REUTERS/Harshith Aranya

Gold edges higher as gloomy U.S. jobs data dents dollar

March 26, 2020

“Gold prices edged up on Thursday, recovering from initial losses, after data showed U.S. jobless claims surged to a record high due to the coronavirus pandemic. The data put further downward pressure on the dollar, lifting the appeal of gold which is seen as a safe haven. Spot gold was up 0.3% at $1,618.60 per ounce by 1235 GMT. ‘Short term, initially gold may rise when stocks fall because it’s a safe haven asset. However, if selling in stocks continue, funds may see margin calls and need to sell gold for cash,’ said Samson Li, a Hong Kong-based precious metals analyst at Refinitiv GFMS. ‘Long term, with all the liquidity central banks are injecting into the system, there will be massive purchasing power destruction in the future, which will be good for gold.’

Data showed the number of Americans filing claims for unemployment benefits shot to an all-time high of more than 3 million last week as strict measures to contain the coronavirus pandemic hit economic activity. The U.S. Senate on Wednesday overwhelmingly backed a $2 trillion bill aimed at helping unemployed workers and industries hurt by the coronavirus, but that did little to prop up risk sentiment.”

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BARRON’S/Lisa Beilfuss

3.28M Americans File for Unemployment. That’s 10 Times as Many as Last Week.

March 26, 2020

layoffs are surging“More Americans filed for unemployment insurance last week than ever before as the coronavirus pandemic forces businesses across the country to close.  In the week ended March 21, seasonally adjusted initial jobless claims were 3.28 million, up more than 1,000% from a revised 282,000 in the prior week, the Labor Department. The result was far worse than the average Wall Street estimate: Economists polled by Bloomberg expected 1.64M in new jobless claims.

Data on the number of continuing claims comes on a delay, but the week before it was 1.8 million. ‘So, in one week, we had a number of people added to the program that was 80% higher than the total number of people on the program the week before,’ said Martha Gimbel, an economist at Schmidt Futures worked at the Labor Department. The number of newly unemployed is massive. For context, the previous record high in initial jobless claims was 695,000 in October 1982.”

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‘There is no gold.’ Bullion dealers sell out in panic buying

March 25, 2020

gold coin“If you think gold has jumped about 10% in a couple of days to $1,638 an ounce, the official price quoted on Wall Street, think again. The real price? Nearer $1,800. If you can get it. ‘There’s no gold,’ says Josh Strauss, partner at money manager Pekin Hardy Strauss in Chicago (and a bullion fan). ‘There’s no gold. There’s roughly a 10% premium to purchase physical gold for delivery. Usually it’s like 2%. I can buy a one ounce American Eagle for $1,800,’ said Josh Strauss. ‘$1,800!’

Major gold dealers have sold out of coins and gold bars amid panic buying as the U.S. economy plunges and the government agreed to a record $2 trillion emergency lifeline. Kitco, the Canadian gold dealing giant, reported Wednesday that it was out of almost all standard one ounce gold coins. American Eagles and Buffaloes, issued by the U.S. Mint, were out of stock, it reported. Ditto Canadian ‘Maple Leafs,’ issued by the Royal Canadian Mint, ‘Britannias’ issued by the Royal Mint of Great Britain, and ‘Kangaroos’ issued by Australia. It was out of Krugerrands, issued by the South African government. Those are by far the most widely traded gold coins in the world. ‘Due to extreme order volumes, please expect shipping delays of 15+ business days,’ warned gold dealer JM Bullion. Giant U.S. dealer Apmex admits Krugerrands are also out of stock. Deliveries of other coins, including Maple Leafs and Eagles, are delayed ‘due to extreme demand’ … Almost nobody on Wall Street has noticed the full price surge for actual gold bars and coins. That’s because financial traders mostly just deal in paper ‘contracts’ for gold. Those are basically gold IOUs.”

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BLOOMBERG/Jack Farchy, Elena Mazneva and Mark Burton

The Gold Market Is Being Tested Like Never Before

March 26, 2020

spot gold and futures fell apart“From South Africa’s ultra-deep mine shafts to vaults underneath London, from metals traders in New York skyscrapers to main-street sellers of coins: the global gold market is being tested like never before. The cracks are starting to show. Worldwide panic over the coronavirus outbreak and a flood of stimulus by central banks has ignited demand for one of humanity’s oldest methods of storing wealth. But even though there’s literally thousands of tons of gold bars sitting in vaults around the world, it’s suddenly harder to get metal when and where it’s needed.

It’s getting harder to transport gold because it typically flies around the world on ordinary commercial flights, which are being canceled by the thousands. And while some flights are still moving, there’s a limit to how much gold can go on each airplane … But it’s not unheard of for nations to send military planes to ship their gold around the world, complete with armed escorts. All these factors have combined to create a historic squeeze in the New York gold futures … The result has been a sharp spike in futures prices, making metal in New York much more expensive than gold for immediate delivery in London. The surging difference – known as a spread – has rattled even veteran traders.”

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THE WALL STREET JOURNAL/Jason Douglas and Bojan Pancevski

Europe Opts for Economic Freeze to Fight Coronavirus, U.S. Debate Continues

March 26, 2020

Europes Economic Freeze“European governments weighing the economic damage of a mass shutdown against the risk of spreading the new coronavirus were initially hesitant to impose stringent lockdowns and border closures. But as the pace of infections and deaths accelerated, Europe has broadly coalesced around a strategy: Freeze now and worry later about the bill. Their initial hesitation to do so crumbled as the new coronavirus swept the continent and policy makers determined that not acting forcefully could lead to equally bad economic outcomes, but with a higher body count.

In the U.S., by contrast, the Trump administration is considering easing the social-distancing measures imposed to slow the contagion as soon as next week, reflecting a debate about whether the economic pain of suppressing the virus is too steep, though it may mean more Americans get sick or die. ‘We’re not going to let the cure be worse than the problem,’ Mr. Trump said Monday. The European strategy is aimed at reducing transmission of the illness and preventing health-care systems from being swamped. In the U.K., not acting forcefully ‘would have unintended consequences for the health of the entire nation,’ not least because many other serious cases would go untreated, said Neil Ferguson, an infectious disease specialist at Imperial College London.”

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Fed Chairman Jerome Powell: ‘We may well be in a recession’

March 26, 2020

Jerome Powell“After taking a series of emergency actions to support the economy during the coronavirus outbreak, lowering interest rates and buying more securities, the chairman of the Federal Reserve did something else extraordinary: He sat for a live television interview. In an exclusive interview with Savannah Guthrie on the TODAY show, Fed Chairman Jerome Powell explained the central bank’s recent decisions to the American people. ‘The Federal Reserve is working hard to support you now,’ he said. ‘Our policies will be very important when the recovery does come, to make that recovery as strong as possible.’

In recent weeks, economists have grappled with the magnitude of the outbreak’s current and future effects on the U.S. economy. During the interview, the Fed chair offered his own assessment, noting the current downturn is unprecedented. ‘We may well be in a recession,’ he said. ‘But I would point to the difference between this and a normal recession. There is nothing fundamentally wrong with our economy. Quite the contrary. We are starting from a very strong position.’

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