CNBC/Yen Nee Lee
The world economy will be worse than expected in the short term, says central bank governor

The renewed outbreak of Covid-19 infections in some parts of the world has dampened the global economic outlook in the near term, said Philippine Central Bank Governor Benjamin Diokno.

“Recent events, I think, point to a deterioration rather than an improvement in the short run,” Diokno said Wednesday during a virtual panel discussion at the Milken Institute Asia Summit.  

“So I would look at the fourth quarter up to maybe the first quarter of next year as worse than the IMF forecasts,” he added. The International Monetary Fund said in October that the global economy would contract by 4.4% this year — a projection that Diokno said was “kind of optimistic.”

That latest IMF forecast was an upward revision from its previous projection made in June.

Investors have also turned more optimistic in recent weeks following progress made on the Covid vaccine front. The U.K. on Tuesday became the first country to start vaccinating the public outside of trial conditions.

But before the economic benefits of vaccines are felt, a “deterioration” in the Covid situation in Europe and the U.S. would weigh down the economy, said Diokno. Some Asian countries such as Japan and South Korea are also experiencing a resurgence in cases, he noted.

Globally, there have been more than 68 million reported Covid-19 infections and over 1.5 million deaths, according to data compiled by Johns Hopkins University. The U.S., India and Brazil are the three countries with the most reported cases and deaths, the data showed.

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Kitco/Neils Christensen
Gold price can push to $2,200 as markets drunk on liquidity won’t sober up in 2021 – Wells Fargo

Financial markets are drunk on liquidity and investors should not expect that 2021 will be the year they sober up, according to analysts at Wells Fargo. In this environment, precious metals will continue to do well, the bank added.

Tuesday, in its 2021 outlook webinar, analysts at Wells Fargo said that they see a bullish backdrop for financial markets that will lead to more risk-taking. The bank expects to see a robust economic recovery as the world looks towards potential vaccines for the COVID-19 virus.

In its outlook, the bank sees the global economy growing by 5.2% next year, with most of the growth coming in the second half of the year as the world starts to move past the devastating impact of the pandemic.

While the bank is bullish on global growth, they still see plenty of potential for gold prices to rise next year. The bank said that they see gold prices pushing to $2,100 and $2,200 by the end of next year.

John LaForge, head of real asset strategy at Wells Fargo, said that despite robust economic growth, he expects low-interest rates and loose monetary policy to support gold, silver and platinum.

“There’s still a lot of money printing going on and that is good for gold and silver,” he said.

But gold and silver are being driven by more than just central bank monetary policy. During the presentation, LaForge said that 2020 was the start of a new commodity bull supercycle and gold should also ride this demand wave higher.

“If you look at the carnage, we saw back in March and April, that’s the kind of watershed event you need to frankly get interested in commodities,” he said. “Right in the middle of it in March, we upgrade commodities. We went favorable for the first time in a long, long time and we expect that to continue into 2021.”

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USA Today/Damian J. Troise and Alex Veiga
Weakness in tech companies leads stocks lower on Wall Street

U.S. stock indexes pulled back from their recent record highs Wednesday, as virus cases surge and coronavirus vaccines move closer to distribution.

The S&P 500 index fell 0.8%, as losses in technology companies outweighed gains in industrial, energy and materials stocks. The benchmark index is still up 1.4% for the month after climbing to record highs four times in the past two weeks.

Markets have been mostly pushing higher in recent weeks on hopes that one or more coronavirus vaccines will begin to be distributed in coming weeks and begin to ease the economy out of the pandemic’s grip.

A vaccine from Pfizer and German partner BioNTech, which is already in use in the U.K., is on track for a positive review and potential approval in the U.S. within the next week. The Food and Drug Administration will also consider a vaccine developed by Moderna later this month.

But there could be more economic damage in store over the next few months and investors are still closely watching Washington for any developments on another shot of stimulus for people, businesses and state governments. Congress is still divided over the size and scope of any new package and the Trump administration has added to the potential plans with a new $916 billion proposal.

“You haven’t seen a deal out of Congress, so to the extent that markets have been rallying on another round of hope about stimulus, not getting that lets a little bit of air out of the market,” said Willie Delwiche, investment strategist at Baird..

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