail sales chart“The onset of the coronavirus pandemic triggered a record 8.7% slump sales at U.S. retailers in March as large swaths of the economy shut down — and there’s no light at the end of the tunnel. Sales fell for the second month in a row in what’s likely to be a prolonged period of agony for an industry that still relies heavily on foot traffic and customers bunched together when they shop. It’s unclear when states will allow stores to fully reopen, and even then, there’s no guarantee Americans will return to them in great numbers.

The plunge in sales last month was more than double the biggest one-month decline during the 2007-2009 Great Recession. Sales sank 27% at auto dealers and 17% at gas stations, two of biggest segments of the retail industry, according to government figures. Fewer people are buying cars with millions of Americans losing their jobs and millions more worrying about their next paycheck. Americans also drove less as an economic shutdown spread across the country, exacerbating already steep price declines caused by a global price war that has cut the cost of crude oil by two-thirds in just a few months. Sales fell a smaller but still crushing 3.1% excluding those categories, but the damage was still unprecedented. Receipts plunged 50% at clothing stores, 26.5% at restaurants and 20% at department stores.”

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YAHOO FINANCE/Emily McCormick and Javier E. David

Stocks fall after grim economic, earnings data

April 15, 2020

2020 stock market crash and rebound amid coronavirus“Stocks fell Wednesday morning after new economic data showed U.S. retail sales and manufacturing output each declined by massive margins in March amid the coronavirus pandemic. Big banks including Goldman Sachs and Bank of America reported steep year on year declines in profitability for the first quarter. Meanwhile, the federal government made progress in helping to provide aid to companies and industries most deeply undercut by the pandemic. The U.S. Treasury announced preliminary agreements to provide at least 10 U.S. airlines with access to billions of dollars in funds to help support the carriers as demand – and revenues – drop off. A new method of counting coronavirus deaths in New York City to include victims who had not been hospitalized sent the region’s death toll soaring on Tuesday. At the state level, coronavirus deaths benchmarked to the previous counting method also rose as of the state’s latest reports, but new hospitalizations declined.

Globally, the number of confirmed COVID-19 cases crossed two million for the first time on Wednesday. While death tolls remain elevated, widespread social distancing measures have mostly showed signs of ‘flattening the curve’ in hot spots across the U.S. Governor Gavin Newsom unveiled his plan Tuesday late afternoon, which outlined the state’s list of considerations for easing social distancing standards without providing a specific timeline.”

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FOX NEWS/Brooke Singman

Fauci says US ‘not there yet’ on reopening economy, May 1st a ‘bit’ too optimistic

April 15, 2020

Dr Fauci“Dr. Anthony Fauci said Tuesday that the U.S. does not have the testing and tracing procedures necessary to safely begin reopening the economy amid the coronavirus crisis, while warning that the White House’s May 1 target may be a ‘bit’ too optimistic. In an interview Tuesday with The Associated Press, Fauci, the director of the National Institute of Allergy and Infectious Disease and a member of the president’s coronavirus task force, underscored the need for critical testing before returning to normal. ‘We have to have something in place that is efficient and that we can rely on, and we’re not there yet,’ Fauci said during his interview with The Associated Press.

Fauci’s comments come as President Trump and others in the administration are weighing how to reopen sectors of the nation’s economy during the pandemic. The White House extended social distancing guidelines through April 30, and has floated the possibility of potentially reopening some areas by May 1. Fauci told the AP that May 1 is ‘a bit overly optimistic’ for many areas of the country, while suggesting that much of the social-distancing rules should occur on a ‘rolling’ basis, rather than all at once … Fauci also warned, yet again, that once restrictions are rolled back and the economy begins to reopen, there are likely to be new outbreaks of COVID-19.”

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BLOOMBERG/John Authers

Gold Still Shines 50 Years After Nixon. Will Netflix?

April 14, 2020

negative real yields are made of gold“The stock market, home of optimists everywhere, is doing very well at present. But gold, where pessimists find a home, is doing even better. In dollars, the shiny metal closed on Tuesday at its highest since 2012. The all-time high is in sight, and it has gained more than 60% since its nadir in 2015. At one point, gold was selling off amid denunciations that it had failed as a safe harbor. That was more or less entirely due to its inverse relationship with real yields on bonds. Gold’s greatest weakness as an asset is that it pays no income. Hence, when real yields go negative, gold grows much more attractive. As the bond market melted down last month, real 10-year yields touched -0.6%, before gaining more than a full percentage point. They are now back around -0.6%, near an all-time low.

The bond move has been driven more by a shift in inflation expectations than by the underlying yield. Inflation break-evens remain at levels lower than anything in the last 15 years bar the Lehman crisis and the Chinese devaluation of 2015. There’s no way gold’s rally can be seen as an attempt to hedge against an expected return of inflation … What does gold tell us about the stock market? I am not a fan of returning to the gold standard, but it is undeniable that the decision by President Richard Nixon to break that link in 1971 had a profound effect on what followed. If we regard gold as the continuing true measure of monetary stability, it suggests that stock markets’ gains in the almost 50 years since are almost entirely due to ‘money illusion,’ or the erosion of the dollar’s buying power.”

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