Gold gains as markets assess economic impact of virus
February 6, 2020
“Gold inched higher on Thursday as investors evaluated the economic impact of the coronavirus outbreak as the death toll jumped past 500, but the gains in bullion were capped by China’s decision to halve tariffs on U.S. imports. Spot gold was up 0.2% to $1,559.50 per ounce by 0835 GMT. Prices fell to $1,546.90 on Wednesday, the lowest since Jan. 21. U.S. gold futures were flat at $1,563.30. The death toll from the virus in mainland China jumped to 563, as experts stepped up efforts to combat a disease that has shut down Chinese cities and forced thousands more into quarantine around the world.
‘Globally, people are looking at the coronavirus more than anything else and also how that would affect the global economy. That is supporting gold at this point of time,’ said Brian Lan, managing director at dealer GoldSilver Central in Singapore. ‘It (cutting of tariffs) is countered by how the virus is going to affect the economy, businesses and China’s GDP.’ China on Thursday said it would halve additional tariffs levied against 1,717 U.S. goods last year, following the signing of a Phase 1 deal that brought a truce to a bruising trade war between the world’s two largest economies.”
KITCO NEWS/Jim Wyckoff
Gold prices up; marketplace coronavirus worries may resurface
February 6, 2020
“Gold and silver prices are modestly up in early U.S. futures trading Thursday. The safe-haven metals bulls have stabilized their markets late this week, despite rallies in global stock markets this week, led by the U.S. stock indexes that are at record highs again. February gold futures were last up $5.30 an ounce at 1,568.10. March Comex silver prices were last up $0.148 at $17.745 an ounce. Asian and European shares were higher overnight as traders and investors at least for now have pushed aside the outbreak in China.
History proves traders and markets are fickle. The coronavirus outbreak continues to spread, with over 500 reported dead in China and around 30,000 afflicted in the country. China’s domestic commerce is being impacted, as is global commerce. The big drop in Tesla’s stock price Wednesday is blamed at least in part on the coronavirus outbreak impacting Tesla’s business in China. Many global companies doing business with China have been negatively impacted. It will not be surprising to this longtime market watcher to see the coronavirus outbreak back on the front burner of the marketplace next week, or sooner.”
THE NEW YORK TIMES/LIVE UPDATE
China’s Death Toll Soars as Wuhan Plans Roundup of Infected
February 6, 2020
“Chinese official, likening the outbreak to ‘wartime conditions,’ orders Wuhan to set up mass quarantine centers. The death toll and number of infections continued to soar in China, officials said Thursday. It has been two weeks since the authorities in Wuhan, the center of the coronavirus outbreak, declared that the city would be locked down as they tried to contain the virus’s spread. The cordon that was first imposed around the city of 11 million quickly expanded to encircle roughly 50 million people in the province of Hubei. The lockdown is unprecedented in scale and experts have questioned its effectiveness. Wuhan and Hubei Province have borne the brunt of the epidemic as the sudden shutdown of transportation links into and around the area slowed the shipping of vital medical supplies. The fatality rate in Wuhan is 4.1 percent and 2.8 percent in Hubei, compared to 0.17 percent elsewhere in mainland China.
The Chinese government says the quarantine has prevented a broader outbreak, but its effects on residents of the lockdown zone have raised ethical concerns. ‘This is almost a humanitarian disaster’ for the central Chinese region, said Willy Lam, an adjunct professor at the Center for China Studies at the Chinese University of Hong Kong, who cited insufficient supplies of medical equipment, food and other necessities. ‘The Wuhan people seem to be left high and dry by themselves.’ Health officials said on Thursday that 563 people had died from the virus, up from nearly 500 people the day before, and that 28,018 cases had been confirmed.”
SOUTH CHINA MORNING POST/Agence France-Presse
Coronavirus: World Bank to lower global growth forecast over outbreak
February 5, 2020
“The World Bank will revise its global growth forecast downward due to the new coronavirus, the president of the multilateral lender said on Tuesday, amid fears the epidemic in China will harm global supply chains. The World Bank last month forecast a rebound in global growth this year after the easing of trade tensions between the US and China that had contributed to a decline in 2019. But World Bank President David Malpass warned the virus that has killed hundreds in China and closed businesses and borders posed a threat to the prediction. ‘There will be a lowering of forecasts for at least the first part of 2020,’ he said. ‘A lot of Chinese goods come out to the rest of the world in the belly of aircrafts that are carrying passengers,’ Malpass added.
But as airlines worldwide have suspended flights to and from China and some of its neighbours have shut their borders ‘you need to adjust the supply chains in order to get the goods out to make the products that the whole world economy is operating on’, he said. The World Bank economic outlook predicted the world economy would grow 2.5 per cent this year, from 2.4 per cent last year. Malpass was discussing the economic outlook with Janet Yellen, former chairwoman of the US Federal Reserve, who agreed that the virus would take a bite out of growth. The virus ‘seems certain to have a significant effect at least for a quarter or two’ on China and, given its economic heft, that will surely hit the global economy, Yellen said.”
FOX BUSINESS/Evie Fordham
Boeing, coronavirus push White House growth forecast lower: Mnuchin
February 6, 2020
“Boeing’s woes and the Chinese coronavirus outbreak have caused the White House to lower its projections for the U.S. economy, Treasury Secretary Steven Mnuchin said on “Mornings with Maria” Thursday. ‘I think our projections have been reduced, because of Boeing and other impacts, so it will be lower,’ Mnuchin said. ‘We would have hit 3% … There’s no question that the virus will have some impact on global growth and some impact on the U.S.’ He said there are many unknowns about coronavirus’ impact but that “after another two weeks we’ll have a much better way to model how this virus spreads.”
Mnuchin said in mid-January Boeing would have an outsized impact on the U.S. economy, before the coronavirus outbreak was dominating headlines. Mnuchin’s claims come after President Trump’s chief economic adviser Larry Kudlow said exports in the ‘phase one’ trade deal with China will be slowed down because of the coronavirus. ‘It is true the phase one trade deal, the export boom from that trade deal, will take longer because of the Chinese virus,’ Kudlow said. ‘On the other hand, the North American trade deal, USMCA, is going to unlock tremendous investment … Manufacturers will benefit.’ Chinese Ambassador Huang Ping responded to the comments Tuesday, saying he hopes the virus will not affect the trade deal. Huang said he did not know if China would use a clause about unforeseeable events in the trade deal to help the country meet its commitments.”
There’s a 70% chance of recession in the next six months, new MIT study finds
February 5, 2020
“There’s a 70% chance that a recession will hit in the next six months, according to new research from the MIT Sloan School of Management and State Street Associates. The researchers created an index comprised of four factors and then used the Mahalanobis distance — a measure initially used to analyze human skulls — to determine how current market conditions compare to prior recessions. ‘The Mahalanobis distance was originally conceived to measure the statistical similarity of the values of a set of dimensions for a given skull to the average values of those dimensions for a chosen group of skulls,’ the researchers explained. It measures the distance between a point and a certain distribution.
Using this principle, the researchers analyzed four market factors — industrial production, nonfarm payrolls, stock market return and the slope of the yield curve — on a monthly basis. They then measured how the current relationship between the four metrics compares to historical readings.
Looking at data back to 1916, the researchers said that the index was a reliable recession indicator since it rose leading up to every prior recession. They found that when the index topped 70%, the likelihood of a recession in the next six months rose to 70%. As of November 2019, the reading on the index was 76%. Of course, economic indicators suggest that the economy is chugging along just fine. In January, private payrolls posted the highest monthly gain since May 2015, and December housing starts soared to a 13-year high. The U.S. economy grew 2.1% in the fourth quarter of 2019, and 2.3% for the entire year.”