KITCO NEWS/Neils Christensen

Gold price jumps as Fed announces open-ended QE

March 23, 2020

“The gold market appears to be reacting to massive central-bank liquidity after the Fed made its third emergency announcement in as many weeks.  On Monday, the Federal Reserve announced an open-edited quantitative-easing program and said it will purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy. ‘The coronavirus pandemic is causing tremendous hardship across the United States and around the world,’ the Federal Reserve said in its statement. ‘While great uncertainty remains, it has become clear that our economy will face severe disruptions. Aggressive efforts must be taken across the public and private sectors to limit losses to jobs and incomes and to promote a swift recovery once disruptions abate.’

Gold prices are up more than 2% in reaction to the Fed’s latest action to support the U.S. economy, which many economists expect will fall into a recession later this year … Analysts at Blue Line Futures said that that not only is the latest announcement could support gold prices on two fronts. ‘It assures liquidity in financial markets for the foreseeable future and reduces the volatility we’ve become accustomed to, one that gold has become a casualty of,’ the analysts said.  Adam Button, managing director at Forexlive.com, equated the move to a nuclear bomb of monetary policy. ‘Today’s announcement is unprecedented in both size and scope. It is a complete perversion of market functioning,’ he said. Button has said that he is bullish on gold in the long term.”

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REUTERS/Peter Hobson

Three Swiss gold refineries suspend production due to virus threat

March 23, 2020

man inside tunnel“Three of the world’s largest gold refineries said on Monday they had suspended production in Switzerland for at least a week after local authorities ordered the closure of non-essential industry to curtail the spread of the coronavirus.  The refineries – Valcambi, Argor-Heraeus and PAMP – are in the Swiss canton of Ticino bordering Italy, where the virus has killed more than 5,000 people.

Switzerland is a global hub for precious metals refining. The three refineries between them process around 1,500 tonnes of gold a year in Ticino – a third of total global annual supply – as well as other precious metals such as silver.  Valcambi and PAMP said they would suspend operations until March 29. Argor said it would do so until April 5.  The Ticino local government order, issued on Friday, is in force until March 29.”

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CNBC/Jeff Cox

The Fed just pledged asset purchases with no limit to support markets

March 23, 2020

federal reserve“The Federal Reserve said Monday it will launch a barrage of programs aimed at helping markets function more efficiently amid the coronavirus crisis. Among the initiatives is a commitment to continue its asset purchasing program ‘in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy.’ That represents a potentially new chapter in the Fed’s ‘money printing’ as it commits to keep expanding its balance sheet as necessary, rather than a commitment to a set amount. The Fed also will be moving for the first time into corporate bonds, purchasing the investment-grade securities in primary and secondary markets and through exchange-traded funds. The move comes in a space that has seen considerable turmoil since the crisis has intensified and market liquidity has been sapped.

Markets initially reacted positively to the moves but headed back lower in early trading, with the Dow Jones Industrial Average down 350 points. Other initiatives include an unspecified lending program for Main Street businesses and the Term Asset-Backed Loan Facility implemented during the financial crisis. There will be a program worth $300 billion ‘supporting the flow of credit’ to employers, consumers and businesses and two facilities set up to provide credit to large employers. There are no details yet on the Main Street program, with a news release saying it will help ‘support lending to eligible small and-medium sized businesses, complementing efforts by the SBA.’”

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MARKET WATCH/Jonathan Nicholson

Coronavirus stimulus package stumbles in Senate

March 23, 2020

mitch mcconnell“Brinksmanship over the more-than-$1 trillion coronavirus economic aid bill continued Sunday, as Democrats prevented it from moving forward on the Senate floor. The debate took on an added dimension as the failed procedural vote on the floor came as U.S. stock futures markets opened sharply lower, allowing Republicans to pin the blame for the market drop on Democratic recalcitrance. ‘The markets are already reacting to this outrageous nonsense. We have an obligation to the American people to deal with this emergency and to deal with it tomorrow,’ Senate Majority Leader Mitch McConnell said on the Senate floor after the 47-47 procedural vote. To move forward, Republicans needed 60 votes. Democrats blocked a plan by McConnell to re-vote at 9:45 a.m. Monday. The Senate will reconvene at noon.

The measure would have sent checks to all Americans, increased unemployment insurance and set up a novel plan using the Federal Reserve to make loans to companies hurt as economic activity across the country shuts down. Despite the dramatic vote, the timing of which was set by McConnell, both sides were still in negotiating mode. Senate Democratic Leader Chuck Schumer, D-N.Y., said, ‘The bipartisan negotiations on this package continue, even as we speak.’  For Democrats, one of the main sticking points has been the hundreds of billions of dollars the bill would provide as relief for industries affected by the coronavirus outbreak.”

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CNN BUSINESS/Charles Riley

The US is running two races against coronavirus. It has to win both

March 23, 2020

running a race“The U.S. is now locked in a race against time on two crucial coronavirus fronts – one medical, the other legislative. The speed at which each issue is addressed has huge implications for investors. The big picture: The number of coronavirus cases in the United States is approaching 35,000. More than 400 people have died in the country. Nearly half the cases are in New York state, making it the epicenter of the US outbreak. New Yorkers, along with millions of people in at least seven other states, are facing orders to stay at home. President Donald Trump is deploying National Guard units in New York, California and Washington ‘to carry out approved missions’ and as a ‘backup’ to state leaders. Governors will remain in command, Trump said.

Race No. 1: How quickly can the United States contain the coronavirus? Experts say the pressure on stock markets won’t lift until the rate of new infections slows dramatically.  Race No. 2: How quickly can US lawmakers agree on an economic rescue package? Investors were hoping that a deal would emerge over the weekend in the Senate. It did not. Now, House Speaker Nancy Pelosi says that House Democrats will introduce their own plan.  Tick, tock. Tick, tock …  If policymakers are able to deliver a stimulus package, but can’t bring down the infection rate, the US economy is likely to remain on lockdown and markets will remain under pressure. At the same time, if progress is made on limiting the spread of the coronavirus, but no support arrives for business and workers, the country will still be headed for a lengthy and nasty recession.”

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THE WALL STREET JOURNAL/Jon Hilsenrath and Stephanie Armour

As Economic Toll Mounts, Nation Ponders the Trade-offs

March 23, 2020

Mike Pence“The nation’s costly fight against the coronavirus pandemic is stirring debate inside the Trump administration and beyond about how much economic loss the country can bear to save an unknowable number of lives infected by the disease. Millions of jobs were lost within days and millions more are projected to vanish as whole industries grind to a halt, streets empty and people hunker down at home to limit the spread of disease. Trillions of dollars are projected to be lost in economic output; trillions have been wiped out in stock market value; and trillions in government debt will be accumulated in the months ahead to help support households and businesses struggling to pay bills.

‘WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF,’ President Trump said in a tweet Monday morning. He went on to suggest he might dial back a federal push for the nation to practice social distancing for 15 days. “AT THE END OF THE 15 DAY PERIOD, WE WILL MAKE A DECISION AS TO WHICH WAY WE WANT TO GO!” Former Goldman Sachs chief executive Lloyd Blankfein made similar comments on Twitter. ‘Extreme measures to flatten the virus curve is sensible-for a time-to stretch out the strain on health infrastructure. But crushing the economy, jobs and morale is also a health issue-and beyond,’ he said. The stakes have rarely been higher for the nation: The risk of death to millions, and the cost of millions of jobs and potential bankruptcies if businesses and households can’t earn cash flow to pay their bills.”

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