KITCO NEWS/Jim Wyckoff
Gold prices down as risk appetite up so far this week
February 4, 2020
“Gold prices are solidly lower in early U.S. futures trading Tuesday. The safe-haven metal continues under pressure from a rebound in global stock markets early this week, as well as good gains in the U.S. dollar index. Silver prices are trading near steady after Monday’s solid losses. February gold futures were last down $11.80 an ounce at 1,570.50. March Comex silver prices were last up $0.005 at $17.675 an ounce.
Asian stock markets rebounded overnight after Monday’s sell-off. European stock markets were also higher and U.S. stock indexes are pointed toward sharply higher openings when the New York day session begins. So far this week trader and investor risk appetites are keener and the marketplace appears to be moving beyond the coronavirus outbreak that continues to spread. Latest counts show over 20,000 Chinese citizens afflicted with over 425 dead, with air travel to China being significantly curtailed and global and domestic business there disrupted. China’s central bank this week has injected large amounts of money into its financial system to help out domestic businesses that are being hurt by the coronavirus outbreak.”
As virus fallout widens, China readies more measures to stabilize economy
February 4, 2020
“Chinese policymakers are readying measures to support an economy jolted by a coronavirus outbreak that is expected to have a devastating impact on first-quarter growth, policy sources said. The sources said the government is debating whether to lower the planned 2020 economic growth target of around 6 percent, which many private sector economists see as well beyond China’s reach. With the death toll from the virus epidemic climbing to over 420 and risks to growth mounting, China’s central bank is likely to lower its key lending rate.
‘Currently, monetary policy is being loosened, but the central bank will follow a step-by-step approach and watch the virus situation,’ said a policy insider. The People’s Bank of China (PBOC) has already pumped in hundreds of billions of dollars into the financial system this week as it attempted to restore investor confidence and as global markets shuddered at the potentially damaging impact of the virus on world growth … In order to minimize job losses, China’s stability-obsessed leaders are likely to sign-off on more spending, tax relief and subsidies for virus-hit sectors, alongside further monetary easing to spur bank lending and lower borrowing costs for businesses.”
Coronavirus could easily tip China into a technical recession, economist warns
February 4, 2020
“China could easily enter a technical recession as the country’s coronavirus outbreak weighs on growth, an economist told CNBC Tuesday. Speaking to CNBC, Diana Choyleva, chief economist at Enodo Economics, said the virus had come at ‘a very bad time for China.’ ‘Not only has growth slowed down significantly in the second half of last year, but this year was going to be the crunch time for trying to sort out China’s very large bad debt problem,’ she explained.
Choyleva said that based on Enodo’s estimates, credit losses arising from the Chinese coronavirus were likely to amount to 20% of the country’s gross domestic product (GDP). She also noted that the shutdown of the Hubei province — where the virus was first reported — was’ unprecedented’ and ‘severe.’ ‘The impact on the economy’s going to be much bigger than SARS,’ she told CNBC. She added that her company had been calculating China’s growth numbers since 2005, and the second half of 2019 had seen an annualized rate of just over 3%. ‘So, when we then estimate what the impact’s going to be like, even on the assumption that it will be a repeat of SARS — I think it will be worse — we could easily get into a technical recession in China in the first half of this year,’ Choyleva added. A technical recession is defined as two consecutive quarters of GDP contraction. China’s economy grew 6.1% in 2019, marking its slowest GDP growth since 1990, with the world’s second-largest economy recording GDP growth of 6% for the fourth quarter.”
SEEKING ALPHA/Tim Worstall
Eurozone GDP – That Recession Might Be Arriving
February 3, 2020
“As we all know, the eurozone simply isn’t an optimal currency area. This poses significant problems for monetary policy for, by definition, we’ve got to have the same monetary policy over those differing economies where such is not optimal … As I’ve been saying for some time now, there’s a strong suggestion of a recession arriving in the eurozone. Manufacturing is already in a recession, and certain economies within the zone are too. Last month’s numbers weren’t good, and this month’s are worse. But here’s the problem. The eurozone, like other central banks, has an inflation target. And eurozone inflation is rising toward that target number. Which means that there’s not a great deal of room for the European Central Bank to ease monetary policy in order to boost growth.
Preliminary numbers showed that euro zone GDP grew by 0.1% q/q in the fourth quarter, slowing from an upwardly revised 0.3% rise in the third and below expectations of 0.2%. Growth from a year earlier eased to 1% from 1.2%. That’s pretty pathetic, and in any other major global economy, that would have the central bank easing monetary policy. The ECB has one problem in that there’s not a great deal it can do to ease policy, of course. Interest rates are already negative, and there aren’t all that many government bonds it can legally buy to expand QE.”
MARKET WATCH/Andrea Riquier
Thank ETF investors for higher gold prices
February 4, 2020
“Gold prices are up. Thank ETF investors. That’s the takeaway from a recent note from research shop DataTrek, which contrasted the 18.4% full-year increase in the gold price with a 1% decline in global demand for the precious metal. The big price jump was a double-edged sword, DataTrek noted: it attracted investors but kept consumers on the sidelines. Throughout the year, as volatility buffeted markets and global downturn concerns pushed investors into safer havens, exchange-traded fund holdings of gold rose 16% to 2,886 tons, an all-time high.
Global central banks, which have been big buyers of gold in recent years, were more subdued in 2019. They bought 0.9% less gold in 2019, but that was still enough to keep full-year purchases near a 10-year high. Central banks like those in Russia and China buy gold as ‘a way of gaining US dollar exposure without helping the American government fund its ever-growing budget deficit,’ said Nicholas Colas, DataTrek’s co-founder … Consumer purchases of jewelry and bars and coins declined … As prices rose, reaching $1,481 per ounce in the fourth quarter, the highest since 2013, consumers in weaker economies like China and India backed away. ‘Global ETF demand will continue to drive prices,’ Colas added. With the economies of China and India at a standstill and slowing, respectively, ‘it will be up to financial market investors to pick up the slack of lower jewelry/coin/bar demand. Given macro uncertainty at present (and ever-lower sovereign debt yields), it is reasonable to expect that they will.’”
CNBC/Daniel Arkin and Maura Barrett
Results for Iowa caucuses delayed as state Democratic Party finds ‘inconsistencies’
February 4, 2020
“The Iowa presidential caucuses were thrown into chaos late Monday after the state Democratic Party said it found ‘inconsistencies,’ delaying results and causing widespread confusion across the state. The Iowa Democratic Party said early Tuesday that it would release the results of the Iowa caucuses later Tuesday after ‘manually verifying all precinct results.’ Party chair Troy Price said the party is ‘validating every piece of data we have against our paper trail. That system is taking longer than expected, but it’s in place to ensure we are eventually able to report results with full confidence.’
The state Democratic party’s communications director, Mandy McClure, said on Monday night that there were ‘inconsistencies’ in the reporting of three sets of results. ‘In addition to the tech systems being used to tabulate results, we are also using photos of results and a paper trail to validate that all results match and ensure that we have confidence and accuracy in the numbers we report,’ McClure said. ‘This is simply a reporting issue. The app did not go down, and this is not a hack or an intrusion. The underlying data and paper trail is sound and will simply take time to further report the results,’ McClure added. The state party had earlier said it was carrying out ‘quality control checks, making sure the numbers are accurate.’”