KITCO NEWS/Jim Wyckoff
Gold prices sharply up amid Goldilocks environment for the metal
April 6, 2020
“Gold prices are trading sharply up in early U.S. trading Monday, as the global marketplace has seen in uptick in sentiment to start the trading week, on reports the coronavirus outbreak may be de-escalating. This somewhat encouraging news appears to be a goldilocks scenario for gold, as buyers are more confident to step in and purchasing the safe-haven metal, while knowing there are still very tough times ahead, including the specter of problematic inflation farther down the road.
Global stock markets were mostly higher in overnight trading. The coronavirus outbreak that has crippled the global economy appears to be de-escalating a bit, according to some models. However, the coming week is going to be ‘our Pearl Harbor moment, our 9/11 moment,’ said U.S. Surgeon General Jerome Adams, regarding an expected wave of coronavirus deaths across the U.S. New York City, New Orleans and Detroit face especially tough days ahead. The debate in the coming days, especially if the outbreak starts to de-escalate, will be when to restart global economies. Traders and investors are also handicapping when economies will get back to full speed when they do start back up. There are complicated supply chains that have been severely disrupted.”
MARKET WATCH/Mark DeCambre
Gold rises, aims for highest close in a month, ahead of difficult virus news
April 6, 2020
“Gold futures were headed higher Monday, supported partly by expectations that the days and weeks ahead may prove grim for investors with an appetite for assets perceived as risky. Bullion’s early gain comes even as stocks looked set to surge higher after tumbling on Friday, in the wake of data that showed job losses in March exceeded many economists’ worst-case-scenario.
‘The bottom line is that the worst may not be over, and it seems premature to say that the bottom is in for stocks,’ wrote Marios Hadjikyriacos, investment analyst at XM. ‘Arguing in the same direction, gold is trading well higher today, indicating that many investors are still ‘playing defense’ even as stocks recover,’ he wrote. ‘With a close at or above its current level, the precious metal would mark its highest settlement since March 9. Optimistic equity investors have clung to hopes that the global outbreak of COVID-19, which was first identified in December in Wuhan, China, is starting to show signs of stabilizing.”
THE WALL STREET JOURNAL/Chong Koh Ping and Nick Kostov
U.S. Braces for Pivotal Week as Global Coronavirus Death Toll Passes 70,000
April 6, 2020
“U.S. officials anticipated America’s most difficult week yet in the coronavirus crisis and some Asian countries braced for a surge in infections as the global death toll passed 70,000. Some European nations showed signs that restrictions were helping to slow the spread of the disease. Infections in the U.S. stood at more than 337,000 Monday, with the death toll at 9,653, according to data from Johns Hopkins University. Surgeon General Jerome Adams said Sunday that this week would be ‘the hardest and saddest week of most Americans’ lives’ as cases are expected to peak in some of the hardest-hit cities, including New York.
Globally, more than 1.28 million people have been infected by the coronavirus in 183 countries and regions as of Monday, according to the data from Johns Hopkins. A total of 70,356 people have died of the Covid-19 respiratory disease caused by the virus. Heath officials in the U.S. said the number of new infections would start to stabilize if people follow state government orders to stay home. In some of the hardest-hit American cities, including New York, Detroit and New Orleans, infections are expected to peak in the coming days, new models suggested. Strict containment measures appeared to be helping to contain the spread in Europe’s worst-hit countries. In Italy and Spain, the rate of infection has slowed down, with the number of confirmed cases increasing less than 5% from the previous day in both countries.”
BLOOMBERG/Michelle F. Davis
Jamie Dimon Sees ‘Bad Recession’ and Echoes of 2008 Crisis Ahead
April 6, 2020
“Jamie Dimon said the coronavirus pandemic will lead to a major economic downturn and stress mirroring the meltdown that nearly brought down the U.S. financial system in 2008. ‘At a minimum, we assume that it will include a bad recession combined with some kind of financial stress similar to the global financial crisis of 2008,’ the chief executive officer of JPMorgan Chase & Co. said Monday in his annual letter to shareholders. ‘Our bank cannot be immune to the effects of this kind of stress.’ The 23-page letter came less than a week after Dimon returned to work after undergoing emergency heart surgery. It was his first public commentary about the coronavirus since Feb. 25.
Dimon, the only current CEO who steered a major U.S. bank through the financial crisis, said JPMorgan’s earnings will be ‘down meaningfully’ this year, though the bank is ‘unlikely’ to cut its dividend. Such a move would only result from ‘extreme prudence.’ he said, adding that JPMorgan will give more details on the impact when it reports first-quarter earnings later this month. The 64-year-old CEO outlined initiatives his bank is taking to support employees, businesses and the community, but refrained from offering long opinions about public policy that marked previous missives. He said 180,000, or about 70%, of the firm’s employees are working from home, and the bank is giving payments of $1,000 to those whose jobs don’t allow them to work remotely.”
SEEKING ALPHA/Lyn Alden Schwartzer
The $40 Trillion Problem
April 6, 2020
“Over the past several weeks in response to the COVID-19-induced global economic shutdown, the U.S. Federal Reserve has announced an unprecedented number of operations to relieve or bail out various markets, as the lender of last resort … The Fed has expanded the monetary base to buy Treasuries and other securities at a record pace, has put in place various lending facilities, and has opened a record number of currency swap lines with other countries … Many analysts are focused on the impact of the virus itself, which is indeed very large. Nearly 10 million jobless claims were filed in the U.S. in the past two weeks due to the shutdown of restaurants, travel businesses, casinos, physical retail, and parts of several other industries, and that can’t be understated. Job losses are likely to continue. However, the sheer speed of the market’s crash, and the unprecedented actions by the Fed and other central banks around the world to support the credit market, point to a larger issue: the later stages of a global debt supercycle.
The sheer amount of debt in the world makes temporary income disruptions a lot more financially impactful than they would be in a system with less leverage. As of 2019, global debt surpassed $250 trillion, more than 250% of the world’s GDP. In the U.S., our total debt (government, corporate, and household) is around 350% of GDP, the same ratio we had back in 2007 at the start of the previous financial crisis … We have less mortgage debt relative to GDP, but most other types of debt are higher as a percentage of GDP in 2020 than in 2007. We just re-arranged where the debt is concentrated, and pushed it up especially to the sovereign level … Foreigners own $40 trillion in U.S. assets, including portions of our government debt, corporate debt, stocks, and real estate.”
SOUTH CHINA MORNING POST/Sidney Leng
Half a million Chinese companies close in 1st qtr as pandemic batters economy
April 6, 2020
“More than 460,000 Chinese firms closed permanently in the first quarter as the coronavirus pummeled the world’s second largest economy, with more than half of them having operated for under three years. The closures comprised of businesses whose operating licenses had been revoked, as well as those who had terminated operations themselves, and included 26,000 in the export sector. At the same time, the pace of new firms being established slowed significantly. From January to March, around 3.2 million businesses were set up, a 29% drop from a year earlier.
The number of business closures underlines the challenges facing China as it tries to revive its economy, which is at risk of a contraction in the first quarter for the first time since 1976. ‘China has managed to get the Covid-19 outbreak largely under control and domestic supply disruptions have now mostly dissipated,’ economists from Société Générale, said in a recent note. ‘However, there are signs of lasting damage to domestic demand, and on top of that the external shock resulting from widespread lockdowns in other major economies is arriving fast and furious.’”