REUTERS/Sumita Layek

Gold gains as markets count economic toll from coronavirus

February 10, 2020

“Gold rose to a near one-week high on Monday as mounting concerns about the impact of China’s coronavirus lifted the appeal of safe-haven assets, after the number of casualties exceeded 900. Spot gold was up 0.2% at $1,572.88 per ounce by 1304 GMT, having hit its highest since Feb. 4 at $1,576.21 earlier in the session. U.S. gold futures were 0.2% higher at $1,575.80. Global shares fell as the death toll from the outbreak exceeded the SARS epidemic of nearly two decades ago, weighing on risk sentiment.  ‘The focus on the economic fallout from the continuous spreading of the virus in and outside of China is supporting gold,’ Saxo Bank analyst Ole Hansen said, adding prices could continue to see upward momentum.

Bullion is considered a safe asset in times of political and economic turmoil.  Further supporting bullion, the dollar eased from four-month highs against a basket of rivals, making gold cheaper for holders of other currencies. Worries about the economic toll from the virus remained even as workers began to return to work in China after the government eased some restrictions …The world’s second-largest economy has suffered since late last month from prolonged business closures, lockdowns and travel restrictions.”

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Gold on track for a fourth straight gain, buoyed by coronavirus outbreak

February 10, 2020

Gold on track for a fourth straight gain, buoyed by coronavirus outbreak“Gold futures on Monday headed modestly higher as investors fretted about the economic impact on China of the fast-moving outbreak of the coronavirus. The death toll for the novel strain of coronavirus climbed to more than 900 in mainland China, exceeding that of the severe acute respiratory syndrome, or SARS, that claimed 774 lives and infected about 8,100 people in 2002-03. The World Health Organization warned that the spread could accelerate, with more than 40,000 cases reported as of Monday.

The precious metal is still viewed by some commodity experts as a go-to asset in the face of nagging concerns about the infectious disease. ‘There is a general sense that the coronavirus will have a negative economic effect that has already stirred up monetary easing in China and could easily do elsewhere,’ wrote Jasper Lawler, head of research at London Capital Group. Gold for April delivery on Comex was up $4.70, or 0.3%, at $1,578.10 an ounce, on track for a fourth consecutive gain.”

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FOX BUSINESS/Jonathan Garber

Coronavirus impact on US economy uncertain: Peter Navarro

February 10, 2020

Coronavirus impact on US economy uncertain: Peter Navarro“It’s too early to know what kind of impact the coronavirus outbreak will have on the U.S. economy, White House trade adviser Peter Navarro said Monday. The outbreak, which has killed at least 910 and sickened 40,600 people globally, has U.S. companies to halt or drastically reduce operations in China and led to the grounding of flights between the two countries. ‘I think we are going to have to wait another couple of weeks or a month to see just what exactly is going on,’ Navarro told FOX Business. ‘There’s also companies that are going back to work in China as we speak. We won’t know for a couple of weeks now whether the virus is going to peak or whether it’s going to spread.’

While the White House is taking a wait-and-see approach on assessing the impact the coronavirus will have on the U.S. economy, it has already warned that the additional $200 billion of purchases that China agreed to as part of the phase one trade deal will be delayed … the Federal Reserve and a number of Wall Street banks have warned the outbreak will weigh on U.S. economic growth. The Federal Reserve said Friday it was on the lookout for ‘possible spillovers from the effects of the coronavirus.’ Additionally, economists at investment banks JPMorgan Chase and Goldman Sachs have reduced their first-quarter gross domestic product forecasts. JPMorgan cut its first-quarter U.S. growth estimate by 0.25 percentage points and Goldman Sachs lowered its forecast by 0.4 percentage points.”

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BLOOMBERG/Justin Sink and Erik Wasson

Trump’s $4.8 Trillion Budget Would Increase Debt, Cut Safety Net

February 9, 2020

Trump’s $4.8 Trillion Budget Would Increase Debt, Cut Safety Net“President Trump’s $4.8 trillion budget for the upcoming fiscal year proposes billions more in funding for defense and a U.S. mission to Mars, but would bring steep cuts to social programs despite almost $1 trillion in deficit spending. The proposal, scheduled to be unveiled on Monday, is an election-year embodiment of many of the policy priorities Trump has championed over his first three years in office. He proposes continuing his effort to ‘rebuild’ the U.S. military by investing heavily in defense spending — $740.5 billion in the next fiscal year — including the creation of Space Force.

But the president also calls for deep cuts to government programs he believes are unpopular with his base, slashing discretionary spending by 5% — down to $590 billion — in the coming year. That includes major reductions in foreign aid and environmental protection programs, along with stringent new work requirements on welfare programs such as food stamps and housing assistance …

Democrats quickly took aim at Trump’s proposed cuts. ‘The budget is a statement of values and once again the President is showing just how little he values the good health, financial security and well-being of hard-working American families,’ House Speaker Nancy Pelosi said in a statement Monday.

Trump’s budget shows the president drifting further away from his campaign pledge to eliminate the U.S. national debt by the time he leaves office. U.S. debt has already risen $3 trillion during Trump’s first three years in office, and his plan calls for adding to the debt until 2035.”

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We’re facing the ‘great American slowdown.’ Should we celebrate?

February 9, 2020

We’re facing the ‘great American slowdown.’ Should we celebrate?“Grant President Trump some bragging rights. After all, most economic news has recently favored Trump, including the 225,000 payroll jobs created in January. Naturally, he’s going to take credit if he can. Similarly blessed, a Democratic president would surely do the same. In his State of the Union address last week, Trump gushed self-congratulation. ‘Incomes are soaring, poverty is plummeting,’ he said. ‘In just three short years, we have shattered the mentality of American decline.’ You need to take two cautionary messages from this — one short-term and one long-term … Although incomes are rising, they are not ‘soaring.’ The increases partly reflect catch-up from the Great Recession, when many households lost income to unemployment.”

“In the 25 years after 1950, the U.S. economy grew about 4 percent a year, according to the Congressional Budget Office. Since then, growth has gradually decelerated. In recent projections, the CBO puts future growth at about 2 percent annually. This means there are fewer income gains to share among households, businesses and governments (federal, state and local) … The future promises less cooperation and more contention, as groups and individuals fight over limited funds. Whoever wins the White House in 2020 will have to confront this long-term mismatch. The rate of economic growth has subsided from its levels in the 1950s and 1960s, while popular demands for more private income and government spending have increased since the 1950s and 1960s. It’s not clear how or whether it will be resolved. What is clear, though, is that Trump and his many Democratic rivals are studiously ignoring the problem.”

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THE HILL/Kristin Tate

Is dumping Donald Trump for Democrats worth a recession?

February 9, 2020

Is dumping Donald Trump for Democrats worth a recession?“Despite relentless political attacks and of course impeachment drama, President Trump has an approval rating held up by consistently upbeat economic news, including the new unemployment numbers. Why would voters cash in their gains this year for a return to bad economic times? The unemployment rate remains at a near historic low of 3.6%, and black and Latino unemployment rates are at record lows. The stock market has been rising due to regulatory and tax reform. The S&P 500 is growing at more than double the annual rate under Trump than previous presidents. Record highs are more than numbers. They have contributed to millions of new jobs and the fastest wage growth in over a decade.

Sending a Democrat in the White House would jeopardize this goldilocks era. Soon, especially as more moderate candidates like Joe Biden and Amy Klobuchar are knocked out of the primary process, the alternatives will be increasingly frightening to the market. This is especially starting to be the case as Bernie Sanders moves into the lead in New Hampshire … If he enters office with a Democratic Congress, he could accelerate the national transition from a relatively free market to a planned economy, with direct and indirect state control of the means of production … Money would flee to greener pastures in offshore accounts, commodities, or even under mattresses. Growth is the well from which both economic opportunity for the middle class and tax dollars spring. The specter of a socialist victory would seriously damage the current economic boom.”

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