REUTERS/ Diptendu Lahiri

Gold firms ahead of tariffs deadline and central bank decisions

December 11, 2019

“Gold inched up on Wednesday as investors sought safety from the threat of new U.S. tariffs on Chinese goods coming into effect on Dec. 15, while also awaiting policy decisions from major central banks. Autocatalyst metal palladium held just shy of an all-time record high. Spot gold had gained 0.2% to $1,467.31 per ounce by 1048 GMT. U.S. gold futures rose 0.3% to $1,471.90. ‘Trade war continues to be a factor supporting gold, there’s no easy solution to it and that uncertainty will keep gold prices up,’ said Commerzbank analyst Eugen Weinberg.

President Trump has days to decide whether to impose tariffs on nearly $160 billion worth of Chinese goods, scheduled to take effect on Sunday … Washington is laying the groundwork for a delay in the latest tariffs, but a final decision has not been made, the person said. ‘Should both parties (U.S. and China) fail to reach positive consensus, gold prices will receive strength over lackluster risk appetites for the near term,’ Phillip Futures analyst Benjamin Lu said in a note. Gold is considered a safe investment during political and economic uncertainty.”

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USA TODAY/Jessica Menton

Millionaires sour on U.S. economy, with their views at the lowest level since before the recession

December 10, 2019

Millionaires on Economy“Millionaires are the most cautious they’ve been on the direction of the economy since the years leading up to the global financial crisis. Investor sentiment on the economy for the next 12 months dropped 14 points from a year ago to – 7, its lowest level since 2006, according to Fidelity Investments’ annual Millionaire Outlook Confidence Index. That marked its lowest level since the index began that same year.

 

Fidelity’s 11th Millionaire Outlook Study surveyed 2,026 investors, including 1,102 millionaires and 924 investors that Fidelity calls the ‘millionaires of tomorrow.’ The study focused on five key measures for its confidence index: the economy, the stock market, real-estate values and consumer and business spending. The outlook wasn’t taken in 2007, 2011 and 2015.  The latest data signals that some wealthy investors are skittish about the longevity of the 10-year economic expansion, even as job creation remains robust and stocks touch record highs.”

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YAHOO FINANCE/Myles Udland

The world’s super-rich are hoarding physical gold

December 10, 2019

Super Rich Are Hoarding“Gold has had a great run in 2019. Over the last year, gold prices are up nearly 20%. The yellow metal is on pace for its best year since 2010. In a note to clients published over the weekend, analysts at Goldman Sachs outlined why the strategic case for owning gold remains strong. The firm cites political uncertainty and recession fears that are unlikely to abate as primary catalysts, among other worries among the global elite like wealth taxes and increasing talk about MMT and central bank effectiveness. By 2020, the firm thinks the price of gold will reach $1,600 an ounce; on Monday, gold was trading near $1,460.

But the firm also surfaces some really interesting data on how investors have expressed their desire to own gold. Which is that owning the physical metal seems to be the global elite’s preferred way to hedge against tail events. ‘Since the end of 2016 the implied build in non-transparent gold investment has been much larger than the build in visible gold ETFs,’ the firm writes … this means that for those including gold in their end-of-the-world trade, owning gold bullion is a must. ‘This [data] is consistent with reports that vault demand globally is surging,’ the firm writes. ‘Political risks, in our view, help explain this because if an individual is trying to minimize the risks of sanctions or wealth taxes, then buying physical gold bars and storing them in a vault, where it is more difficult for governments to reach them, makes sense.’ ‘Finally, this build can also reflect hedges by global high net worth individuals against tail economic and political risk scenarios.’”

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CNN BUSINESS/Julia Horowitz

British pound has been riding high. An election surprise could send it crashing

December 11, 2019

The British Pound“Investors are betting that Prime Minister Boris Johnson will sweep to victory in Thursday’s election. If he doesn’t, the pound and UK stocks are poised to plunge. The pound has strengthened about 2% since the general election was called in late October, and on Wednesday was trading near a seven-month high around $1.31, and way above a low of $1.20 hit in August. The FTSE 250 index of midsize British companies has gained roughly 3%. Traders are counting on Johnson, who has held his lead in the polls against Labour leader Jeremy Corbyn, to score a majority in parliament on December 12. This would allow the Conservative leader to take the country out of the European Union by January 31 — removing Brexit uncertainty.

‘It means more clarity about what government intends to do,’ said Jordan Rochester, a strategist at Nomura. Should Johnson win, UK markets are expected to hold onto recent gains … particularly if the margin of victory is slim … An unexpectedly strong showing from Labour, meanwhile, could result in a shock. The odds of the opposition party winning an outright majority look small. But recent polling suggests there’s still the chance of a hung parliament, which would open the door to Labour forming a minority government with the support of a smaller party.”

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FOX BUSINESS/Megan Henney

Corporate pension plans could become a thing of the past

December 11, 2019

Corporate Pension Plans in the Past“Despite record-breaking gains in the stock market this year, U.S. pension plans are near their worst financial state in two years. That’s according to a new report from Mercer, a human resources consulting firm, which found that nearly 63 percent of pension funds are considering ‘termination’ of guaranteed benefits to new workers within the next five years. That would close off the pensions to future participants.

The reason pension plans are on their death bed essentially comes down to the escalating cost of the promised payments to former employees: Historically low interest rates have pushed funded positions lower in 2019. By the end of 2019, the average pension plan had 85 percent of the funds necessary to meet its obligations, hovering near a two-year low, according to Mercer. The report comes amid a diaspora of pension plans in corporate America, which are increasingly turning to more risk-averse retirement plans, such as 401(k)s. In fact, a majority of American companies no longer offer a long-term, defined-benefit pension plan, which guarantees workers a monthly payment when they retire.

In October, embattled General Electric became the latest company to offer lump-sum buy-outs to about 100,000 former employees who have not begun receiving their pension, while freezing the retiree payments for about 20,700 salaried pensioners … The number of pension plans offering defined benefits dropped by about 73 percent between 1986 to 2016, according to data from the Department of Labor’s Employee Benefits Security Administration.”

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CNBC/Elliott Smith

Rising debt is one of the two biggest global economic risks, former Barclays CEO Diamond says

December 10, 2019

Rising Global Debt“Rising debt is one of the two biggest risks facing the global economy, according to Atlas Merchant Capital CEO Bob Diamond. Aside from the U.S.-China trade war, Diamond cited negative-yielding bonds and a rise in outstanding credit worldwide as a key concern for investors. ‘It may be 2020, it may be 2021, but at some point we need to begin to worry about the proliferation of credit,’ Diamond, who served as CEO of British bank Barclays from January 2011 until July 2012, told CNBC at the SALT Conference in Abu Dhabi.

‘One of the very positive things that has happened over the last 10 years since the financial crisis is the quick reaction of monetary policy and lowering interest rates, but I worry about the $17 trillion in negative interest rate bonds, and we worry about the overall size of the amount of credit that is outstanding now,’ he added. In its recent Global Financial Stability Report, the IMF (International Monetary Fund) escalated its warnings about high levels of risky corporate debt, which have been exacerbated by persistent low interest rates from banks. Last month, ratings agency Moody’s issued a negative outlook for sovereign creditworthiness in 2020, citing a ‘disruptive and unpredictable’ political environment for the $63.2 trillion in outstanding government debt across the 142 sovereigns it rates.”

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