REUTERS/ Diptendu Lahiri

Gold retreats from $1,600 as markets eye U.S. reaction after Iran attacks

January 8, 2020

“Gold surged past the $1,600 level for the first time in nearly seven years earlier on Wednesday after Iran conducted retaliatory attacks against U.S. forces in Iraq, but the metal pared gains as investors awaited reaction from the White House.  Spot gold rose 0.7% to $1,585.30 per ounce by 0830 GMT, having earlier surged as much as 2.4% to its highest since March 2013 at $1,610.90. U.S. gold futures rose 0.5% to $1,582.90 per ounce.

‘Gold is paring some gains right now as the retaliation was not seen as aggressive as the markets thought it would be and investors are booking profit for that reason,’ Saxo Bank analyst Ole Hansen said.  ‘How gold will move from here is pinned on what U.S. President Donald Trump says when America wakes up,’ Hansen added, saying at the end of this day we will either see gold back at $1,600 levels or going down to the $1,550.  Iranian state television said that at least 80 ‘American terrorists’ were killed in attacks involving 15 missiles Tehran launched on U.S. targets in Iraq on Wednesday morning.”

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FOX NEWS/Frank Miles

Iran Supreme Leader calls missile strike a ‘slap in the face,’ says it’s not enough

January 8, 2020

Iran Missile Strike“Iran’s Supreme Leader Ayatollah Ali Khamenei said Wednesday that ballistic missile attacks targeting U.S. military and coalition forces in Iraq Wednesday morning were ‘a slap in the face’ to the United States. Khamenei said the U.S. should leave the region, adding, ‘Military action like this is not sufficient. What is important is ending the corrupting presence of America in the region,’ Reuters reported. Iran fired as many as 15 ballistic missiles into Iraq Wednesday, officials said, in a major retaliation by the rogue regime after a U.S. drone strike that killed Iranian Quds Force Gen. Qassem Soleimani last week.

Ten missiles hit the Ain al-Asad Air Base, one missile hit a military base in Erbil and four missiles failed to hit their targets, according to a U.S. military spokesman for Central Command, responsible for American forces in the Middle East. The attacks unfolded in two waves, about an hour apart.

Initial assessments showed ‘no U.S. casualties,’ a U.S. military official in Baghdad told Fox News.

Iranian state television later claimed – without evidence – that the strikes killed ‘at least 80 terrorist U.S. soldiers’ and damaged helicopters, and drones at the Ain al-Asad airbase.”

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BLOOMBERG/Andy Mukherjee

Worst Economy in 42 Years Needs an Honest Look

January 7, 2020

Worst Economy in 42 Years“India’s economy hasn’t been this bad in 42 years. Pulling it back from the abyss will require more honesty than imagination. Tuesday’s advance estimates for the financial year ending on March 31 peg the economy’s inflation-adjusted growth rate at 5%, a third year of slowdown. And even this figure could be optimistic. Consumer demand is in the doldrums and government spending — the only thing supporting growth — is bound to be pruned in the closing months of the fiscal year to avoid a budget blowout.

So much for the real economy. The main function of these advance statistics is to aid the upcoming government budget, which requires a handle on nominal GDP. By that measure, not only is the current fiscal year’s 7.5% growth the worst since 1978, it’s substantially lower than the 12% expansion the government had penciled in when projecting taxes … When Prime Minister Narendra Modi’s government returned to power in 2019, it made rosy projections for public finances by completely glossing over the previous year’s shortfall in tax revenue equal to 1% of GDP … More well-grounded tax assumptions will reveal a big resource gap — closer perhaps to 5% of GDP, including borrowings not captured in the budget but whose burden falls on the taxpayer nonetheless. Indian state governments have a deficit equal to 3% of GDP, higher than the budgeted 2.6%.”

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FORBES/Sergei Klebnikov

Bank of England Chief: Global Economy Is Heading Towards A ‘Liquidity Trap’

January 8, 2020

Global Economy Is Heading Towards A Liquidity Trap“The global economy is heading for a ‘liquidity trap’ and central banks are running low on ways to fight a future recession, warned Mark Carney, governor of the Bank of England, in a recent interview with the Financial Times. The Bank of England governor stated his concern that central banks around the world are ill-prepared to prevent the next major economic downturn. The greatest concern for the British economy and those of other advanced countries is how central banks would be able to combat a future economic recession, and monetary policy alone may not be enough to do so, Carney said.

The outgoing Bank of England chief also warned that the global economy is heading for a ‘liquidity trap,’ which occurs when monetary policy loses all effectiveness and fails to encourage any additional spending. ‘It’s generally true that there’s much less ammunition for all the major central banks than they previously had and I’m of the opinion that this situation will persist for some time,’ he said.

Like other bank leaders, such as the European Central Bank’s Mario Draghi and his successor, Christine Lagarde, Carney argues that governments should also use fiscal policy tools like tax cuts or boosts to public spending to combat a future recession. … ‘We have a statutory responsibility to identify the major risks to financial stability,’ Carney said in the interview. ‘We can’t dodge that.’”

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MARKET WATCH/Mark DeCambre

The man who called Dow 20,000 says one of the biggest stock-market dangers in 2020 is ‘people could be throwing risk to the wind’

January 7, 2020

Throwing Risk to the Wind“‘Actually, one of the dangers is that people could be throwing risk to the wind and this thing could be a runaway. We sometimes call that a melt-up and produces prices too high and then if there’s a shock, you come down to Earth and that could impact sentiment.’

That is Jeremy Siegel, professor of finance at the Wharton School of Business, expressing what he perceives as one of the biggest market risks in 2020, in an interview with Barron’s. The professor who forecast that the Dow would see 20,000 at the end of 2015 says that market fundamentals are sufficient to support the recent run-up in U.S. equity benchmarks but worried that euphoria, or a meltup, could take stocks to unsustainable peaks.

‘I think this market is fully valued and not undervalued, but I don’t think it’s overvalued,’ Siegel told Market Brief, pointing to low interest rates fostered by the Federal Reserve and signs of a detente between Beijing and Washington on the tariff front, as reasons for his fairly positive outlook. The academic’s comments come as markets briefly faced selling pressure, with the Dow, the S&P 500 index and the Nasdaq Composite Index on the verge of producing a second straight decline, until bouncing back, following a U.S. airstrike on Friday that killed Iranian Major Gen. Qassem Soleimani, escalating Middle East tension that could ripple across the globe.”

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ASSOCIATED PRESS/Jill Lawless and Raf Casert

EU chief warns UK must compromise to get Brexit trade deal

January 8, 2020

UK Must Compromise“The president of the European Commission warned Britain on Wednesday that it won’t get the ‘highest quality access’ to the European Union’s market after Brexit unless it makes major concessions. In a friendly but frank message to the U.K., Ursula von der Leyen said negotiating a new U.K.-EU trade deal will be tough. She also said the end-of-2020 deadline that British Prime Minister Boris Johnson has imposed on negotiations makes it ‘basically impossible’ to strike a comprehensive new agreement in time.

Von der Leyen is visiting Johnson at 10 Downing Street in London Wednesday for the first time since the British leader’s election victory last month. Johnson’s Conservatives won a substantial parliamentary majority in Britain’s Dec. 12 election, giving him the power to take the U.K. out of the EU on Jan. 31. It will be the first nation to ever leave the bloc. Britain’s departure will be followed by a transition period in which the U.K.-EU relationship will remain largely unchanged while the two sides negotiate a new trade arrangement. Johnson says the U.K. is seeking a free trade deal, but doesn’t want to agree to keep EU rules and standards. Britain wants to be free to diverge from EU regulations in order to strike new trade deals around the world … That could cause problems. Speaking at the London School of Economics before her meeting with Johnson, von der Leyen warned that ‘without a level playing field on environment, labor, taxation and state aid, you cannot have the highest quality access to the world’s largest single market.”

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