CNN Business/Jazmin Goodwin
Fed chair calls the economic recovery ‘extraordinarily uncertain’

Federal Reserve Chairman Jerome Powell said the outlook for the United States economy is “extraordinarily uncertain” as the rise in Covid-19 cases continues to take an economic toll on the country.

“As we have emphasized throughout the pandemic, the outlook for the economy is extraordinarily uncertain and will depend, in large part, on the success of efforts to keep the virus in check.” Powell said in prepared remarks for his testimony on Tuesday to the US Senate Committee on Banking, Housing, and Urban Affairs. “The rise in new Covid-19 cases, both here and abroad, is concerning and could prove challenging for the next few months. A full economic recovery is unlikely until people are confident that it is safe to re-engage in a broad range of activities.”

Powell’s remarks echo comments he made earlier this month. At a virtual panel discussion at the European Central Bank’s Forum on Central Banking, Powell emphasized the economy’s recovery but noted that the economy that we knew before the coronavirus pandemic might be over.

But recent news of promising vaccines has Powell “very positive” for the medium term, though he expects “significant challenges and uncertainties including timing, production and distribution, and efficacy across different groups.”

“It remains difficult to assess the timing and scope of the economic implications of these developments with any degree of confidence,” he said.

Meanwhile, several programs employed by the Fed in March are set to expire at the end of the year. Powell said these programs help “unlock almost $2 trillion of funding.”

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CNBC/Stephanie Landsman
Virus surge is leading to a double-dip recession and dollar crash, economist Stephen Roach warns

The U.S. may be on the cusp of a double-dip recession.

Economist Stephen Roach believes surging coronavirus cases are disrupting Wall Street’s hopes for a V-shaped recovery.

“With the infection rate soaring right now, a still vulnerable U.S. economy is likely to experience further lockdowns,” the Yale University senior fellow told CNBC’s “Trading Nation” on Monday.

Even though he believes the lockdowns won’t be as severe as they were last spring, Roach warns the damage will be undeniable.

“That’ll lead to a temporary relapse in the economy probably in the first quarter,” said Roach, who served as chairman of Morgan Stanley Asia during the deadly 2003 SARS epidemic. “We’ve had those relapses in 8 of the last 11 business cycle upturns, and I don’t think this one is an exception to that rule.”

Roach’s economic forecast is similar to JPMorgan Chase’s outlook, which calls for GDP to dip 1% in 2021′s first quarter before resuming its expansion. But he suggests the drop could be more significant.

“It’s hard to predict a noisy number like quarterly GDP,” said Roach. “But I would think a moderate single-digit decline would not be surprising to me.”

‘Playing out even more dramatically’

The fallout is also contributing to a massive dollar decline, according to Roach. He has been warning the Street since last spring a crash is virtually inevitable.

“When I first came up with this seemingly out-of-consensus, crazy view, I worried about the likelihood of a current account deficit driven by massive Covid-related budget deficits,” he said. “That’s playing out even more dramatically than even I thought when I wrote about it.”

Since March 20, the Dollar Currency Index is off 10.5%. For the year, it’s down 4.5%.

“This is just the early stages,” Roach noted. “The pressure on the dollar is likely to be even more intense. … We need fiscal relief to address this really difficult economic situation.”

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Kitco/Anna Golubova
Risk in gold is ‘limited’: Prices still on track towards $2,100 in 2021 – Bloomberg Intelligence

Despite a drop below $1,800 an ounce last week, gold’s path of least resistance is up, according to Bloomberg Intelligence, which sees the bull run taking the precious metal above $2,000 an ounce in 2021.

“Gold is quite straightforward: probabilities tilt toward more of the same for its price at about $1,790 an ounce on Nov. 27 than advance in 2021 above this year’s peak of around $2,075. A key question regarding gold and risk: what it might take to reverse rising debt and QE?” Bloomberg Intelligence senior commodity strategist Mike McGlone said in his December outlook.

Debt and massive quantitative easing are enough to keep gold’s bull run alive next year, noted McGlone, adding that gold has a solid foundation.

“The metal may be less supported by rising stock-market volatility as in 2018-20, but seemingly unstoppable trends in negatively yielding debt, quantitative easing (QE) and rising debt-to-GDP provide firm foundations for the store of value,” McGlone said. “The unlikeness of reversing these pre-pandemic trends should limit price pullbacks in the metal.”

Bloomberg Intelligence’s graphic shows gold’s recent drop below $1,800 an ounce as part of the overall uptrend.

“Gold is poised to extend its uptrend in 2021,” the December outlook stated. “Dipping into support layers toward the end of November should provide a foundation for further price gains. Backing up into its upward sloping 50-week moving average toward the end of 2020 should provide the gold bull market a relative advantage in 2021.”

Gold’s is currently in an enduring stair-step rally with the wide range between $1,800 and $2,000 an ounce, added McGlone.

“The metal’s upward trajectory, which resumed with the first Federal Reserve rate hike in 2015, shows few signs of other than staying the course. Our graphic depicts gold revisiting good initial support around $1,800 an ounce after an August jump to the most extended above its 50-week mean since 2011,” he said. “Sustaining below its 50-week mean of about $1,755 to Nov. 25 would be an initial sign of weakness, but the more likely price trajectory is up.”

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