REUTERS/Karthika Suresh Namboothiri

Gold unchanged as U.S.-China trade uncertainty persists

December 5, 2019

“Gold was little changed on Thursday, hovering below a one-month peak as investors sought further clarity on the U.S.-China trade war in a week of mixed messages. Spot gold was flat at $1,474.60 per ounce by 1340 GMT, having hit its highest since Nov. 7 at $1,484 the previous day. U.S. gold futures were also unmoved at $1,479.70. ‘We have seen gold very volatile in the last couple of days with all the headlines around the trade war,’ said Carlo Alberto De Casa, chief analyst at ActivTrades. ‘Investors are generally cautious at times like today when there is no news.’

A Bloomberg report on Wednesday fanned hopes that the two sides were close to a phase one deal, prompting a rally in global equities while gold retreated from a one-month high. With a Dec. 15 deadline for imposition of further U.S. tariffs on Beijing looming large, President Donald Trump said on Tuesday that an agreement might have to wait until after the U.S. presidential election in 2020.”

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KITCO NEWS/Allen Sykora

Softening economy to mean stronger gold in 2020 – Metals Focus

December 5, 2019

Softening Economy Stronger Gold“A weaker global economy in 2020 is likely to mean stronger gold prices, said Philip Newman, director of consultancy Metals Focus. Further, he pointed out that there is still a large amount of negative-yielding bonds around the world, which also helps the metal. ‘We don’t have a [forecast for a] tremendous rally, but we do have it moving gradually higher,’ Newman said in an interview. Newman called for gold prices to average just above $1,500 an ounce in 2020 and perhaps get as high as the $1,650 neighborhood. He is anticipating an average of around $1,400 an ounce for 2019, up from around $1,270 in 2018.

‘The macro[economic] backdrop is deteriorating into 2020,’ Newman said. ‘That tells us you’re going to have loose monetary policy by key central banks…. We think this will be ultimately supportive of gold.’ The metal has struggled some recently, with spot prices falling back to roughly the $1,475 area after peaking around $1,556 in early September. Still, they remain well above the levels where they were during the first half of the year, suggesting ‘considerable investment’ demand flowing through the market, Newman said.  ‘We think that as the economy starts slowing in 2020, that will bring a pause to the record highs we’ve seen in the U.S. equities. Ultimately, we think this will bring renewed inflows into the precious , primarily gold,’ Newman said.”

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BLOOMBERG/Erik Wasson and Billy House

Pelosi Says House Will Draft Trump Impeachment Articles

December 5, 2019

Impeachment Articles“Speaker Nancy Pelosi said the House will draft articles of impeachment against President Donald Trump for abusing his office in a ‘profound violation’ of the public trust. ‘The facts are uncontested. The president abused his power for his own personal benefit,’ Pelosi said Thursday at the Capitol. ‘Today, I’m asking our chairmen to proceed with articles of impeachment.’ The announcement puts Trump on track to become the third president to be impeached in U.S. history. But the chances that the Republican majority in the Senate will convict him are scant.

Speaking in somber tones against a backdrop of American flags, the California Democrat said Trump undermined U.S. security and jeopardized the integrity of the country’s elections by pressuring a foreign government for help in next year’s presidential campaign. ‘His wrongdoing strikes at the very heart of our Constitution,’ Pelosi said. ‘The president leaves us no choice but to act because he is trying to corrupt once again, the election for his own benefit.’ She spoke a day after Judiciary Chairman Jerrold Nadler indicated the panel was moving toward at least three articles of impeachment: abuse of power, bribery and obstruction. Trump was defiant on Thursday morning, saying on Twitter that Democrats ‘have no impeachment case’ and challenging them to move fast so the nation can move on.”

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MARKET WATCH/Barbara Kollmeyer

This stock bear is waiting for one clear signal to jump back into markets

December 5, 2019

Bear in Head First“Stock market bears have had few breaks this year.  The S&P 500 has nabbed 26 record closes this year, while the Dow counts 15, and pullbacks have often been quickly met by investors ready to buy. The pendulum swinging back toward more optimistic U.S.-China trade talk means a few more records could be reached in 2019. Our call of the day comes from JonesTrading’s chief market strategist Michael O’Rourke, an unrepentant bear who sees little reason to dive in now, even if he has missed gains this year. ‘We have been in an environment of deteriorating stock fundamentals, a weak global economy and a decelerating U.S. economy, against a backdrop of a historically expensive market,’ he tells MarketWatch.

Despite strong gains, the S&P 500 is just under 10% above its 2018 high, while the Russell 2000 is below its 2018 high. As for his call: ‘I will turn positive on the equity market when valuations are more attractive and aligned with economic and earnings growth.’ What has happened in the past couple of years is that company earnings growth has been ‘artificial,’ driven by the administration’s tax cuts, he argues. That should mean that investors should assign a lower valuation, but they aren’t doing that, which is ‘dangerous.’ ‘I will become more constructive on the equity market as it begins to approach that historic 15x to 16x earnings multiple within a stable economic environment,’ says O’Rourke. And right now, the forward price/earnings ratio—a popular method of valuing a stock’s worth—for the S&P 500 is right around 20.”

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YAHOO FINANCE/Julia LaRoche

Jeffrey Gundlach gives Fed’s Powell a ‘C-‘, likens him to a losing NFL coach

December 5, 2019

Jeffrey Gundlach“If bond investor Jeffrey Gundlach were to grade Jerome Powell, he’d give the Federal Reserve Chairman a ‘C’ — arguably slightly better than the grade he’d receive from President Donald Trump, his fiercest critic. In a wide-ranging exclusive interview with Yahoo Finance, the CEO of $150 billion DoubleLine Capital explained that one of the main frustrations investors have had with the Fed lately is its inconsistent messaging. ‘Every press conference from basically December until about June was a completely different message from the one before,’ Gundlach told Yahoo. ‘And they were getting increasingly dovish. And then he kind of went all-in on dovishness, and started to follow the bond market and cut rates.’

The 60-year-old billionaire analogized Powell’s behavior to ‘an NFL coach after losing a game.’ He added that the heads of losing teams all say the same thing, ‘Got to watch the tape, got to play better, not good enough.’ Now Jay Powell does the same sort of boilerplate. He just says, ‘data-dependent, don’t know we’re going to do, we might.’ He basically wants to say as little as possible. He went on to describe the Fed as ‘rudderless’ and ‘shamelessly following the bond market [more] than ever before.’ He noted that the Fed has pretty much always followed the bond market, except during the Paul Volcker era, when the then-Fed chief was indifferent to the message of the market.

‘So, at this point, I’m afraid I would have to give Powell a pretty low grade. I’d give him a C- because of the fact that he’s really kind of lost his way as it appears.’”

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THE WALL STREET JOURNAL/Megumi Fujikawa

Japan’s Cabinet Approves $120 Billion Stimulus as Economic Clouds Gather

December 5, 2019

Japan Approves Stimulus“Prime Minister Shinzo Abe’s cabinet approved a $120 billion stimulus program, Japan’s largest in more than three years, citing the same global economic risks that have led central banks in the U.S. and Europe to cut interest rates. Mr. Abe’s plan is also aimed at healing a self-inflicted wound on the Japanese economy: the October increase in the national sales tax to 10% from 8%. Retail sales fell 7.1% in October and car sales were particularly hard-hit, suggesting the tax may have led consumers to refrain from big-ticket purchases. Japan’s exports have already been suffering this year, in part because of a slowdown in Chinese growth.

Tokyo’s new spending includes more than $50 billion to help recover from a typhoon in October that killed about 100 people. Levees in many areas collapsed and led to widespread flooding, pointing to the need for stronger infrastructure. Other spending will go to putting more digital devices in schools and funding reward points for shoppers who pay for purchases with credit cards, smartphone apps or other cashless methods. The government started the reward program in October to blunt the impact of the tax increase, and it has proved more popular than expected. Mr. Abe’s government estimated new spending by central and local governments would boost Japan’s real gross domestic product by a cumulative 1.4% through the fiscal year ending in March 2022. The spending plan of ¥13.2 trillion ($120 billion) is as much as the previous major stimulus package, which was released in August 2016 when a slowdown in developing economies caused turmoil in financial markets.”

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