REUTERS/Sumita Layek

Gold soars more than 2.5% as virus triggers flight to safety

February 24, 2020

“Gold prices surged more than 2.5% to over seven-year highs on Monday as the spread of coronavirus outside China and its potential impact on global economic growth spurred safe haven buying. Spot gold was up 2.3% at $1,681.84 per ounce by 1250 GMT after hitting $1,688.66, its highest level since January 2013. U.S. gold futures were up 2.2% to $1,684.30.  Gold in euros hit an all-time peak of 1,560.39 euros per ounce, while gold priced in sterling rose to a record high of 1,308.45 pounds an ounce. ‘Beyond the near term disruptions to global supply chains, the coronavirus could have an effect on headline GDP,’ said FXTM market analyst Han Tan.

‘On the onset of 2020 we were optimistic that global economic conditions were able to recover on signs of subsiding trade tensions, but the potential fallout from the coronavirus not only triggers risk aversion, but could also erode the growth potential for the full year.’ European shares tumbled over 3% after a sharp rise in new infections in South Korea, Italy and Iran exacerbated worries of a wider spread of the virus. The World Health Organization is worried about the growing number of cases without any clear link to China. ‘There seems to be a mix of short covering and a fear of missing out driving the gains (in gold), with $1,660 well supported on any pullbacks,’ MKS PAMP said.”

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KITCO NEWS/Allen Sykora

Gold price soars as virus spreads; traders anticipate potential monetary easing

February 24, 2020

Gold price soars as virus spreads; traders anticipate potential monetary easing“Gold futures are sharply higher early Monday not only because investors are seeking safe havens as the coronavirus keeps spreading around the world, but also because they are starting to factor in the potential for central-bank rate cuts to offset any economic damage from the outbreak, analysts said. And while gold appears to be on the verge of going parabolic – rising roughly $100 in the last week – analysts say it would be risky for speculators to pick a market top and sell, trying to benefit from any correction that might be coming.

‘Right now, because of the spread of the coronavirus into different cities, people are starting to panic,’ said Phil Flynn, senior market analyst at Price Futures Group. ‘They are going into a full-court press into gold…as concerns are growing that people see the virus potentially damaging economies and economic growth around the globe. There are concerns that countries will have lower interest rates, thereby devaluing their currencies. That is making gold an attractive, safe haven.’”

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CNBC/Stephanie Landsman

Coronavirus could spark a 20% tech pullback, investor Paul Meeks warns

February 23, 2020

Coronavirus could spark a 20% tech pullback, investor Paul Meeks warns“Investor Paul Meeks is bracing for a bear market in technology. Meeks, who’s known for running the world’s largest tech fund during the dot-com boom, sees 20% pullback risks growing as the coronavirus outbreak spreads. ‘There is some comeuppance due, and unfortunately I think the coronavirus is that exogenous variable that is a catalyst to take some of these stocks down,’ the portfolio manager at Independent Solutions Wealth Management told CNBC’s Trading Nation on Friday. The major indexes ended the week meaningfully lower after a series of new coronavirus cases sparked fresh concerns over a global economic slowdown. Tech stocks led Friday’s sell-off. The Nasdaq had its worst daily performance since last month.

Meeks, who has been avoiding the space, suggests Friday’s activity may be the tip of the iceberg.

If the outbreak isn’t contained soon, Meeks believes the next serious tech sell-off could be longer and deeper than his original prediction almost a year ago.  Last April, he warned on “Trading Nation” the tech rally had gone too far, too fast and he has been singling out Apple. He still owns the iPhone maker’s stock, but as an underweight. ‘Apple is grossly overvalued,’ said Meeks.”

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FOX NEWS/David Aaro

Global outbreak causes coronavirus pandemic fears after cases jump in Italy, South Korea and Iran

February 24, 2020

Global outbreak causes coronavirus pandemic fears after cases jump in Italy, South Korea and Iran“Fears of a global pandemic continue to grow as coronavirus cases spike in several countries, including Italy, South Korea and Iran and the U.S. stock market nosedived early Monday. A staggering 50 people died in the Iranian city of Qom from the new coronavirus in the month of February, Iran’s semiofficial ILNA news agency reported on Monday. The new death toll is significantly higher than the latest number of confirmed cases that Iranian officials had reported just a few hours earlier, which stood at just 12 deaths out of 47 cases, according to state TV. The 50 deaths date back as far as Feb. 13, according to an Iranian official.

Authorities are struggling to contain and understand the outbreak in those countries, where infected cases have skyrocketed as they have increased over 2,000 percent in the past couple weeks. Italy is considered the site of Europe’s first major outbreak and the largest outside of Asia. The number of infected cases jumped to 152, compared to just three 10 days ago … ‘We are worried about the situation in the Islamic Republic of Iran and in Italy,’ World Health Organization chief Tedros Adhanom Ghebreyesus told a news conference in Stockholm via a video link. Cases in South Korea increased to 763 on Monday, with 161 more people infected within the last 24 hours. The country had just 28 infected cases on Feb. 14. President Moon Jae-in called for ‘unprecedented, powerful’ steps to fight the virus which is spreading rapidly throughout the country. ‘The coming few days will be a critical time for us,’ Jae-in said. “The central government, local governments, health officials and medical personnel and the entire people must wage an all-out, concerted response to the problem.’”

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MARKET WATCH/Shawn Langlois

The ugly side to the booming U.S. economy, in one telling chart

February 23, 2020

The ugly side to the booming U.S. economy, in one telling chart“Low unemployment rates, rising wage growth, a relentless bull market — by many measures, the good times are rolling. Just ask President Trump, who is glad to take credit for ‘the greatest economy in our nation’s history.’  But there is an ugly side to this boom that you obviously won’t hear at MAGA rallies, according to the Wolf Street blog’s Wolf Richter, who calls it the ‘bifurcation’ of the U.S. economy.  ‘One group of consumers is doing well. They have rising incomes, and they can afford the surging home prices, the surging health-care costs, and the surging new-vehicle prices,’ he wrote.

‘There are other consumers whose incomes have not budged much. They have jobs but are living paycheck to paycheck, and not because they’re splurging but because, at their level of the economy, prices of basic goods and services have run away from them.’ This group is getting hit by nosebleed costs in health care, education, and housing to the point where they’re getting ‘strung out.’ The rate of credit card balances that are 30 days or more delinquent at the 4,500 or commercial banks that are smaller than the top 100 banks spiked to 7.05% in the 4th quarter, the highest delinquency rate going back to the 1980s. Meanwhile, the delinquency rate at the biggest 100 banks was at 2.48%. Richter said big banks use generous offers to go after consumers with high credit scores. ‘Their special offers rope in the lion’s share of consumers with top credit scores,’ he said. The smaller banks, don’t have the same resources that the bigger banks have, but instead offer subprime customers a card with few incentives that charges a hefty 30% interest rate.”

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BLOOMBERG/Bloomberg News

Millions of Chinese Firms Face Collapse If Banks Don’t Act

February 22, 2020

Millions of Chinese Firms Face Collapse If Banks Don’t Act“Brigita, a director at one of China’s largest car dealers, is running out of options. Her firm’s 100 outlets have been closed for about a month because of the coronavirus, cash reserves are dwindling and banks are reluctant to extend deadlines on billions of yuan in debt coming due over the next few months. There are also other creditors to think about. ‘If we can’t pay back the bonds, it will be very, very bad,’ said Brigita, whose company has 10,000 employees and sells mid- to high-end car brands such as BMWs.

Millions of companies across the country are in a race against the clock to stay afloat. A survey of small- and medium-sized Chinese companies showed that a third only had enough cash to cover fixed expenses for a month, with another third running out within two months. Only 30% of such firms have managed to resume operations. While China’s government has cut interest rates, ordered banks to boost lending and loosened criteria for companies to restart operations, many of the nation’s private businesses say they’ve been unable to meet upcoming deadlines for debt and salary payments. Without more financial support, some may have to shut for good. ‘If China fails to contain the virus in the first quarter, I expect a vast number of small businesses would go under,’ said Lv Changshun, an analyst at Beijing Zhonghe Yingtai Management Consultant Co.”

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