KITCO NEWS/Jim Wyckoff

Gold, silver prices up as buyers step back into markets

March 20, 2020

“Gold and silver prices are trading solidly higher in early U.S. trading Friday. The precious metals prices are rallying as more confident buyers are stepping in after the markets had been pounded down recently on a ‘sell what you can’ trader mentality that also pervaded many other markets earlier this week. The buying in gold and silver late this week is likely safe-haven demand, along with short covering in the futures market following the recent big losses. April gold futures were last up $22.70 an ounce at $1,503.30.

Trading today will be extra important for the overall marketplace, from a psychological perspective. After Thursday’s gains, if the U.S. stock indexes can on Friday put together a two-day winning streak for the first time in weeks, then many traders and investors will head into the weekend thinking the markets panic has now passed and most markets have at least stabilized. Make no mistake, the economic and human toll from the Covid-19 pandemic will continue to rise, and likely dramatically on both counts. California is headed for a complete lockdown of its citizens, and some health officials are predicting the most populous state in the U.S. (and the world’s fifth- largest economy) will see up to half of its population infected by the illness.”

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BLOOMBERG/Sophie Alexander

California’s 40 Million Residents Ordered to Stay at Home

March 19, 2020

California Shut Down“California Governor Gavin Newsom ordered that all of the state’s 40 million residents go into home isolation starting Thursday evening, marking the most stringent U.S. effort yet to stymie the spread of the novel coronavirus. ‘This is a moment where we need some straight talk,’ Newsom said in a press conference. “As individuals and as a community we need to do more to meet this moment.’ The shelter-in-place order vastly expands mandates put in place earlier this week across the San Francisco Bay Area. It allows people in the most populous U.S. state to leave their homes for needed items like groceries and medicine, while otherwise requiring that they limit their social interactions. Businesses not deemed essential will be shut.

As of Thursday evening, California had about 908 cases of the coronavirus and 18 deaths, a tally that’s lower than states including New York and Washington but sure to increase as testing accelerates. New York Governor Andrew Cuomo on Thursday ordered businesses to keep 75% of their workforce home, though he’s stopped short of issuing a broad shelter-in-place requirement.”

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MARKET WATCH/Jeffry Bartash

Echoes of the Great Depression? U.S. economy could post biggest contraction ever

March 20, 2020

depression era newspaper“The deepening coronavirus crisis is increasingly likely to hit the U.S. economy harder than at any time since the early stages of the Great Depression some 90 year ago. With many industries partly or even completely shutting down, the U.S. could post the biggest economic contraction since the government began keeping quarterly records shortly after World War Two.  The devastation could even rival some of the worst stretches in the early 1930s, when the whole world entered a prolonged slump. The U.S. economy shrank by an astonishing 13% in 1932 (the U.S. has annual GDP estimates for the 1930s).

‘The United States is facing what could become the most serious economic crisis since the Great Depression of the 1930s,’ contended Rep. Don Beyer, a Democrat from Virginia who is vice chairman of the Joint Economic Committee in Congress. Wall Street forecasters have been slashing their estimates frenetically as the damage mounts. JP Morgan is the most pessimistic, predicting a stunning 14% annualized decline in gross domestic product in the three-month period running from April to June. How bad is that? The biggest recorded quarterly decline in modern U.S. history was 10% in the first three months of 1958 during a short, steep recession. Some 2M people lost their jobs in less than a year. Even during the worst of the Great Recession, the biggest contraction in GDP was 8.4% in the 2008 fourth quarter.  Not far behind JP Morgan is Deutsche Bank, which predicts the economy will shrink 13% in 2nd quarter.  Oxford Economics puts the decline at 12% and the loss of 1 million jobs. Capital Economics sees a 10% decline in GDP, TS Lombard 8.4% and Nationwide 8%.”

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CNBC/Stephanie Landsman

David Stockman says coronavirus is sparking crisis, warns ‘Wall Street is toast’

March 19, 2020

be prepared sign“Main Street may be more resilient than Wall Street during the coronavirus crisis. Former Office of Management and Budget director David Stockman warns the pandemic is exposing risky speculation and shaky market fundamentals. ‘Wall Street is toast. It’s going to end as a financial crisis because the illusion that central banks always have your back and the economy would keep expanding and growing forever and ever … was complete nonsense.’ Stockman, served under President Reagan and has been forecasting an epic decline for years.

Last year, he blamed ‘day traders, chart monkeys [and] robo machines’ for creating a dangerous market environment that lacked rationality and got flooded with overvalued stocks. He believes fiscal and monetary policy is not equipped to deal with the fallout. ‘There are going to be bailouts,’ Stockman said. His base case is the S&P 500 will fall to 1,600, a more than 50% collapse from the index’s all time high hit last month. The move would imply another 34% plunge from current levels. ‘We’re going to have a recession. It’s going to be fairly prolonged,’ he added. ‘Covid-19 is a severe supply side shock.’ Stockman contends help from the Fed won’t be effective … On the fiscal side, Stockman suggests the country cannot afford the price tag to bail out the country.”

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THE ATLANTIC/Annie Lowrey

This Is Not a Recession. It’s an Ice Age.

March 20, 2020

wall street bull statue“We can’t say we’re in a recession yet, at least not formally. A committee decides these things—no, really. The government generally adopts the view that a contraction is not a recession unless economic activity has declined over two quarters. But we’re in a recession and everyone knows it. And what we’re experiencing is so much more than that: a black swan, a financial war, a plague … For weeks or months, we won’t know how much GDP has slowed down and how many people have been forced out of work. Government statistics take a while to generate. They look backwards, the latest numbers still depicting a hot economy near full employment. To quantify the present reality, we have to rely on anecdotes from businesses, surveys of workers, shreds of private data, and a few state numbers. They show an economy not in a downturn or a contraction or a soft patch, not experiencing losses or selling off or correcting. They show evaporation, disappearance on what feels like a religious scale.

What is happening is a shock to the American economy more sudden and severe than anyone alive has ever experienced. The unemployment rate climbed to its apex of 9.9 percent 23 months after the formal start of the Great Recession. Just a few weeks into the domestic coronavirus pandemic, and just days into the imposition of emergency measures to arrest it, nearly 20 percent of workers report that they have lost hours or lost their job. One payroll and scheduling processor suggests that 22 percent of work hours have evaporated for hourly employees, with three in 10 people who would normally show up for work not going as of Tuesday. Absent a strong governmental response, the unemployment rate seems certain to reach heights not seen since the Great Depression or even the miserable late 1800s. A 20 percent rate is not impossible.”

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CNN BUSINESS/Annalyn Kurtz

Goldman Sachs predicts 2.25 million Americans filed initial unemployment claims this week, the highest on record

March 19, 2020

unemployed highlighed“Americans are starting to lose their jobs in response to the coronavirus pandemic, and economists expect it’s only going to get worse. And quickly. Early Thursday, a government report showed 281,000 Americans filed for their first week of unemployment benefits last week. It was a sudden 33% jump over the week before and the biggest percentage increase since 1992. But next week’s report is likely to be far worse, according to Goldman Sachs economists. They predict the report will show 2.25 million Americans filed for their first week of unemployment benefits this week — eight times the number of people who filed last week and the highest level on record.

That estimate is based on news reports of an unprecedented surge in layoffs. Airlines, restaurants, hotels, sports events and retailers are all struggling to cope with a sudden drop in revenue, as people stay home to prevent the spread of the virus.  State employment agencies have been grappling with a sudden spike in calls, inquiring about unemployment benefits. Florida’s Department of Economic Opportunity received 76,000 calls between Monday and Wednesday, up from about 28,000 calls for the entire week before.”

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