REUTERS/Eileen Soreng

Gold slips as U.S.-China deal hopes cheer stock markets

November 15, 2019

“Gold prices fell on Friday as a White House official’s comments rekindled hopes of a U.S.-China trade deal and boosted appetite for riskier assets, but bullion was still on course for a weekly gain. Spot gold was down 0.5% at $1,464.40 per ounce at 1240 GMT, though up about 0.4% on the week.

U.S. gold futures were down 0.6% at $1,464.70 per ounce. White House economic adviser Larry Kudlow said late on Thursday that the United States and China were getting close to a deal and the ‘mood music is pretty good.’

‘Comments from the White House economic adviser are injecting renewed optimism surrounding the prospects of a trade deal,” said FXTM market analyst Han Tan, adding, if there are significant bouts of risk-on sentiment, gold could break below the $1,450 support level. Hopes of a trade deal between Washington and Beijing sent world stock markets and other risk assets higher. Gold’s trajectory is still very much hinged on the outcome of the ongoing trade talks and any decline in gold will be contained until there is official confirmation that a deal is signed, Tan said. Gold prices have gained more than 14% this year as the trade spat between the world’s biggest economies roiled financial markets, stoking fears of a global economic slowdown.”

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BLOOMBERG/Gordana Filipovic

Serbia Buys Nine Tons of Gold to Heed President’s Crisis Advice

November 14, 2019

Serbia Buys Gold“Serbia’s central bank bought nine tons of gold in October, raising its reserves of the precious metal on the advice of President Aleksandar Vucic. The biggest former Yugoslav republic is following Hungary and Poland, where officials boosted gold reserves in 2018 to create a bulwark against crisis. Central Bank Governor Jorgovanka Tabakovic, a member of Vucic’s Progressive Party, said the October 9-11 purchases raised the bank’s gold holdings to 10% of total reserves and made good on a suggestion from the president in May.

‘We have completed gold purchase transactions and Serbia is safer today with 30.4 tons of gold worth around 1.3 billion euros ($1.4 billion),’ Tabakovic told reporters in Belgrade Thursday. ‘For now, we have no plans to buy more.’ The acquisition is the latest in a series of moves by Serbia to shore up its financial stability by changing the structure of its foreign debt and increasing the share of dinars and euros, Tabakovic said. The central bank paid 395 million euros ($434.3 million) for the gold, $1,503 an ounce, the governor said.”

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BARRON’S/Reshma Kapadia

Investors Should Worry Less About the Trade War and More About China’s Economy

November 15, 2019

Trade War Chinese Economy“Optimism for an initial trade deal between the U.S. and China took a hit on reports that China is wary of committing to a certain number of agricultural purchases and still requires some relief from tariffs, even for a limited agreement.  Investors, though, might want to turn their attention to more troubling signs that have emerged in the latest China economic data, which came in weaker than expected. Growth in fixed asset investments outside of rural areas slipped to 5.2% so far this year from the year-ago period, and industrial production growth tumbled to 4.7% in October, down from 5.8% in September.

More weakness is ahead in industrial production, and Beijing is likely to drip-feed more stimulus into the economy, including modest rate cuts by the People’s Bank of China, Pantheon Macroeconomics Chief Asia economist Freya Beamish wrote in a note.  Then there’s increasing competition U.S. companies are facing from Chinese upstarts. DataTrek co-founder Nicholas Colas wrote in a note to clients this week that China ride-sharing company Didi Chuxing’s push into Latin America will challenge Uber Technologies (UBER). The popularity of Chinese internet technology company, ByteDance, and its TikTok video app has turned up the heat on Facebook (FB). Domestic upstart Luckin Coffee (LK) has just as many locations as Starbucks (SBUX) in China, according to Colas, who cited data from Thinknum. As for a U.S. and China trade deal—coming close to a deal doesn’t mean much until it is signed and delivered, a message that investors have heard frequently.”

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MARKET WATCH/Victor Reklatiis

Pelosi says Trump ‘makes what Nixon did look almost small’

November 15, 2019

Trump Pelosi Nixon“House Speaker Nancy Pelosi blasted President Donald Trump after the chamber’s first public impeachment hearings, comparing him unfavorably to former President Richard Nixon, who resigned in 1974 before the House could vote to impeach him. Pelosi delivered this zinger Thursday at her weekly news conference: ‘What President Trump has done on the record in terms of acting to advantage a foreign power to help him in his own election and the obstruction of information about that, the cover up, makes what Nixon did look almost small — almost small.’

Pelosi also said Wednesday’s ‘devastating testimony corroborated evidence of bribery uncovered in the inquiry.’  When a reporter asked her to clarify what counted as bribery in the impeachment inquiry focused on the Trump team’s dealings with Ukraine officials, the California Democrat said: ‘The bribe is to grant or withhold military assistance in return for a public statement of a fake investigation into the elections. That’s bribery.’ In addition, Pelosi said “all roads lead to Putin” with Trump. Russian President Vladimir Putin benefited from the delayed American assistance to Ukraine, as well as from Trump’s decision to pull back U.S. troops from northern Syria and from the president expressing doubts about NATO, she said. ‘The list goes on. I won’t even go into the elections.’”

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CNBC/Thomas Franck

Ray Dalio says ‘capital wars’ will be the next front in the US-China economic conflict

November 15, 2019

US China Conflict“The economic fight between the U.S. and China that has roiled financial markets over the last two years could next blossom into a full-blown war for investing capital and ultimately, for the prestige of the globe’s reserve currency, hedge fund magnate Ray Dalio said Thursday. The power struggle between the world’s two largest economies — in the form of a tit-for-tat trade war at present — may soon mushroom into a melee over the dollar’s longheld place as world’s preferred form of exchange, the Bridgewater Associates founder said.

‘There is a trade war, there is a technology war, there is a geopolitical war, and there could be capital wars. And how that’s approached is going to determine what our futures are like,’ Dalio said at the annual gala of the National Committee on U.S.-China Relations in New York. The founder of the world’s largest hedge fund said that countries or empires that once enjoyed reserve-currency status tended to prioritize education and civility, infrastructure and new technologies, which facilitated global influence over time. ‘I honestly don’t know how it will be approached. We want to be optimistic,’ he added. Dalio’s warnings come as federal lawmakers, alarmed some U.S. retirement money pouring into China, work to stem the tide of funds to Beijing. Senators’ fears peaked earlier this week, when the main pension plan for U.S. government workers reaffirmed its decision to allow one of its funds to invest in an international index that includes Chinese companies.”

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Elizabeth Warren’s Tax Plan Would Bring Rates Over 100% for Some

November 15, 2019

Elizabeth Warren“Democratic presidential candidate Elizabeth Warren has unveiled sweeping tax proposals that would push federal tax rates on some billionaires and multimillionaires above 100%. That prospect raises questions for taxpayers and the broader economy that experts are starting to ponder: Under which circumstances would taxpayers have to pay those rates? How might that change their behavior? And would investment and economic growth suffer? Potential tax rates over 100% could result from the combination of tax increases the Massachusetts senator proposes for the very top tier of investors. She wants to return the top income-tax rate to 39.6% from 37%, impose a new 14.8% tax for Social Security, add an annual tax of up to 6% on accumulated wealth and require rich investors to pay capital-gains taxes at the same rates as other income.

Consider a billionaire with a $1,000 investment who earns a 6% return, or $60, received as a capital gain, dividend or interest. If all Warren’s taxes are implemented, he could owe 58.2% of that, or $35 in federal tax. Plus, his entire investment would incur a 6% wealth tax, i.e., at least $60. The result: taxes as high as $95 on income of $60 for a combined tax rate of 158%. The rate would vary according to the investor’s circumstances, any state taxes, the profitability of his investments and as-yet-unspecified policy details, but tax rates of over 100% on investment income would be typical.”

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