KITCO NEWS/Allen Sykora

Goldman Sachs: ‘Strategic Case Is Still Strong’ For Holding Gold

December 9, 2019

“Goldman Sachs says the ‘strategic case is still strong’ for investing in gold and reiterated its call for the precious metal to rise to $1,600 an ounce next year, even though analysts conceded there could be more of a pullback in the short term. Gold has risen by 19% over the last 12 months due to slower global economic growth and elevated geopolitical tensions prompting ‘fear-driven’ demand, Goldman said. However, since September, the metal has eased from its highs for the year due to a rotation into pro-risk assets and an increase in long-term real interest rates, the bank continued.

Further, the metal could ease some more due to elevated speculative positions, Goldman said. Traders exiting bullish trades are potential sellers. ‘Overall, while we acknowledge the risks related to still-high gold positions, we believe the strategic case is still strong, particularly for investors with long-term horizons,’ Goldman said. ‘This is based on a deteriorated attractiveness of long-term DM [developed-market] bonds as portfolio diversifiers and real return generation instruments, exposure to growing EM [emerging-market] wealth, limited mine supply growth, elevated political risks and a potential increase in debasement concerns sparked by rising airtime of Modern Monetary Theory.’”

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FORBES/Yuwa Hedrick-Wong

The Next Recession May Come by Stealth

December 8, 2019

The Next Recession“The global economy today is mired in uncertainty arising from the trade war, an enfeebled Europe, Brexit and rising geopolitical tensions. An even deeper source of uncertainty is that the liberal global economic order, in place since the 1950s, is dying. Two trends are converging to kill it. The first is the West’s declining economic dominance relative to the rest of the world, and China in particular. The second is the rise of populism in Western democracies, arguably the most serious challenge to the legitimacy of the liberal global order. And yet, even as the liberal global economic order fades away, it’s unclear what a post-liberal global economic order will look like. So, for now, the global economy is like a barfly at closing time: it has no clue where it’s going, but it can’t stay here.”

“Against this backdrop, any number of missteps could trigger chain reactions that push developed world economies into recession. But we should also be prepared for a potentially different kind of downturn. The accepted definition of a recession is two consecutive quarters of contraction in an economy. The next recession, however, may not technically qualify as one. For example, we could have one quarter of 0.3% growth, followed by a contraction of 1.2% the next, then anemic growth in the third and fourth quarter of, say, 0.1% each, and then another contraction of 0.5% and so on. While the technical definition of a recession may never be met, the economy would still be shrinking, left to wane inexorably by impotent monetary and fiscal policies. It would be a recession by stealth.”

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CNBC/Patti Domm

What Trump does before trade deadline is the ‘wild card’ that will drive markets in the week ahead

December 6, 2019

Trump Before Trade Deal“The Trump administration’s Dec. 15 deadline for new tariffs on China looms large, and while most strategists expect them to be delayed while talks continue, they don’t rule out the unexpected. ‘That’s the biggest thing in the room next week. I don’t think he’s going to raise them. I think they’ll find a reason,’ said James Paulsen, chief investment strategist at Leuthold Group. But Paulsen said President Trump’s unpredictable nature makes it really impossible to tell what will happen as the deadline nears. ‘He’s the one off you’re never sure about. It’s not just tariffs. It could be damn near anything,’ Paulsen said. ‘I think he goes out of his way to be a wild card.’

Just in the past week, Trump said he would put new tariffs on Brazil, Argentina and France. He rattled markets when he said he could wait until after the election for a deal with China. Once dubbing himself ‘tariff man,’ Trump reminded markets that he sees tariffs as a way of getting what he wants from an opponent, and tariffs may be around for a long time. Trade certainly could be the most important event for markets in the week ahead, which also includes a Fed interest rate decision Wednesday and the U.K.’s election that could set the course for Brexit. If there’s no China deal, that could beat up stocks, send Treasury yields lower and send investors into safe havens.”

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SOUTH CHINA MORNING POST/David Brown

Donald Trump’s trade wars could scupper the euro-zone’s fragile economic recovery. That’s the last thing both sides need

December 9, 2019

EU Fragile Economic Recovery“There has been much focus on the pitfalls of the US-China trade war, yet the threat of increasing trade tensions between the US and Europe could be a bigger potential worry for global markets. Forget US President Trump’s headline-grabbing threat to slap 100 per cent tariffs on champagne, cheese and French luxury handbags in retaliation for France’s digital services tax that is expected to affect US tech giants such as Google, Apple, Facebook and Amazon. If the US and Europe go head to head, there could be serious consequences for China if global growth takes another hit. It’s the last thing global investors need right now. They need hope and encouragement looking ahead to 2020, not more dismay.

The 17-month trade dispute is clearly taking its toll. China is feeling the pinch, judging by the latest trade data, showing exports down 1.1 per cent in November, for a fourth consecutive monthly decline. The positive takeaway is that more domestic stimulus steps will now be needed so Beijing can help steer the  growth rate into a more secure range above 6 per cent next year. For this to happen, China needs forward-looking, targeted and effective policies to keep global risks at bay and ensure domestic demand stays underpinned. It will require even looser monetary and fiscal policies, which will keep investors positive for the time being. As Germany is the world’s third-largest exporter of goods and services, which means its fortunes are closely governed by the ebbs and flows of global trade, it’s no surprise that the nation’s leading economic indicators have been so fragile.”

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FRANCE 24/News Wires

Day 5 of public transport chaos in France as strike over pensions continues

December 9, 2019

France Public Transit Strike“French commuters and tourists braced for a fifth day of public transport chaos Monday as the government prepared to respond to widespread anger over pension reform that has sparked open-ended walkouts.  President Emmanuel Macron, Prime Minister Edouard Philippe and senior cabinet ministers met late Sunday to discuss the contentious reform, which the country’s powerful labour unions claim will force many to work longer for a smaller retirement payout.

As both the government and unions vowed to stand firm, businesses started counting the costs of the strike which began last Thursday when some 800,000 people took to the streets across France in a mass rejection of plans to introduce a single, points-based pension scheme, unifying 42 existing plans. The stoppages stranded commuters, closed schools, and hit tourism and Christmas retail.

Many people opted to take days off or to work from home, but thousands had no choice but to squeeze into perilously overcrowded suburban trains and metros whose numbers were slashed to a minimum. The biggest labour unrest in years came as France’s economy is already dented by more than a year of weekly anti-government demonstrations by so-called ‘yellow vest’ activists protesting unemployment and waning spending power. Many are opposed to Macron’s plans for putting the country on a solid economic footing, of which the retirement overhaul forms a major part.”

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REUTERS/Karthika Suresh Namboothiri

Gold gains as trade tariff deadline looms

December 9, 2019

Gold on the Rise Monday“Gold rose on Monday as investors hedged against a possible escalation in the U.S.-China trade dispute ahead of a Dec. 15 deadline for fresh U.S. tariffs, while scarce palladium surged to a new high as it closed in on the $1,900 mark. Spot gold was up 0.3% to $1,463.92 per ounce by 1307 GMT. U.S. gold futures traded 0.2% higher at $1,468.40. China’s Assistant Commerce Minister Ren Hongbin said Beijing hoped it could reach a trade agreement that satisfied both sides as soon as possible, but investors seemed reluctant to let go of gold amid diminishing hopes of a deal before Dec. 15.

‘There will be enough uncertainty and support in the market ahead of that date to keep the market stuck in this range,’ Saxo Bank said. Prices shed 1.1% on Friday after strong U.S. non-farm payroll data. ‘Based on the (jobs) report, you could argue that gold should be trading lower; it hasn’t. It just goes to show that there is quite a bit of scepticism about the outlook for global growth,’ they added. Also providing support, China’s exports shrank for the fourth consecutive month in November.”

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