KITCO NEWS/Wyckoff

Gold prices modestly down ahead of U.S. stock market opening

March 30, 2020

Gold prices are trading a bit weaker in early U.S. trading Monday, as traders await the opening of the U.S. stock market that is trying to stabilize. Silver prices are under stronger selling pressure to start the trading week. June gold futures were last down last down $0.82 an ounce at $1,640.50. May Comex silver prices were last down $0.354 at $14.18 an ounce.  Global stock markets were mostly weaker in overnight trading. U.S. stock indexes are pointed toward mixed openings when the New York day session begins.

Traders and investors are entering another week uncertainty, as the mood of the marketplace has turned from panic to gloom. President Trump extended the shutdown of most U.S. retail businesses and schools by another 30 days. The U.S. can expect a best-case scenario of around 100,000 to 200,000 deaths and millions infected, said the top U.S. health official. In overnight news, China’s central bank Monday cut its main short-term lending rate and injected $7 billion into the financial system in the latest action taken by global policymakers to try and support their markets.”

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CNBC/Emma Newburger

Trump extends distancing guidelines through April 30 to keep US death toll below 100,000

March 29, 2020

President Trump“President Donald Trump reversed himself on Sunday, extending national social-distancing guidelines to April 30 in effort to keep the projected coronavirus death toll in the U.S. from reaching a catastrophic, worst-case scenario.  Trump’ previously said he wanted the country to reopen for business by Easter. Public health experts have warned that loosening restrictions by Easter, on April 12, would result in unnecessary death and economic damage. Trump had suggested that the coronavirus death rate would likely peak within two weeks.

‘Nothing would be worse than declaring victory before the victory has been won,’ Trump said at an evening press briefing. The president claimed Sunday that Easter was just an ‘aspiration’ and he hopes the country will ‘be well on our way to recovery’ by June 1. Trump said his administration was extending the guidelines to avoid a major death toll. The president pointed to modeling that forecast 2.2 million deaths in the U.S. if drastic measures weren’t taken to mitigate the outbreak. Trump said the administration is working to keep the projected death toll below 100,000.”

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MARKET WATCH/Chris Matthews

Indicators suggest a stock-market bottom, but coronavirus fears could send the S&P 500 swooning again

March 30, 2020

Arrow Down on Stock Market“U.S. stocks staged an impressive rebound last week as the Federal Reserve and Congress delivered unprecedented fiscal and monetary stimulus aimed at dampening the blow the coronavirus epidemic has dealt to the U.S. economy.  The question investors must now ask themselves is whether or not the equities market has already hit the bottom of this bear market or whether investors should prepare themselves for worse to come … While most investors and analysts interviewed by MarketWatch agree that a retest of Monday’s lows — when the S&P 500 closed at 2,237.40 — are possible, if not likely, they remain split over whether stocks have more to fall.

The single most important variable is the ultimate duration of the COVID-19 pandemic and the shutdown of swaths of the economy to restrict its spread.  ‘We have no idea how long this will be,’ said Yousef Abbasi, global market strategist at INTL FCStone said. ‘Right now, fundamentals don’t matter because there is very little clarity as to when the economy can restart — and depending on how long this goes — what the economy will look like when it does restart’ …. Others argue that the unique catalyst of the current slump in stocks should cause investors to set aside metrics that have predicted previous bottoms. ‘Another 10% to 20% decline is not out of the question, especially considering the growing number of disparaging forecasts and the crisis in confidence of governments,’ said Brian Belski, chief investment strategist at BMO Capital Markets.”

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BLOOMBERG/Bloomberg News Exclusive

A Global Consumer Default Wave Is Just Getting Started

March 28, 2020

stretched households“Like millions of people around the world, Zhang Chunzi borrowed money she thought she’d be able to repay before the coronavirus changed everything. Now laid off from her job at an apparel exporter — the 23-year-old is missing payments on 12,000 yuan ($1,700) of debt from her credit card and an online lending platform operated by Jack Ma’s Ant Financial. ‘I’m late on all the bills and there’s no way I can pay my debt in full,’ Zhang said.

Her story is playing out in similar ways across China, where the virus outbreak has been taking lives and ravaging the economy for more than three months. As Covid-19 works its way through the rest of Asia, Europe and the Americas — forcing countries into lockdown, driving up unemployment and pummeling small-business owners — analysts say it’s only a matter of time before defaults start spreading within the record $47 trillion pile of household debt globally. The early indicators from China aren’t pretty. Overdue credit-card debt swelled last month by about 50% from a year earlier, according to executives at two banks who asked not to be named discussing internal figures. Qudian Inc., a Beijing-based online lender, said its delinquency ratio jumped to 20% in February from 13% at the end of last year … An estimated 8 million people in China lost their jobs in February.”

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THE WALL STREET JOURNAL/Ruth Simon, Esther Fung, Suzanne Kapner, Heather Haddon

America’s Make-or-Break Week

March 29, 2020

corporate contagionCongress has passed a $2 trillion rescue plan but before those funds start to flow, American companies from the owner of a single liquor store in Boston to corporate giants like Macy’s Inc., must decide what to do about April’s bills: Which obligations do they pay and which can they put off? How many employees can they afford to keep on the payroll? Can they get a break on rent? The decisions they make this week could shape how deeply the economy is damaged.

‘Rent is due. Utilities are due. Credit card bills are due April 1,’ said Hadley Douglas, who has laid off two workers from her liquor business. ‘The deadline is looming large and it is petrifying’ … Millions of Americans are suddenly out of work and many businesses have already closed under orders from state and local governments. A record 3.28 million Americans filed for unemployment benefits in the week ended March 21. The U.S. restaurant industry has lost $25 billion in sales since March 1. Nearly 50,000 stores of major U.S. retail chains have closed. An estimated $20 billion in monthly retail real estate loans are due as early as this week, according to Marcus & Millichap, a commercial real-estate services and consulting firm … Companies of all sizes are feeling the squeeze, especially retailers and restaurants that have closed their doors during the outbreak. Nike Inc. is asking to pay half its rents. TJ Maxx is delaying payments to its suppliers. Victoria’s Secret and Men’s Wearhouse have furloughed thousands of workers. Cheesecake Factory Inc. closed 27 of the company’s locations and furloughed 41,000 hourly workers, nearly 90% of its total staff.”

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MARKET WATCH/ Ivan Martchev

Conditions are ripe for the price of gold bullion to double

March 28, 2020

gold market“Gold bullion has not done what it did during the past month since 2008. The Midas metal shows rapidly rising relative performance against the CRB Index as industrial commodities are crashing due to the coronavirus effect. Gold bullion is staying firm, close to a multiyear absolute high … What happened to gold bullion after it registered its previous all-time high relative to the CRB in 2008? It doubled in absolute terms to peak above $1,900 in 2011.  We have a similar environment at the moment.

Interest rates have been dropped to zero at the fed funds rate level, and the federal deficit will be larger than 10% of GDP (larger than after 2008) due to the $2 trillion bailout. Record deficit spending and the Fed’s quantitative easing (QE) with no preset limits is the perfect environment for gold bullion.

Second-quarter GDP growth in the U.S. will be down double digits in the 20%-40% range … With record deficit spending and interest rates at zero, we may be faced with an environment where the Fed will keep interest rates below the level of inflation for some time until the economy normalizes after the outbreak is controlled. This would be the perfect environment for gold bullion.”

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