KITCO NEWS/Jim Wyckoff

Gold prices near steady as global stock markets gain

April 28, 2020

gold stacks of increasing heightsGold prices are not far from unchanged on the day in early U.S. trading Tuesday. More chart consolidation and some profit taking by the shorter-term futures traders are featured early this week. The gold market bulls are still encouraged by their metal’s stability amid rallies in global stock markets recently. This week’s drop in crude oil prices has somewhat curtailed demand for the precious metals. June gold futures were last up $1.60 an ounce at $1,725.60.

Global stock markets were mixed in overnight trading, while the U.S. stock indexes are pointed toward higher openings and at or near seven-week highs when the New York day session begins. Some regions in some countries, including the U.S., are reopening at least some businesses that have been shuttered from the Covid-19-induced lockdown. People around the globe are starting to suffer from what is being called ‘quarantine fatigue,’ which means many are starting to ignore social-distancing guidelines and are eager to see economies reopen—while government leaders debate the timing of reopening commerce. Reports say U.S. automakers plan to restart their plants on May 18.”

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REUTERS/Samuel Shen and Emily Chow

Shanghai gold boss wants super-sovereign currency for post-crisis times

April 28, 2020

“The president of the Shanghai Gold Exchange (SGE) called for a new super-sovereign currency to offset the global dominance of the U.S. dollar, which he predicted would decline long term, while gold prices rally. Concern has mounted among some market participants over the dollar-denominated system as the U.S. Federal Reserve cut interest rates to near-zero and embarked on unlimited quantitative easing to contain the economic damage of the coronavirus pandemic.

The measures have helped to drive gold prices to more than seven-year-highs this month, while the dollar has been range-bound. Wang Zhenying, who heads the world’s largest physical spot gold exchange, said in an interview the gold gains should be sustained, but ultimately a new kind of currency was needed.  ‘Future global trade needs a super-sovereign currency system under which no single country has the power to freeze the international assets of another country,’ said Wang, who held senior roles at China’s central bank, which supervises the SGE.  Wang foresaw a decline in the U.S. currency, triggered by the Fed’s monetary policies.  ‘When the Fed turns on the liquidity tap, the U.S. dollar will, in theory, be in a long-term depreciatory trend,’ he said.”

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BLOOMBERG/Joe Light

Mortgage Chaos Threatens to Worsen Once It’s Time for Repayments

April 28, 2020

houses under construction“The mortgage market has been disrupted by millions of borrowers postponing payments because of coronavirus. But lenders and veterans of the 2008 financial crisis warn the real chaos won’t start until the pandemic passes. The problem is confusion over what will happen when borrowers have to make up those payments. Federal agencies that back most of the market have introduced policies, some of which could require documentation that overwhelms servicers, leading to lengthy wait times and, in extreme cases, foreclosures.

Industry executives say Fannie Mae, Freddie Mac and their regulator are attempting to unveil a program in coming weeks that could alleviate many of the problems. Mortgage lenders say they hope the companies and their watchdog come up with a plan that prevents a repeat of the turmoil that followed the 2008 financial crisis, when confusion and delays hindered borrowers in trying to resume payments. But unless there are dramatic changes, Americans should ‘expect even more chaos when forbearance ends,’ said Michael Stegman, who served as a senior housing adviser during the Obama administration. The $2.2 trillion stimulus package passed by Congress requires mortgage companies to let borrowers delay payments for at least six months if they have been hurt by the pandemic. Because the government wanted to provide help quickly, borrowers merely need to say they face a hardship to receive aid … But servicers say they’re unsure what will happen when their call centers are flooded in a few months by people ready to resume paying.”

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CNBC/Steve Liesman

US will need to spend trillions more as economy takes until 2022 to fully recover

April 28, 2020

unemployment rate“The economy could take one to two years to rebound to full strength and the Fed and Congress, having already committed historic sums to fight the coronavirus pandemic, will have to commit trillions more, according to a CNBC Fed Survey. With the Federal Reserve’s balance sheet already at an unprecedented $6.45 trillion, the 36 respondents see it rising on average to $9.8 trillion. The additional trillions, respondents expect, will be added by the end of the current quarter. Congress, having already committed about $2.5 trillion, is seen putting in an additional $2 trillion.

‘My guess is that the virus itself will largely disappear within a year, but that the structural social and economic impacts will be with us much longer,’ John Kattar, chief investment officer at Ardent Asset Management said. Jack Kleinhenz, chief economist for the National Retail Federation, said, ‘The policy response has been appropriate, but policy takes time to work its way into the economy and targeted sectors…Many small businesses stand at risk.’ Despite the tsunami of relief, respondents still see the unemployment rate rising to a peak of 19%, hitting that level in August 2020. It’s expected to decline only gradually, falling to 11% by December and to 7% by the end of 2021. That would leave it at about double the rate before the crisis took hold.”

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MARKETWATCH/Callum Keown

Expert who called the 2008 crisis says the signal to sell stocks is coming soon

April 28, 2020

picture of 100 dollar bill“It is a bumper week of U.S. corporate earnings and one that will tell us more about the devastating impact of coronavirus on the economy. The busiest week of earnings season will see Alphabet, Amazon, Apple, Tesla, Boeing and Exxon Mobil all report results. Despite fears it could be the worst quarterly earnings seasons since 2009, the Dow Jones Industrial Average scored its fourth consecutive session of gains on Monday and was set to open higher on Tuesday. However, former Goldman Sachs hedge-fund manager Raoul Pal said the dollar was the world’s ‘biggest problem’ and that the signal to sell equities was coming soon.

He said the narrative that the Fed printing money would causes a dollar collapse was ‘very wrong.’

The chief executive of Global Macro Investor, who predicted the 2008 financial crisis, said: ‘You see the biggest problem the world faces is the dollar. We are in a vicious doom loop where slowing growth causes the dollar to rise, which causes slower growth, which causes the dollar to rise, as all borrowers play musical chairs to get access to the dollar to service debts. ‘Dollar swap lines, QE, jawboning, etc. have done nothing to stop this,’ he added in a post on Twitter. He said no printing of money by the Federal Reserve would solve what he described as a ‘structural’ problem. ‘All attempts to create more money to solve the dollar standard issue tend to devalue all fiat versus gold. Gold is rallying on debt deflation probabilities.’”

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THE GUARDIAN/Shahin Vallée

Coronavirus has revealed the EU’s fatal flaw: the lack of solidarity

April 28, 2020

Macron“The European summit last week was hailed as a moment of truth. France’s president, Emmanuel Macron, laid out how European leaders had a rendezvous with history and needed to come together and show that Europe under duress was able to respond with a common voice and common means to the Covid-19 crisis. By all measures, this rendezvous with history was missed. European leaders in effect agreed to keep calm and carry on.

They endorsed a roadmap to exit lockdown after each country had in fact already decided and announced their own uncoordinated exit plans. In some countries, such as Germany, deconfinement measures are not a prerogative of the federal government and coordinating between states is challenging enough, let alone coordinating with other countries. As a result of the great disparity in the level of infection in each country, the different endowments in medical supplies and the varying levels of testing capacities (France is 150,000 per week and Germany has capacity for 700,000), each country is striking its own path. This lack of coordination risks a second wave of reinfection as the virus travels from country to country … Similarly, each government’s ability to support economic recovery will be highly constrained by their level of debt. The ability to support households or the unemployed will vary greatly from one country to the next, creating lasting scars on the weakest, such as Italy or Spain, who cannot offer the same level of support as France or Germany.”

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