December 18, 2019
“Gold eased on Wednesday as a rising dollar offset support for the safe haven metal from lingering U.S.-China trade uncertainty, while palladium slipped after a record run to the key $2,000 an ounce level. Spot gold was 0.3% lower at $1,471.96 per ounce by 1410 GMT, reversing gains from earlier in the session. U.S. gold futures were down 0.3% at $1,476. ‘The dollar is a little bit stronger,’ said Afshin Nabavi, senior vice president at precious metals trader MKS SA, adding, that due to a lack of follow-through on the upside, investors had started modestly selling gold. A break of the $1,465-$1,495 range could attract fresh interest, Nabavi added.
The dollar strengthened as U.S. economic data suggested the Federal Reserve was unlikely to cut interest rates further and as liquidity waned before the coming holidays. World stocks also remained just off record highs. Gold, often used as a hedge against political and economic uncertainties, is however on track for its biggest annual gain since 2010, bolstered by interest rate cuts by major central banks and the protracted tariff dispute.”
House counts down the final hours to historic Trump impeachment vote
December 18, 2019
“The House convenes Wednesday morning for a final day of debate before members vote on whether to make President Donald Trump the third president in the nation’s history to be formally impeached. Following the debate, the Democratic-controlled chamber is expected to approve two separate articles of impeachment, charging Trump with abuse of power and obstruction of Congress. The historic vote is slated to take place Wednesday evening, and the vote breakdown will almost certainly fall along party lines.
While House Democrats use their debate time to condemn the president’s actions, the minority House Republicans are expected to interject with procedural motions, appeals and objections throughout the day. These tactics are a time-honored part of any major House debate — for the party in the minority they serve as symbolic expressions of opposition, in this case to impeaching Trump, and as delay tactics intended to drag out the debate. Despite their serious-sounding names, like ‘motion to adjourn,’ these motions don’t actually accomplish anything. In nearly all cases, either the Democratic leadership will deny the GOP’s requests, or the Democratic majority will vote down last-minute motions that Republicans force members to vote on.”
MARKET WATCH/Associated Press
Asian markets little changed as Brexit fears temper Wall Street’s optimism
December 18, 2019
“Asian shares were mixed Wednesday after record highs on Wall Street amid investor optimism about an interim U.S.-China trade deal announced last week were tempered by fresh worries of a hard Brexit. Japan’s benchmark Nikkei 225 erased earlier gains to inch down 0.4% in morning trading. Hong Kong’s Hang Seng also gave up early gains and was last down 0.1% while the Shanghai Composite was headed in the same direction. Australia’s S&P/ASX 200 gained 0.2% while South Korea’s Kospi was little changed. Benchmark indexes in Taiwan, Singapore, Malaysia and Indonesia were mixed.
The U.S. Fed said Tuesday that industrial production and manufacturing were stronger last month than economists expected, though they are weaker than a year ago. Industrial production rebounded to 1.1% growth in November from October, better than the 0.8% that the market was expecting. But it remains 0.8% below year-ago levels … But in the U.K., British Prime Minister Boris Johnson signalled that he won’t soften his Brexit stance now that he has a majority in Parliament, seeking to rule out any extension of an end-of 2020 deadline to strike a trade deal with the European Union. Analysts say it will be difficult to complete a trade deal within a year, which could mean Britain leaving without a deal at the start of 2021 — a prospect that alarms many U.K. businesses.”
KITCO NEWS/Allen Sykora
BMO Sees Gold Averaging $1,501/Oz, Profitable Producers In 2020
December 18, 2019
“BMO Capital Markets looks for gold to benefit from loose central-bank monetary policy in 2020, allowing the metal to post an average price of $1,501/oz. The ‘vast majority’ of gold producers should be profitable at these prices, BMO added. Analysts called for silver to average $18.20 an ounce. Shortly before 8:30 a.m. EST, spot gold was at $1,472.40 and silver was at $16.90. ‘With inflation stubbornly low and surprisingly well correlated across global economies, monetary policy looks set to remain loose through 2020 ¾ indeed the bias of risk is for further cuts,’ BMO said.
‘This will keep macro asset allocation supporting gold and precious-metals markets. However, in our view, 2020 is more likely to be a year of consolidation than aggressive upside for gold and silver prices ¾ while many of the tailwinds are still blowing, they are not doing so with the same strength that drove prices higher through Q3.’ … ‘In our view, the gold price moves in ranges, and while global monetary policy is trending toward loosening, a range centered around $1,500/oz looks well based,’ BMO said. “For gold to push out the top of its current range would likely require significant portfolio rotation, most likely at a time of emerging-market panic or equity-market sell-off. For a downside breakout, this would involve a significant risk-on rally for which gold would be the funding source.” Central banks are likely to support gold not only by keeping interest rates low or even negative, but through continued gold buying ‘as they seek to dedollarize their own holdings,’ BMO said.”
Poland may have to leave EU, Supreme Court warns
December 17, 2019
“Poland could have to leave the EU over its judicial reform proposals, the country’s Supreme Court has warned. The proposals would allow judges to be dismissed if they questioned the government’s judicial reforms. Judges say the proposals threaten the primacy of EU law and could be an attempt to gag the judiciary. Poland has already been referred to the European Court of Justice (ECJ) regarding rules for judges. Under the proposals put forward by the socially conservative Law and Justice party government, judges can be punished for engaging in ‘political activity’. Any judge that questioned the legitimacy of judges nominated by the National Council of the Judiciary could be handed a fine or in some cases dismissed. Politicians will start discussing the proposals on Thursday.
The ruling party claims changes to the law are needed to tackle corruption and overhaul the judicial system, which it says is still haunted by the communist era. But the EU accused Law and Justice (PiS) of politicising the judiciary since it came to power in 2015. The Supreme Court said the party was undermining the principle of the primacy of EU law over national law. It said in a statement: ‘Contradictions between Polish and EU law…. will in all likelihood lead to an intervention by EU institutions regarding an infringement of EU treaties, and in the longer run [will lead to] the need to leave the European Union.’”
‘Decade of the central bank’ ends with the Fed and its global cohorts in need of some new tricks
December 17, 2019
“On Nov. 25, 2008, the Federal Reserve launched the shot heard around the financial world. The central bank announced it would start using digitally created money to buy mortgage debt in an effort to drive down interest rates and resuscitate a dead housing market. Along with a series of cuts that ultimately would take short-term interest rates close to zero, the move was part of an ambitious gambit to take the country out of its worst economic crisis since the Great Depression. It quickly expanded to the purchase of government bonds in a total of three rounds that spanned six years. Flash forward 11 years. The Fed’s campaign of ‘quantitative easing,’ along with keeping rates historically low, coincided with the longest expansion and most robust bull market in U.S. history.”
“As the decade ended, the institutions found themselves in quite a different position from where they started, particularly considering the worries over the state of the economy and potential asset bubbles. Where they once had plenty of space to offer policy accommodation in the case of a downturn, central banks now face severe restrictions. Policy rates among G-7 countries all are below 2% and countries that practiced QE face bloated balance sheets that threaten to pose financial imbalances … ‘This is a new paradigm. This is the world central banks are going to have to operate in where zero percent policy rates are more the norm,’ said Tom Garretson, fixed income strategist at RBC Wealth Management.”