REUTERS/Harshith Aranya

Gold rises as coronavirus fears drive investors to safe haven

March 5, 2020

“Gold prices rose on Thursday as coronavirus cases continued to spread around the world, exacerbating concerns about the global economic impact of the epidemic and prompting investors to seek refuge in the safe-haven metal. Spot gold was up 0.7% at $1,646.73 per ounce by 1056 GMT. U.S. gold futures rose 0.2% to $1,645.80.  ‘The virus is really taking over… I think the markets are a bit nervous, (gold is) more prone to higher prices and is well supported on the downside,’ said Afshin Nabavi, senior vice president at precious metals trader MKS SA.  ‘At the moment, it looks like it’s going to have very negative effects on businesses, tourism, travel and smaller businesses. So, I think the economy is going to be hurting big time.’

The International Monetary Fund said the global spread had crushed hopes for stronger growth this year, while a Fed report showed there were signs the epidemic had begun to weigh on business sentiment in the U.S. European shares fell again on Thursday, which implied a lower open for Wall Street as cases of the coronavirus surged in the United States.  The American coronavirus death toll rose to 11 on Wednesday, and California declared a state emergency. U.S. lawmakers have approved an $8.3 billion emergency bill to help contain the virus.”

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KITCO NEWS/Neils Christensen

Gold price near session highs following in-line reading in weekly jobless claims

March 5, 2020

Gold price near session highs following in-line reading in weekly jobless claims“Gold prices are holding their own with prices back above $1,650 an ounce following data that continues to show a steady labor market. Thursday the U.S. Labor Department said that weekly jobless claims dropped by 3,000 to 216,000, down from the previous week’s unrevised estimate of 219,000 claims. The four-week moving average for new claims –fell to 213,000, down by 3,25 claims from the previous week.

Continuing jobless claims, which represent the number of people already receiving benefits, were at 1.729 million during the week ending Feb. 22, an increase of 7,000 from the previous week. Gold prices are currently trading near the top of their range following the release of the latest labor market data. April gold futures last traded at $1,655.90 an ounce, up 0.79% on the day. However, market analysts say that gold prices aren’t reacting much to economic data after the Federal Reserve announced an inter-meeting 50-basis-point cut to interest rates Tuesday. The U.S. central bank said that it made the emergency move to because of growing risks due to the spreading coronavirus.”

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CNBC/Yun Li and Eustance Huang

Dow drops 600 points, continuing a wild week on Wall Street

March 5, 2010

Dow drops 600 points, continuing a wild week on Wall Street“Stocks plunged on Thursday, halving their massive relief rally in the previous session, as markets remained choppy in the face of the fast-spreading coronavirus. The Dow Jones Industrial Average dropped 597 points, or 2.2%, shortly after the opening bell with Boeing and Goldman Sachs combined shaving off 140 points. The S&P 500 dropped a similar 2.1% with only four components trading higher. The Nasdaq Composite fell 2.1%. Fears about the coronavirus disrupting the global economy continued to grip Wall Street as countries around the world extended quarantines and travel restrictions. California declared a state of emergency after a coronavirus-related death and 53 confirmed cases in the state.

‘The majority of this is just growing concern about the fallout from the virus because it’s spreading,’ said Tom Essaye, founder of the Sevens Report. ‘For every hour, another group of people have it and it’s in another state. People are getting a bit nervous about this constant barrage of headlines.’ That angst fueled investor demand for safer assets like U.S. Treasurys and gold, which rose nearly 1%. The rate on the 10-year Treasury note dropped to 0.94% but remained just above an all-time low hit earlier in the week. The rate compression on Wednesday kept pressure on the equity of U.S. regional and consumer-facing banks, which led the major indexes lower.”

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MARKET WATCH/Steve Goldstein

Even a portfolio of 40% bonds won’t escape further coronavirus losses

March 5, 2020

Even a portfolio of 40% bonds won’t escape further coronavirus losses“Who’s worried after the 1,173-point jump in the Dow Jones Industrial Average? Well, everyone. Eurasia Group, for instance, says only a benign spread of coronavirus will allow the global economy to escape a recession. A benign scenario would result in a significant decline in the rate of new cases by the end of April; a ‘serious’ scenario would see the number of new cases rising until the end of July and a ‘soft U’ shaped economic recovery; and a ‘severe’ scenario would see new cases rise through to the end of 2020, resulting in a substantially different global economy, with shorter supply chains and deglobalization.

MSCI, the index and portfolio analysis firm, has done its own scenario analysis, modeling what it called a ‘severe but plausible short-term downside scenario.’ MSCI assumed not just a 2-percentage point decline in global economic activity but also a higher risk premium, since investors may turn more risk-averse in response to the increased uncertainty.  U.S. equities, down 11% from Feb. 19 through Mar. 3, could drop another 11%, and a 60/40 equity/bond portfolio could lose another 7%, according to MSCI in the call of the day.”

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BLOOMBERG/Chris Anstey and Enda Curran

Global Economy Is Gripped by Rare Twin Supply-Demand Shock

March 4, 2020

Global Economy Is Gripped by Rare Twin Supply-Demand Shock“The coronavirus is delivering a one-two punch to the world economy, laying it low for months to come and forcing investors to reprice equities and bonds to account for lower company earnings. From one side, the epidemic is hammering the capacity to produce goods as swathes of Chinese factories remain shuttered and workers housebound. That’s stopping production of goods there and depriving companies elsewhere of the materials they need for their own businesses. That supply shock was initially viewed as a short-term disruption, easily reversed once the virus was brought under control. Hence the initial predictions that global growth would follow a V-shaped trajectory, sliding in the first quarter and rebounding in subsequent weeks.

Those early bets for 2020 are now in tatters because demand is slumping too. With the virus no longer contained to China, increasingly worried consumers everywhere are reluctant to shop, travel or eat out. As a result, companies are likely not only to send workers home, but to cease hiring or investing — worsening the hit to spending. How the two shocks will reverberate has sparked some debate among economists, with Harvard University Professor Kenneth Rogoff writing this week that a 1970s style supply-shortage-induced inflation jolt can’t be ruled out. Others contend another round of weakening inflation is pending. The bottom line for central banks and governments is that there’s likely to be even more pressure to deliver economic fixes.”

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THE WALL STREET JOURNAL/Orla McCaffrey and Ben Eisen

Mortgage Rates Hit Record Low, But Coronavirus May Deter Buyers

March 5, 2020

Mortgage Rates Hit Record Low, But Coronavirus May Deter Buyers“Mortgage rates fell to their lowest level on record Thursday, pulled down by fears that the spread of coronavirus could weigh on the U.S. economy. The average rate on a 30-year fixed-rate mortgage fell to 3.29% from 3.45% last week, mortgage-finance giant Freddie Mac said. Mortgage rates are closely linked to yields on the 10-year Treasury, which this week dropped below 1% for the first time following an emergency Fed rate cut.

A decline in mortgage rates typically boosts home sales. But a worsening coronavirus epidemic and the efforts to contain it––quarantines, business shutdowns and travel restrictions––could keep would-be home buyers on the sidelines during what is usually a busy spring selling season. Already, signs of a slowdown are appearing in the housing market. Low rates pushed home sales to a high mark for the year in December. But existing home sales fell in January from a month earlier, an indication that cheaper borrowing costs are no longer enough to overcome five straight months of rising home prices and limited housing supply … The decline in rates is likely to continue to fuel a refinancing frenzy that pushed mortgage lending to its highest level since 2006 last year.”

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