REUTERS/ K. Sathya Narayanan
Gold edges higher but faces first weekly decline in six
January 17, 2020
“Gold edged higher on Friday but was on track to post its first weekly decline in six as solid Chinese data and a preliminary U.S.-China trade deal improved risk appetite. Palladium jumped over 3% to register another record high as the market grapples with deep supply shortages. Spot gold was up 0.1% at $1,554.69 per ounce at 1401 GMT, but was heading for a weekly drop of around 0.5% – its biggest since early November.
‘You would expect gold to trade a little bit lower after the economic data from China. (But) what is pushing gold prices higher is the sense of caution as to what to expect after the Phase 1 trade deal,’ said FXTM analyst Lukman Otunuga. ‘I think the sense of uncertainty and caution is encouraging investors to take positions in gold.’ World shares hit record highs after data showed China’s economy was stabilizing and the world’s second-largest economy ended 2019 on a somewhat firmer note as the trade truce revived business confidence. However, investors were still nervous as the Phase 1 deal failed to address tariffs and some important core issues.”
KITCO NEWS/Jim Wyckoff
Gold, silver prices up; focus on better consumer demand
January 17, 2020
“Gold and silver prices are moderately higher in early U.S. futures trading Friday. The precious metals market bulls are presently focusing on better global economic prospects in 2020 igniting better consumer demand for the metals. The safe-haven metals are faring well despite keener risk appetite that sees the U.S. stock indexes at record highs and a world geopolitical scene that is presently quiet.
Asian and European stock markets were mixed to firmer overnight. U.S. stock indexes are pointed toward higher openings and at record highs again when the New York day session begins. Trader and investor risk appetite remains robust amid a quieter geopolitical front. Given the low interest rate environment at present, and no signs of inflation becoming problematic any time soon, many investors reckon the only game in town is and will be buying shares. However, veteran traders are realizing that a whole lot of bullish stock market traders are now on one side of the boat. That situation may not last long. In overnight news China, the world’s second-largest economy, had its worst annual GDP growth pace in 29 years in 2019, at 6.1% … All in all, the marketplace deemed the data as more upbeat because China’s economy is picking up speed from what was seen a few months ago.”
MARKET WATCH/Steve Goldstein
From a U.S. stock surge to a bursting of China’s triple bubble, here are 10 possible shockers for 2020, according to Credit Suisse
January 17, 2020
“Three weeks into the new year and there really haven’t been that many surprises. Stocks keep reaching new records, and companies with what one could charitably say are elevated valuations, like plant-based food company Beyond Meat and car maker Tesla, are back in fashion. A brief flare-up of tensions in the Middle East seems to have been quickly relegated to history. The impeachment trial for President Donald Trump looks like it will be short-lived … Now for a few ghastly shockers. One is where China’s gross domestic product growth slumps to below 4%. The Credit Suisse team warns of a triple bubble in credit, real estate and investment, and says that in Japan, the U.S., Ireland and Spain, recessions happened within a year of house prices falling … Another would be technology stocks underperforming. Global technology is overbought, the sell side is very positive on the semiconductor sector, and, statistically, the best-performing three sectors in the U.S. and Europe tend to underperform the following year. Plus, regulatory headwinds are increasing.
A funding crisis in Italy is another nasty surprise the Credit Suisse team imagines. Italy’s per capita growth is the weakest in Europe, it is losing export market share, it has one of the lowest levels of secondary education in Europe, and very challenging demographics. Either a political crisis—Italy is no stranger to those—or a downgrade of Italian debt by credit-rating firms could trigger such a crisis, which could drive spreads on Italian government bonds versus German debt much higher, trigger an Italian recession, and weigh on European stocks.”
Asia Gold-China sees brisk festive purchases; Indian demand tame
January 17, 2020
“Physical gold purchases gathered steam ahead of the Lunar New Year celebrations in China and Singapore, while demand in India dwindled this week, encouraging retailers to offer more discounts. The Chinese Lunar New Year falls during the last week of January and gold demand is usually boosted during the period. ‘Demand has been increasing – but I think it is more about seasonal demand picking up rather than a change in a trend,’ said Samson Li, a Hong Kong-based precious metals analyst at Refinitiv GFMS. ‘Demand should start to dry up after the New Year.’ Premiums of $5-$6 an ounce over the benchmark price were charged in top-consumer China, compared with $7-$7.50 last week. In Singapore markets, premiums rose to $0.60-$0.80 an ounce versus $0.50-$0.60 last week.
“We’re seeing the usual buying for the upcoming Chinese New Year … Compared to last year, retail buying is 10-15% better for this period,” said Brian Lan, director at Singapore dealer GoldSilver. Demand was fragile in India, the world’s second largest gold consumer, where dealers were offering a discount of up to $11 an ounce over official prices, compared with a discount of $7 last week. The domestic price includes a 12.5% import tax and 3% sales tax. Gold futures were trading around 39,770 rupees per 10 grams on Friday, after hitting a record high of 41,293 rupees earlier this month.”
U.S. Passes Global Growth Baton to Rest of World, For Now
January 16, 2020
“America’s days as pace-setter for the world economy may be coming to an end. With the International Monetary Fund releasing new forecasts on Monday, a rising number of economists are predicting that the U.S.’s momentum will fall behind that of the rest of the world as global growth bottoms out and looks set to slowly pick up in 2020. ‘The world leads and the U.S. lags,’ Joachim Fels, global economic adviser for Pacific Investment Management Co., which oversees $1.91 trillion in assets, told Bloomberg Television. In one of the more pessimistic forecasts out there, Pimco predicts the U.S. expansion could slow to about 1% in the first half of this year before accelerating.
The projected 2020 pattern would be in contrast to what happened in the past two years, when U.S. demand was boosted by President Donald Trump’s tax cuts while economies elsewhere were weaker and weighed down by his America First trade policies. ‘We are turning on its head the story we’ve been telling each other for the last two years, namely that Europe was bad and the U.S. was good,’ said Torsten Slok, chief economist for Deutsche Bank AG. That reversal of fortunes has implications for investors. European stock markets should outperform the U.S. while yields on German bunds should converge upward toward those on U.S. Treasury securities, Slok said.”
U.S.-China Trade Deal: A $40 Trillion Trap on Trump’s Wall Street Buddies?
January 17, 2020
“There’s one thing we can say for sure about President Donald Trump’s trade talks with his Chinese counterpart Xi Jinping: both men think they’re playing the other for a fool. Folks can debate who’s the real dupe in the ‘phase one’ negotiations. On balance, though, Xi seemed to get the better of the Art of the Deal White House. Trump didn’t score much more than the U.S. had with the Trans-Pacific Partnership. The extra $200 billion of U.S. goods China will buy doesn’t alter the mechanics of the trade relationship one iota. Yet might Wall Street end up being the loser here?
The U.S. investment game just won unprecedented access to China’s financial sector. Just not the kinds of assets Wall Street’s small army of lobbyists might’ve preferred. Once U.S. institutions apply for asset-management licenses, they will soon be able to buy non-performing loans directly from mainland banks—and increase their exposure to the debt stumble for which many observers think Beijing is due. ‘And just like that, U.S. pensioners will backstop China’s $40 trillion financial system,’ quipped Zero Hedge. Snark aside, you have to wonder why investors still traumatized by Wall Street’s subprime crisis would want any part of China’s so-called Minsky moment. That’s when a debt-and-credit-driven boom meets a nasty end. No industrializing economy has avoided one. Not Japan in 1990, nor Latin America in 1994, Southeast Asia in 1997, Russia in 1998, nor the U.S. in 2008. Can China beat the system, so to speak? No one can say, of course.”