KITCO NEWS/Neils Christensen

Gold price holding massive gains, ignores mixed U.S. flash PMI data

March 24, 2020

“The gold market is ignoring the latest economic data as prices are holding on to 6% gains even after preliminary data showed mixed sentiment with the U.S. manufacturing and service sectors.  IHS Markit said its flash U.S. manufacturing Purchasing Managers Index for March dropped to a reading of 49.2, down from February’s 50.7. However, the data was better than expected. Economists were expecting to see a reading of 45.1. Still, the IHS noted it’s at its lowest level in 127 months. The firm’s service sector PMI reading fell to 39.1, down from February’s reading of 49.4. Economists were forecasting the index to come in at 44.1. IHS said that this is the lowest sentiment reading in index history.

The data is having little impact on gold prices as the market is still focused on the extraordinary measure the Fed took Tuesday, announcing open-ended quantitative easing. April gold futures last traded at $1,665.50 an ounce, up 6.25% on the day. Economists have noted that the spreading coronavirus is having a more significant impact on the service sector because stores have been shut down and nearly 1 in 5 Americas are in lockdown in an attempt to slow the spread of the virus.”

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REUTERS/Paul Arnold, John Revill

Swiss gold sales surge as wary investors snap up precious metals

March 24, 2020

Gold bars on currency“Gold dealers in Switzerland are rushing to keep up with demand as worried investors seek out lower risk investments in precious metals with financial markets roiled by the coronavirus pandemic.  Some sellers are seeing a ten-fold increase in sales of gold bars, coins and other pieces as existing buyers increase their holdings and newcomers enter the market.  Banks too are seeing a sharp rise in demand for other precious metals, including silver, as well as smaller investments like 20 or 50 gram gold combibars.

‘The physical demand for gold at Zuercher Kantonalbank is currently enormous. All available products — bars, coins, etc. — are in demand,’ said a spokesman.  ‘The high demand for silver bars is also astonishing.’ The price of gold had been steadily increasing since the start of the year but was briefly knocked lower as investors scrambled for cash … However, it has surged since March 19, gaining nearly 10% in less than a week. Retailers have extended opening times and also tried to take on extra staff to deal with the rising demand, which is being channeled online as shops are shuttered on government orders to contain the virus.”

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MARKET WATCH/Steve Goldstein

Goldman Sachs says it is time to buy gold — the ‘currency of last resort’

March 24, 2020

New era for gold?“The current coronavirus-induced economic and financial market turmoil is seemingly the perfect environment for gold. ‘We have long argued that gold is the currency of last resort, acting as a hedge against currency debasement when policy makers act to accommodate shocks such as the one being experienced now,’ said analysts at Goldman Sachs led by Jeffrey Currie. The Goldman analysts, with a 12-month price target of $1800 an ounce, said that is about to change, thanks to the Federal Reserve’s aggressive bond purchase plan unveiled on Monday, in which the U.S. central bank said it would buy as many Treasurys and mortgage-backed securities as needed to keep financial markets running smoothly.

The Goldman analysts said gold has been weighed down by a world in need of dollars, requiring forced sales of liquid assets like gold. The downturn in oil as Saudi Arabia and Russia fail to agree on production cuts has also created dollar shortages for emerging market economies, which may have made Russia, a net seller of gold, according to Goldman. In 2008, the Goldman analysts noted, the November announcement of quantitative easing was a turning point. ‘We are beginning to see a similar pattern emerge as gold prices stabilized over the past week and rallied [Monday] as the Fed introduced new liquidity injection facilities with this morning’s announcement,’ they said.”

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CNBC/Jessica Dickler

Stashing cash? Savings interest rates sink

March 24, 2020

storing cash in mattress“Stashing cash in a savings account may give you peace of mind, but little else. In the wake of an emergency rate cut by the Federal Reserve to combat the economic effects of the COVID-19 outbreaksavings interest rates are down significantly. Although the Fed has no direct influence on deposit rates, those tend to be correlated to changes in the target federal funds rate. Now, according to the Federal Deposit Insurance Corp., the average savings account rate is a mere 0.08%, or even less, at some of the largest retail banks.

Online-only banks such as Marcus by Goldman Sachs and CIT Bank still offer higher returns, thanks in part to lower overhead expenses than traditional banks. However, those rates are falling, as well.

What was closer to 2% is now close to 1.5%, according to according to Ken Tumin, the founder of DepositAccounts.com. The rates on these savings accounts are variable, after all, ‘and within two weeks that might be even lower,’ he said. ‘Online-only banks usually pay out higher yields and interest rates, and might be worth looking into,’ said Sean Stein Smith, CPA and member of the American Institute of CPAs’ financial literacy commission. In addition, ‘locking in rates with a longer-term CD might give an extra 1% or even 2% than you otherwise might earn,’ he added. For now, top-yielding CD rates are averaging just under 2% — slightly better than a high-yield savings account.”

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BLOOMBERG/Ruth Carson, Chikako Mogi and William Shaw

Dollar Heads for Worst Day in 4 Years, Showing Stress Is Easing

March 24, 2020

dollar falls from record high“Traders around the world dumped the dollar in favor of risk assets after the Fed’s unprecedented stimulus spurred relief across markets hampered by liquidity strains. The dollar gauge fell as much as 1.5%, the most since 2016 on a closing basis, ending a 10-day rally that took the greenback to the strongest level on record. Stocks in Asia and Europe surged, while improved liquidity conditions spurred a drop in U.S. Treasuries.

Norway’s krone led gains against the greenback, jumping the most on record, Australia’s dollar extended a rebound from a multi-year trough and the pound rose as much as 2.2%, even after the U.K. entered a full lockdown to contain the coronavirus. An index of emerging-market currencies was on course for its biggest advance in more than three years, a positive development for borrowers with debt in the U.S. currency. ‘Markets are going to start feeling the full tsunami of liquidity the Fed is providing now,’ said Nathan Sheets, head of macroeconomic research at PGIM Fixed Income. ‘The liquidity they’ve provided from their first line of defense — swap lines — to other domestic measures are all about the Fed making it clear to markets that they will play the role as an international lender of last resort.’ The relief sweeping over markets is in stark contrast to last week when investors sold almost everything but the dollar amid the growing fallout from the virus.”

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THE WALL STREET JOURNAL/Justin Lahart

U.S. Workers, Businesses Lack Funds to Tide Them Over Until Help Comes

March 24, 2020

concerned business person“The American economy is in a race against time. With measures to halt the spread of the coronavirus intensifying, the U.S. is embarking on its sharpest downturn since the end of World War II. The states where nonessential businesses are shut down, including California, New York and Ohio, account for more than 40% of U.S. GDP. Many of those workers and businesses will face severe constraints. In two weeks’ time—the period of a typical paycheck—workers will struggle to make ends meet. After a month, more than half of them could be in trouble and a fifth of small businesses on the brink.

The stimulus the Fed announced Monday, including its planned program to support lending to small and midsize businesses, will help. So, too, will the fiscal spending package Congress is hammering out—when it comes. For the economy, the most important questions are how soon help will arrive, how ample it will eventually be and, above all, how long the coronavirus crisis will last. Between the big stimulus and plans by lenders to extend loans or offer grace periods on payments, consumers and businesses can manage a shutdown lasting several weeks. Beyond that is uncharted territory, and with the crisis at an intense point right now, few people are thinking that far out. Most economists think the economy will shrink more than 10% in the second quarter at an annual rate, a larger decline than that at the start of the financial crisis and one that would mark the worst contraction since quarterly measurements began shortly after World War II.”

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