REUTERS/ Asha Sistla
Gold gains as souring U.S.-China relations dent risk appetite
November 20, 2019
“Gold prices rose to their highest in nearly two weeks on Wednesday as U.S. Senate measures on Hong Kong posed a potential roadblock for a trade deal between the United States and China, denting appeal for riskier assets. Spot gold was up 0.3% at $1,476.50 an ounce by 1015 GMT and U.S. gold futures rose 0.2% to $1,477. ‘The U.S. senate passing the Hong Kong democracy bill is raising further risk of a trade deal running into problems and it’s causing some renewed risk-off in the markets,’ said Saxo Bank.
‘We see stocks trading weaker, bond yields moving lower and gold is ticking higher.” The U.S. Senate passed two bills backing human rights in Hong Kong and banning export of certain munitions to the region’s police forces. China condemned the move and called for Washington to stop meddling in its internal affairs. European stocks steered away from a recent peak and U.S. 10-year bond yields slipped to their lowest in nearly three weeks, also pressured by U.S. President Donald Trump’s threat to raise tariffs on Chinese imports if a trade deal cannot be reached with Beijing.”
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KITCO NEWS/Jim Wyckoff
Gold, silver bulls showing resilience
November 19, 2019
“Gold and silver prices are modestly up in midday U.S. trading Tuesday. The gold and silver market bulls can correctly argue their metals have been fairly resilient amid the record-setting run in the U.S. stock market that saw new record highs again today. While the metals have eroded from their late-summer highs, they have not seen dramatic declines that one might expect when a competing asset class is setting record highs. December gold futures were last up $3.10 an ounce at 1,475.00. December Comex silver prices were last up $0.12 at $17.12 an ounce.
Focus of traders and investors is turning more to the civil unrest in Hong Kong, which is becoming more widespread and violent, and is bearish for Asian stock markets. Also, it appears mainland China government officials and Hong Kong officials are becoming more at odds on dealing with the protesting. Hong Kong has been a major business hub for years, but the protests in the streets are making the world’s businesses leery of dealing in Hong Kong. If this situation deteriorates much further, it would likely boost the safe-haven metals. In other news, China’s central bank lowered its short-term repo rate Tuesday, and the People’s Bank of China governor said he will continue to work to lower real lending rates, as the government works to stem the negative economic effects of its trade war with the U.S. Easier monetary policy in China should foster more demand for commodities.”
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MARKET WATCH/Mark DeCambre and Andrea Riquier
Stocks open lower as Trump threatens to raise tariffs if trade talks languish
November 20, 2019
“U.S. stocks opened in the red Wednesday morning as doubts persisted about progress on a U.S.-China trade deal and weak corporate earnings offered few reasons for investors to bid stocks higher after touching records. Wall Street also awaited minutes from the Federal Reserve’s October meeting to glean further insights about its monetary policy, though Chairman Jerome Powell last week outlined his thoughts about the economy in congressional testimony.”
“Trade talks between the U.S. and China are in danger of hitting an impasse, threatening to derail the Trump administration’s plan for a limited phase-one pact this year, according to the Wall Street Journal, citing former administration officials and others. Both sides remain divided over core issues—including Beijing’s demand for removing tariffs and the U.S.’s insistence on China buying farm products—nearly six weeks after an ‘agreement in principle’ was announced by the White House on Oct. 11. On Tuesday President Donald Trump said at a cabinet meeting that China needs to make a deal he likes to avoid import tariffs going even higher, with fresh levies including smartphones and toys set to go into effect Dec. 15, directly hitting American consumers. ‘The announcement from the US president has hit stock markets this morning as traders are gearing up for some sort of tough response from the Chinese government,’ wrote David Madden, market analyst at CMC Markets UK, in a daily research note.”
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CNBC/Stephanie Landsman
This trend could hurt Wall Street’s bullishness and revive recession fears
November 19, 2019
“Economic forecaster Lakshman Achuthan is detecting a stark disconnect between Wall Street and the economy. As stocks continue to hit new highs, he’s worried investors are wrongly assuming an economic revival is underway. ‘The actual data itself is just decelerating pretty hard actually,’ the Economic Cycle Research Institute co-founder told CNBC. ‘I don’t think we can remove recession risk from the table. It’s still out there as long as you’re slowing.’ Achuthan sees the downtrend particularly affecting two key parts of the economy: retail sales and industrial production. He highlights the issue in a chart.
‘On the manufacturing side, you have IP [industrial production] at a 3½-year low. It’s deeply negative,” he said. “On the retail sales front, you’re having deceleration.’ Achuthan, a former self-proclaimed super bull, began noticing slowdown signs in early 2018. ‘All the hopes are the consumer is somehow going to rev up, and that’s coinciding with the holiday season here,’ said Achuthan. ‘But when we look at all of our leading indexes that anticipate turning points in the U.S. economy, it’s not there yet. So, we have more slowdown to go.’ Yet, stocks are firing on all cylinders. But don’t let that fool you, he says. ‘A couple of months before the Great Recession, markets hit an all-time high. In 1990, right when that recession was starting, markets hit an all-time high,’ he noted. ‘In ’01, they actually hit a high after the recession started. So, the market could be a little off on recession timing.’”
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BLOOMBERG/Benjamin Stupples
World’s Rich Are Rattled and Seeking Old-Fashioned Security
November 19, 2019
“A few blocks from Grosvenor Square in Mayfair, 46 Park Lane resembles a private club with wood-paneled walls and an ornate fireplace dating back to Britain’s Victorian era. But down a flight of stairs is one of the most secure rooms in London. Built by IBV International Vaults, the steel-walled stronghold is scheduled to open next month and will cater to billionaires looking for a place to stash their most prized possessions.
‘We’re getting calls every week about a room available for 2.5 million pounds ($3.2 million) a year,’ said Sean Hoey, managing director of IBV London, referring to an apartment-size space. The firm, which also has 550 safe-deposit boxes on site and room for about 450 more, is betting on London’s reputation as a “safe haven,” even with Brexit. This will be IBV’s sixth location, and it’s hardly the only such firm fielding queries from the wealthy. From London to Switzerland to parts of the U.S., the rich are looking to store precious metals, cash and cryptocurrency. For some, it’s the threat of a global recession. Others are avoiding bank deposits as negative interest rates force lenders to charge for holding cash. Many are concerned about natural disasters. Hedge fund titan Ray Dalio captured the anxiety last month when he warned the global economy is under threat from an explosive mix of ineffective monetary policy, a widening wealth gap and climate change. A majority of wealthy investors are stockpiling cash in anticipation of a sharp market drop before the end of next year, according to a survey of clients from UBS Global Wealth Management.”
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MARKET WATCH/Shawn Langlois
These are the risks that could trigger a ‘vicious cycle,’ economist warns
November 19, 2019
“From the trade war to a debt crisis and everything in between, there’s clearly a lot to be worried about in terms of the health of the global economy, according to Mark Zandi, chief economist at Moody’s Analytics. ‘Recession risks for next year remain uncomfortably high,’ he told MarketWatch on Tuesday. ‘The economy is barely growing at its potential, which means unless growth picks up soon, unemployment will begin to rise.’ Once that happens, he said, consumers tighten spending, businesses slash hiring and the economy gets caught in a ‘self-reinforcing vicious cycle.’
Here’s a slide — the chart of the day in our daily ‘Need to Know’ column — that Zandi used in a recent presentation to show both the possible catalysts for a recession, as well as the extent of the impact they could have. As you can see from the chart, Zandi’s most pressing concern remains the trade war and how it’s ‘undermining the global economy.’ The uncertainty of the tariffs, he said, is ‘a pall over business investment and hiring.’ What happens on that front, Zandi predicted, will determine what’s next. ‘If the president follows through on his threat to raise tariffs again on China in December, a recession next year is likely,’ he said.”
