REUTERS/Brijesh Patel

Gold dips on modest progress against coronavirus

April 7, 2020

“Gold prices fell on Tuesday, retreating from a one-month high hit earlier in the session as risk sentiment improved on wider market optimism after tentative signs of progress against coronavirus outbreaks in some countries. Spot gold lost as much as 1% and was 0.4% down at $1,654.83 an ounce by 1212 GMT, having touched a one-month high of $1,671.40. ‘Risk appetite is back in the markets as new infections are declining. That’s weighing on gold prices. Also, higher yields are negative for gold,’ said analyst Peter Fertig.

‘However, some investors fear that monetary policy would lead to inflation. For them, buying gold at these levels remains attractive.’ Cautious optimism around a slowdown in reported cases of thenew coronavirus in some countries lifted European shares for a second day, even as companies continued to take steps to shore up cash after lockdowns crushed global demand. More than 1.32 million people worldwide have been reported as infected by the virus and 74,087 have died … The pandemic has rattled financial markets over the course of the past quarter and prompted nations to extend lockdowns to curtail its spread.”

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Gold is cheap; prices to hit $5,000 in medium-term, says economist

April 7, 2020

gold bars and moneyGold prices could climb to $5,000 in a few years, this according to John Butler, author of ‘The Golden Revolution.’ Butler attributed this price growth to the longevity of loose monetary and fiscal policies that will come as a result of COVID-19, as well as gold’s performance during periods of declining economic growth. ‘Based on the historical pattern of the 1970s, and stagflation, and other times these sorts of things have come about, I think gold is going to rise, by orders of magnitude,’ Butler told the Macro Hive podcast. ‘I think it is perfectly realistic to see gold closer to $5,000 than where it is today in a few years’ time.’

On the lasting effects that the pandemic will leave on the economy, Butler said that policy reforms are here to stay. ‘Politicians jump on whatever opportunity to try and push their pet agenda forward, and in some cases, it might be a very well-meaning program and in other cases it might be a way to try to increase their power and influence. I see all of the above right now,” he said. ‘The other thing is what Milton Friedman said decades ago, [which is that] there is nothing more permanent than a temporary emergency government program.’”

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CNBC/Jacob Pramuk

More Americans worry about losing wages and covering costs as coronavirus spreads, poll finds

April 7, 2020

woman crying wearing mask“As the coronavirus pandemic clobbers the U.S. economy, more voters in pivotal 2020 election states are worrying about losing their jobs or wages, a poll released Tuesday found.  More than a third of respondents in the six key states who have already lost income or employment said they could afford food, housing and other essential costs for less than a month, according to States of Play, a joint CNBC/Change Research survey of swing states. Even so, the likely voters polled in Arizona, Florida, Michigan, North Carolina, Pennsylvania and Wisconsin — which will play an enormous role in deciding the 2020 election winner — overwhelmingly said they are more worried about their health than their finances.

The COVID-19 outbreak has ripped through the United States, infecting more than 368,000 people and leading to at least 10,993 deaths, according to data compiled by Johns Hopkins University as of Tuesday morning. Business shutdowns across the country caused the economy to shed 701,000 jobs in early March — though a tally of roughly 10 million new jobless claims over two weeks indicates the economic destruction is much worse than the employment report showed. 81% said they had significant concerns about a recession, a jump from 57% last month. Fears about lost wages spiked, with 65% now seeing it as a very or somewhat serious concern in April, versus 35% in March. 39% said the same about losing a job, an increase from 16% last month.”

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Will We Flunk Pandemic Economics?

April 6, 2020

ben franklin wearing a mask“Just a month ago Donald Trump was still insisting that Covid-19 was a trivial issue, comparing it to the ‘common flu.’ And he dismissed economic concerns; after all, during flu season, ‘nothing is shut down, life & the economy go on.’ But pandemics come at you fast. Since Trump’s blithe dismissal, something like 15 million Americans have lost their jobs — the economic implosion is happening so quickly that official statistics can’t keep up.

In our last economic crisis the economy shrank around 6 percent relative to its long-run trend, and the unemployment rate rose around five percentage points. At a guess, we’re now looking at a slump three to five times that deep. And this plunge isn’t just quantitatively off the charts; it’s qualitatively different from anything we’ve seen before. Normal recessions happen when people choose to cut spending, with the unintended consequence of destroying jobs. So far this slump mainly reflects the deliberate, necessary shutdown of activities that increase the rate of infection. As I’ve been saying, it’s the economic equivalent of a medically induced coma, in which some brain functions are temporarily shut down to give the patient a chance to heal. While a deep slump is unavoidable, however, good policies could do a lot to minimize the amount of hardship Americans experience. The problem is that the U.S. political landscape has long been dominated by an anti-government ideology that left us unprepared, intellectually and institutionally, for this crisis.”

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MARKET WATCH/Barbara Kollmeyer

As hopes rise that worst of Spain’s pandemic is past, fear emerges of equally traumatic economic downturn

April 7, 2020

empty streets“Over the weekend, more than 2,100 people died in Spain as a result of the coronavirus, yet here we are, allowing ourselves to feel hopeful. The neighbors looked weary but clapped and cheered enthusiastically from their Madrid balconies. The weekend’s tally was lower than the previous weekend’s death toll of 2,500. Alas, any celebrating may have been premature, as a four-day string of declines was broken on Wednesday by 743 more deaths. Still, recuperations are rising, and the number of those requiring intensive care is stabilizing, a trend that overwhelmed hospitals here have desperately needed to see materialize.

Wall Street has rallied, inspired in part by signs that Spain and Italy could be ‘bending the curve.’ But getting to this moment, after Spanish Prime Minister Pedro Sánchez warned two-plus weeks ago that the ‘worst’ was yet to come, has been soul-destroying. Since his March 21 address to the nation, the death toll has climbed tenfold from 1,300 to 13,055 … Talk is also turning of how to exit the crisis, which has grown so deep economically here that the government is now discussing the a universal basic income.  A record number of Spaniards claimed unemployment benefits in March, and claims are bound to rise. When the battle against the virus is over, many predict Spain’s struggle to rebuild will be arduous. ‘On one side, we are now more hopeful,’ says a young mother, ‘but with much fear because we know what is coming after is even harder.’

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What follows a pandemic, unemployment and emergency stimulus? Inflation?

April 7, 2020

covid positive test“In the field of epidemiology, there’s a saying: ‘If you’ve seen one pandemic, you’ve seen one pandemic.’ But while global disease outbreaks are epidemiologically unique, their likely economic consequences may be easier to discern. The longer-term consequences, however, sometimes bear little relation to the immediate economic challenges arising from the pandemic and efforts to tackle it. As governments around the world impose business lockdowns to cut the rate of Covid-19 transmission, the initial effect of the global pandemic has been an epidemic of  joblessness.

The economic legacy, however, might be price inflation. Already, although the pandemic is still raging, there is a risk of food price inflation emerging. Qu Dongyu, the Chinese director general of the UN’s Food and Agriculture Organisation, last week argued for keeping global food supply chains moving. ‘Restricting trade is not only unnecessary, it would hurt producers and consumers and even create panic in the markets,’ he said. Hopefully, nations will heed Qu’s warning, but Thai rice export prices hit a seven-year high last week, in part due to temporary export restrictions imposed by Vietnam and Cambodia … It’s rare to see the world economy hit simultaneously by demand and supply shocks, but that is what the global spread of Covid-19 has caused.”

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