Gold inches higher on virus concerns; set for monthly gain
January 31, 2020
“Gold prices inched higher on Friday and were set to post their biggest monthly gain in five, as the coronavirus epidemic fuelled economic slowdown concerns, despite the World Health Organization’s confidence that the outbreak could be controlled. Spot gold rose 0.2% to $1,576.28 per ounce by 0756 GMT. The metal has gained 3.9% so far this month, on course for its best month since August. U.S. gold futures declined 0.6% to $1,580.10.
The WHO on Thursday declared the coronavirus outbreak a global emergency, however, it opposed restrictions on travel or trade with China and said the actions taken by Beijing can ‘reverse the tide’.
‘Even as we saw some improvement in economic data and the WHO statement (showed confidence in China) … they are yet to come out with any vaccine for coronavirus,’ said Vandana Bharti, assistant vice-president of commodity research at SMC Comtrade. ‘Underlying fears are there and dips will be used as a buying opportunity,’ she said. The new coronavirus has claimed 213 lives so far in China and has spread to at least 22 countries, while paralysing many provinces in the world’s second-largest economy with lockdowns, travel restrictions and closed businesses.”
KITCO NEWS/Ann Golubova
There is fear out there’: People are taking advantage of higher gold prices
January 30, 2020
“As gold prices hit multi-year highs in 2019 and beginning of 2020, people lined up to sell their most precious gold items, citing fear of the always-rising stock market, according to one American jeweler. The U.S. has a growing aging population that is looking through their old jewelry boxes and taking advantage of higher gold prices to support their lifestyle or help their kids out, House of Kahn Estate Jewelers president Tobina Kahn told Kitco News last week. Kahn, who owns two family stores in Palm Beach, Florida, and Chicago, Illinois, reported a 50% increase in business in 2019 as people rushed to sell their gold.
‘There is a lot of fear out there, which helps gold. We have a virus out there. It is beyond bad. People are making their own beliefs on what they hear in the news,’ Kahn said. The economic situation is looking bleak and the retired population, which is living longer, needs additional funds. ‘People are realizing there is something wrong with the stock market. The average American is becoming smarter. They are realizing there is something wrong with the mathematical equation.’”
Dow drops 350 points as airlines suspend service to China due to coronavirus
January 31, 2020
“Stocks fell broadly on Friday, wiping out the Dow Jones Industrial Average’s gain for January, as investors grew increasingly worried about the potential economic impact of China’s fast-spreading coronavirus. The Dow dropped 350 points, or 1.2%, falling to its low of the session after Delta and American suspended all flights between China and the U.S. The S&P 500 was down 1% while the Nasdaq Composite dipped 0.9%. The major averages slid even as Amazon surged 9% to a $1 trillion market value, joining an elite club shared only by Apple, Microsoft and Alphabet. China’s National Health Commission confirmed on Friday that there have been 9,692 confirmed cases of the coronavirus, with 213 deaths.
The World Health Organization (WHO) recognized the deadly pneumonia-like virus as a global health emergency on Thursday, citing concern that the outbreak continues to spread to other countries with weaker health systems. WHO’s designation was made to help the United Nations health agency mobilize financial and political support to contain the outbreak. The virus, which was first discovered in the Chinese city of Wuhan, has now spread to at least 18 other countries and has dampened sentiment over global economic growth. ‘The outbreak of the coronavirus has added another headwind to the near-term outlook for stocks,’ said Peter Berezin, chief global strategist at BCA Research, said in a note. ‘Viruses often become less lethal as they mutate because a virus that kills its host is also a virus that kills itself. Unfortunately, in a world of mass travel, a virus can spread across the globe before it has time to lose potency.’”
Stock Losses Deepen, Bonds Rally on Virus Jitters: Markets Wrap
January 30, 2020
“Stocks extended losses and bonds climbed on heightened concern that the spread of the coronavirus will slam global economic growth. The Dow Jones Industrial Average erased its 2020 advance as investors remained on edge over the impact of the disease that’s now infected about 10,000 people around the world …”
The final week of January has been tumultuous across global markets, as a barrage of corporate earnings, central-bank decisions and economic data landed in the growing shadow of the deadly epidemic. The outbreak will cut U.S. economic growth by 0.4 percentage point in the first quarter as the number of tourists from China plunges and exports to the Asian nation slows, according to Goldman Sachs Group Inc. Still, a report showed that American consumer sentiment increased in January to an eight-month high, indicating sustained optimism in the face of the coronavirus. Global stocks headed toward their worst week and month since August, with the S&P 500 trimming its January advance to less than 1%. Alongside technology, defensive companies such as utilities and real estate have driven gains in the U.S. equity benchmark this month. Energy and material shares have underperformed.”
MARKET WATCH/Shawn Langlois
Do NOT buy the dip, warns investor who says a ‘brutal bear market’ looms
January 30, 2020
“Kevin Smith, chief investment officer at Crescat Capital, says the ‘bear case for U.S. stocks has never been stronger’ and it’s time for investors to be aware of the ‘gravity’ of the current situation. ‘We certainly did not predict the Coronavirus, but it may prove to be the catalyst to tip this market that is trading at truly historic valuation levels after a record long U.S. economic expansion,’ he told clients in a note this week. ‘Median EV-to-sales for the S&P 500, based on our work recently reached an insane, euphoric level of 3.6 times, two times than the tech bubble peak.’
‘A top this month would certainly make sense to us given the recent overbought conditions, unsustainably high bullish sentiment levels, bear capitulation (not Crescat), and deteriorating macro indicators,’ Smith wrote. He said the median enterprise value-to-sales is one of the best ways to understand just how inflated the current stock bubble is. The ratio is seen by many, including Smith, as more accurate than other more commonly cited valuation metrics in part because it takes company debt into account. ‘Investors will need a good grounding in valuation and business cycle analysis to reject the common buy-the-dip advice that is soon to become prevalent in the still early stages of what is likely to become a brutal bear market,’ he warned.”
THE WALL STREET JOURNAL/Max Colchester
After Years of Political Turbulence, Brexit Is Finally Happening
January 31, 2020
“The U.K. is set to formally quit the European Union late Friday, closing the chapter on nearly half a century of integration with its European neighbors as it looks to chart a new but uncertain course in the world. The day, which follows four years of nearly unprecedented political chaos triggered by the 2016 Brexit referendum, marks a watershed moment for both the U.K. and the EU. The bloc is losing its second-largest economy and a major military force. Britain is leaving the umbrella of a major trading power and will begin a process to forge a new place on the global stage.
‘The most important thing to say tonight is that this is not an end but a beginning,’ Prime Minister Boris Johnson is due to tell the nation Friday evening. ‘This is the moment when the dawn breaks and the curtain goes up on a new act.’ What that act will look like is still unknown. As of 11 p.m. U.K. time, Britain will quit the club of 28 European nations and enter a transition period of at least 11 months as it negotiates future relations with the bloc. During that time, the U.K. will legally be outside the EU but nothing will be different for citizens on either side. Only once the transition ends does the start of a unique experiment in de-globalization truly begin, illustrating what happens when a country erects new barriers to trade with its largest commercial partner. ‘We are about to run a series of unparalleled experiments,’ said Anand Menon, professor of politics at King’s College London.”