MARKETWATCH/Callum Keown

Here’s why the ‘unloved but welcome’ U.S. stock market rally from March lows won’t last, Goldman says

“Brief hopes that U.S.-China trade tensions may subside appear to have been dashed.

Investors had breathed a sigh of relief on Friday when President Donald Trump chose not to mention sanctions or tariffs at a press conference about China’s new security law in Hong Kong.

However, Beijing is set to pause purchases of certain U.S. products, including soybeans, according to reports, sending stock futures slightly lower before the open. Traders had initially shrugged off a weekend of protests against police killings of black people.

Optimism over the economic recovery from coronavirus, with all 50 states taking steps to reopen, has sent stocks higher in recent weeks.”

Click here to read the full article.

KITCO/Jim Wyckoff

Gold prices weaker as traders assessing new crisis in U.S.

“Gold prices are modestly lower in early U.S. trading Monday. The safe-haven metal sees some pressure from U.S. stock indexes that are surprisingly not showing much reaction to major civil unrest that has exploded across major U.S. cities. Silver prices are posting solid gains and hit a more-than-three-month high overnight. August gold futures were last down $5.10 an ounce at $1,746.60. July Comex silver prices were last up $0.186 at $18.685 an ounce.

Global stock markets were mixed in overnight trading. U.S. stock indexes are pointed toward mixed openings when the New York day session begins. Civil unrest over racial inequality that erupted in U.S. cities during the weekend has dealt another major blow to the world’s largest economy. Reports said President Trump Friday night had to take cover in a bunker at the White House due to unruly crowds gathered at the White House. With the U.S. dealing with its own civil problems, it seems even less likely mainland China will loosen its tightening grip on Hong Kong.”

Click here to read the full article.

MARKETWATCH/Mark DeCambre and William Watts

Gold edges lower as investors play down U.S.-China tensions

“Gold futures traded slightly lower Monday, losing ground as equities drifted into positive territory and investors appeared to play down U.S.-China tensions and a weekend of civil unrest in several U.S. cities.

Gold for August delivery GCQ20, -0.14% on Comex fell $6.50, or 0.4%, to $1,745.10 an ounce, while July silver SIN20, 1.11% was up 14.10 cents, or 0.8%, at $18.64 an ounce.

”Investors are continuing to largely ignore the escalating U.S.-China tensions, the global recession and ongoing riots in the U.S., among other risks. Sentiment remains supported due to the easing of lockdown measures and because of ongoing central bank support,” said Fawad Razaqzada, market analyst at ThinkMarkets, in a note.”

Click here to read the full article.

by Sean Kelly

More central banks are planning to buy gold this year.

The increase in the number of central banks buying gold in 2020 is especially significant since central bank gold buying already reached record levels in 2019.

That’s according to the World Gold Council’s 2020 Central Bank Gold Reserves survey released this month.  Twenty percent of central banks intend to acquire gold over the next twelve months according to the report.  That compares to eight percent in the 2019 survey.

Key factors in the central banks’ gold acquisition plans are no different than those of informed individual investors.

Interest rates head the list of bankers’ concerns.

• “88 percent of respondents say that negative interest rates are a relevant factor for their reserve management decisions.
• “79 percent of respondents view gold’s performance during times of crisis as an important reason to hold gold, up from 59 percent in 2019.”
• “74 percent of respondents consider gold’s lack of default risk to be an important reason for holding the metal, up from 59 percent in 2019.”

The report concludes that these shifts signal an ongoing re-evaluation of gold’s role in the international monetary system and reflect “long-term concerns about fiscal sustainability as government stimulus is deployed to cushion the global economy.”

We are disappointed that the mainstream media does not feature reports on this news more prominently, since it is part of a global shift away from the dollar and will affect American living standards over time.  In any case, this “de-dollarization” is a leading financial megatrend of our times and is a very bullish development for gold, of which our friends and clients deserve to be aware.

This megatrend affects individual precious metals investors in three specific ways.  First, the central banks buy in huge quantities, last year adding 650 metric tons to their holdings.

It is a harbinger of a changing world order, a move to weaken the US geopolitical hegemony that had grown for the last century.  As central banks move to gold, they do so mostly with the dollars they once held.  Ten years ago, Russia held $180 billion in US Treasury securities.  Now Russia’s gold holdings have grown, its dollar holdings have fallen so low they are reported down in the asterisks in US Treasury listings, below the holdings of countries like Iraq and Vietnam.  This shift from dollars to gold over time removes some of the underpinnings of the dollar in global markets.

We also view gold in central bank reserves to be gold held in strong hands.  That means it is not likely to be sold in the case of market events, such as margin call selling in a stock market crash.

The World Gold Council reported earlier this year that global investment demand for gold (bullion, coins, ETFs) in the first quarter of 2020 was 80 percent higher than during the same quarter in 2019.

More central banks are planning to buy gold this year.  We recommend you do so, too.  Before they do!

 

MARKETWATCH/Mark DeCambre

Gold rises Friday and set for weekly gain as investors await President Trump statement on China

“Gold futures headed higher for a second session Friday, putting gold prices on track for a modest weekly gain amid focus on U.S.-China tensions and global monetary stimulus measures.

President Donald Trump said that he was preparing to hold a Friday news conference on China but hasn’t set a specific time. His planned remarks would come after the U.S., Australia, Canada and the U.K. governments issued a joint statement Thursday reiterating their “deep concern regarding Beijing’s decision to impose a national security law on Hong Kong,” after China’s parliament, the National People’s Congress passed legislation Thursday that could greatly curtail democratic freedoms.

Fawad Razaqzada, market analyst at ThinkMarkets, said that “the rising US-China rift, which has deepened over moves by Beijing to impose a security law on Hong Kong, has further boosted the appeal of the haven metal,” in a Friday research note.”

Click here to read the full article.

KITCO/Allen Sykora

U.S. April personal spending falls while income rises; core inflation minus 0.4%; gold higher

“Gold remained higher early Friday after a report showed that personal spending by Americans fell by 13.6% in April, while income rose 10.5% and core inflation declined 0.4%. Spot gold was last up $11 to $1,730 an ounce.

Ahead of time, most consensus forecasts compiled by news organizations called for spending to be 12.6% to 13% lower, while income was expected to fall by somewhere between 2.1% and 6.5%. The core inflation rate was seen down 0.3%

“The increase in personal income in April primarily reflected an increase in government social benefits to persons as payments were made to individuals from federal economic recovery programs in response to the COVID-19 pandemic,” the Bureau of Economic Analysis said.”

Click here to read the full article.

BLOOMBERG/ Elena Mazneva and Jack Farchy

Virus Has Sparked Round-the-Clock Rush to Fill U.S. Gold Vaults

“The scramble to jump on one of the hottest gold trades in years — by shipping bullion to New York — has sparked what may be one of the largest ever physical transfers of the metal.

“The flows into New York are unprecedented,” said Allan Finn, global commodities director at logistics and security provider Malca-Amit. His company’s teams in New York have been working 24 hours a day to cope with demand while navigating lockdowns, flight disruptions and social distancing.

Gold flooded into the U.S. in recent months as traders rushed to profit from an arbitrage caused by dislocations in the market triggered by the pandemic. Since late March, some 550 tons of gold — worth $30 billion at today’s price and roughly equal to global mine output in the period — have been added to Comex warehouse stockpiles. Hundreds of tons of that was imported.”

Click here to read the full article

CNBC/Christina Wilkie

Trump’s China press conference could mark the end of his cautious approach to Beijing

“For weeks, the Trump administration has been ratcheting up pressure on Beijing over its alleged cover-up of early coronavirus cases, and Trump has publicly blamed China both for the virus itself and for its outsized severity in the United States.

Beijing, in turn, has suggested the virus originated in U.S. service members, a claim widely refuted by international health experts. The four-week moving average for new claims – normally viewed as a more reliable measure of the labor market since it smooths out week-to-week volatility – fell by 436,000 to 2.61 million.

In the past week, however, the pressure from the United States has taken a more serious turn in response to a proposed Chinese security law that threatens the long-standing independence of Hong Kong. The law was formally approved Thursday by China’s People’s Congress, and it is expected to criminalize most forms of political protest under blanket bans on “sedition” and “subversion.””

Click here to read the full article.

CNBC/REUTERS

Gold gains as simmering US-China tensions boost demand

“Gold rebounded on Thursday as deteriorating U.S.-China relations over Beijing’s move to impose a national-security law in Hong Kong fanned concerns over quick economic recovery and drove investors towards the safe-haven metal.

Spot gold was up 0.8% at $1,722.70 per ounce, recovering from a two-week low of $1,693.22 touched in the previous session. U.S. gold futures rose 0.8% to $1,739.70.

“The tensions between U.S. and China continue to be rather on the high side. Overall, the market is a bit worried about the situation geopolitically and also economically,” said Afshin Nabavi, senior vice president at precious metals trader MKS SA.”

Click here to read the full article.

MARKETWATCH/Elisabeth Buchwald

The extra $600 Americans receive in weekly unemployment benefits ends in July — how that could cost the U.S. more jobs

“Two-thirds of Americans are receiving more money from unemployment benefits than they did from their jobs, largely because of a supplemental $600 weekly benefit that’s part of the $2.2 trillion CARES Act.

But decreasing those benefits could cost the country even more jobs on top of the historic 40 million jobs that have already been wiped away by the coronavirus pandemic, Heidi Shierholz, an economist at the Economic Policy Institute, a left-leaning think-tank based in Washington, D.C., said.

The weekly supplemental $600 benefit is set to expire at the end of July if the U.S. Senate and President Donald Trump don’t pass the $3 trillion HEROES Act stimulus package, which would extend the $600 weekly add-on unemployment benefit into January 2021.

Many Republican lawmakers hold that the $600 weekly boost in unemployment insurance during the pandemic is a disincentive to return back to work, given that people could earn more from not working.”

Click here to read the full article.

KITCO/Jim Wyckoff

Gold prices gain as risk aversion upticks late this week

“Gold and silver prices are trading moderately higher in early U.S. trading Thursday, as safe-haven demand has returned to the metals after a brief absence. Souring China-U.S. relations are back on the front burner of the market place. August gold futures were last up $10.70 an ounce at $1,737.50. July Comex silver prices were last up $0.108 at $17.86 an ounce.

Global stock markets were mixed in overnight trading, with European shares mostly higher and Asian shares mostly lower. U.S. stock indexes are also pointed toward mixed openings when the New York day session begins. There is a bit more risk aversion in the marketplace Thursday, as China’s government has ratified what is calls a national security law that ostensibly tightens mainland China’s grip on Hong Kong. The move has further angered the U.S. as relations between the two largest economies in the world continue to deteriorate. The U.S. Secretary of State on Wednesday said Hong Kong was no longer autonomous from China, implying the U.S. may revoke Hong Kong’s favorable trade status. Such would have big implications for the many major U.S. companies doing business in Hong Kong. The U.S. House of Representatives Wednesday passed a bill that would sanction China for its oppression of minority groups.”

Click here to read the full article

KITCO/Allen Sykora

Another 2.12 million Americans file initial jobless claims; gold remains higher

“Americans have now filed a total of 40.77 million initial claims since the week of March 21.

New weekly claims have been above 2 million every week since March 21 after the previous all-time high had been 695,000 back in October 1982, according to Labor Department figures. Traders have been closely monitoring jobless claims as a key gauge of the weakness in the economy due to lockdowns and social-distancing measures across the country to combat the spread of the COVID-19 pandemic, with many businesses temporarily closing their doors. States are now gradually reopening their economies.

The four-week moving average for new claims – normally viewed as a more reliable measure of the labor market since it smooths out week-to-week volatility – fell by 436,000 to 2.61 million.”

Click here to read the full article.

FORBES/Frank Holmes

You Can’t Just Print More Gold

“’I think there is a strong likelihood we will need another bill.’

That’s according to Treasury Secretary Steven Mnuchin, who supports additional fiscal stimulus to combat the economic impact of the novel coronavirus—within reason.

The secretary’s statement comes after the House passed a record-shattering $3 trillion relief package, though leaders in the Senate have said they will not put it up for a vote. Senate Majority Leader Mitch McConnell has made it clear that the next coronavirus bill “cannot exceed $1 trillion,” according to reporting by Axios.

Even so, the U.S. government’s response is already massive, dwarfing anything that’s come before it.”

Click here to read the full article.

KITCO/Jim Wyckoff

Gold prices lower as investor risk appetite rising this week

“Gold prices are trading lower again and back below $1,700.00 in early U.S. trading Wednesday, amid keener trader/investor risk appetite in the marketplace at mid-week. The recent safe-haven bids that had supported gold and silver markets has evaporated, for the moment. June gold futures were last down $13.20 an ounce at $1,692.30. July Comex silver prices were last down $0.16 at $17.435 an ounce.

Global stock markets were mostly higher in overnight trading. U.S. stock indexes are pointed toward solidly higher openings when the New York day session begins. Traders and investors remain upbeat at mid-week. After two months or more of being mostly quarantined the citizens of major industrialized countries are eager to get back to their pre-Covid-19 ways of life and are seeing light at the end of the tunnel. The global stock markets are trading like they expect the world’s consumers to get back to old spending habits sooner rather than later. Still, tens of millions of workers in the major global economies have been idled by the pandemic-induced closure of businesses. A significant number of lost jobs are gone for good.”

Click here to read the full article

CNBC/Chloe Taylor

Coronavirus is accelerating a ‘capital war’ between China and the US, investor warns

“The coronavirus crisis will accelerate a capital, trade and technology war between the world’s two largest economies, one investor has warned.

Speaking to CNBC’s “Squawk Box Europe” on Tuesday, Michael Howell, CEO of Crossborder Capital, warned that the preliminary trade deal between the U.S. and China was under threat, and there could even be a new battleground: investing capital.

“I think the real tension oncoming is not just trade wars but capital wars — we’re in a world where capital wars matter,” he said, noting that there was “an awful lot of liquidity” being poured into markets amid the coronavirus crisis.

Governments and central banks around the world have rolled out unprecedented stimulus packages in an effort to curb the economic shock from the pandemic, with President Donald Trump in March approving a historic $2 trillion coronavirus relief bill.”

Click here to read the full article.

CNBC/REUTERS

Gold falls 1% as risk appetite firms on recovery optimism

“Gold fell over 1% on Tuesday as major economies further eased coronavirus-linked restrictions, fueling hopes for economic recovery and bolstering risk appetite.

Spot gold slipped 1.1% to $1,710.95 per ounce, having earlier hit a low since May 13 at $1,708.47. U.S. gold futures settled down 1.7% at $1,705.60.

“There is a risk-on tone in the market, driving the reversal of (gold’s) safe-haven flows,” said Daniel Ghali, commodity strategist at TD Securities.

U.S. stocks surged as investors grew optimistic about business restarts and a potential coronavirus vaccine.

Spain urged foreign tourists to return from July, while Britain will reopen thousands of shopping centres next month. U.S. states were also gradually easing restrictions.

“A breakdown below $1,700 could crack open the doors towards $1,680 (for gold),” said FXTM analyst Lukman Otunuga. Nevertheless, the downside is likely to be cushioned by trade woes, disappointing economic data and growth fears.”

White House economic adviser Larry Kudlow said President Donald Trump is so “miffed” with Beijing over the novel coronavirus and other matters that the trade deal is not as important to him as it once was.”

Click here to read the full article.

by Sean Kelly

We would like to thank Federal Reserve Chairman Jerome Powell for doing our work for us Sunday night on the CBS program 60 Minutes (5/17/20).

A good deal of our day has to do with discussing the US dollar and our monetary system.  It is no surprise that so few American understand how it works.  The schools don’t really deal much with it.  And frankly, parts of the monetary system were designed to shroud the sketchiest parts of the operation.

We don’t blame people for not knowing more about it: how dollars are created and what gives them value.  People have families to provide for and work responsibilities that demand their attention.  A good mechanic knows more about our cars than we will ever learn.  A pharmacist has a dizzying array of medicines to counsel customers about.

Individual areas of expertise like that don’t leave people a lot of extra time to pay attention to arcane monetary issues like debt monetization or liquidity operations.

But Chairman Powell pulled the curtain back on what the Fed really does in his interview with Scott Pelley.

And that’s a big help!  Because in talking to our friends and clients about the importance of gold in their retirement accounts and financial portfolios, the subject almost always comes up.  And once they understand the way the Fed makes money out of nothing, money that gets stovepiped to bailout reckless banks or to crony companies and even foreign governments, the gold story starts to become more clear.

And when they learn that dollars created out of nothing take on value to the degree they dilute the value of the dollars they have been saving, the reasons to own gold come into sharp focus.

So what did Chairman Powell say that helps make much of this clear?  Just the truth.

Discussing the Fed’s response to the COVID-19 shutdown, the interviewer asked if the Fed has just flooded the country with money.

Here’s a partial transcript:

Reporter: “Fair to say you simply flooded the system with money?”

Fed Chairman: “Yes. We did. That’s another way to think about it. We did.”

Reporter: “Where does it come from? Do you just print it?”

Fed Chairman: “We print it digitally. So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds for other government guaranteed securities. And that actually increases the money supply. We also print actual currency and we distribute that through the Federal Reserve banks.”

Reporter: “In terms of size, Mr. Chairman, how does what the Fed is doing right now compare to the unprecedented action it took in 2008?”

Fed Chairman: “So the things we’re doing now are substantially larger. The asset purchases that we’re doing are a multiple of the programs that were done during the last crisis. . .”

Bear in mind that when the Chairman says the Fed buys assets in the afternoon, it is doing so with money that didn’t exist in the morning.  It didn’t exist until somebody hit “enter” on a computer keyboard.  And made it up.

You might think that creating “money” that isn’t backed by anything is like writing a check on an account with no deposits, or even like counterfeiting.  You would be right.

It is like counterfeiting.  But it is legal counterfeiting.

So, our hat is off to Powell.  Other Fed chairman have been obfuscatory about what they do, and for good reason.  Most people work too hard to believe that real wealth is created out of thin air.  And once they learn that there is no discipline on government spending and no limit on the dollars the Fed can create, they begin to see gold in a new light.

Actually, we shouldn’t say new light, because gold has been the shining and enduring money of the ages for thousands of years and in the far-flung corners of the earth.  People turn to gold for both protection and for profit when the authorities start doing things like making “money” out of nothing at all.

So, thank you Chairman Powell for helping us out.

For today, our work here is done.

MARKETWATCH/Mark DeCambre

Gold prices rise amid U.S.-China tensions, but the metal is looking at a weekly decline

“Gold prices headed higher on Friday as testiness between the U.S. and China drew investors into assets considered havens, including government debt and the Japanese yen.

However, continuing plans to reopen economies that have been frozen by the COVID-19 pandemic and hope for remedies has limited the upside in precious metals, experts said

“The heightened uncertainties in the markets are causing further ventures into riskier waters to pause for breath, after what has been a bumpy ride for risk assets this week,” wrote Han Tan, market analyst at FXTM, in a Friday research note.

“Gold is climbing back towards the $1730 handle and the Yen is advancing against all of its G10 and Asian peers,” he wrote.”

Click here to read full article.

KITCO/Jim Wyckoff

Gold prices up on safe-haven bid amid rising China tensions

“Gold and silver prices are trading higher in early U.S. dealings Friday, on safe-haven buying after fresh developments in China have sapped investor and trader risk appetite heading into a long U.S. holiday weekend. June gold futures were last up $15.50 an ounce at $1,737.70. July Comex silver prices were last up $0.276 at $17.645 an ounce.

Global stock markets were also mostly lower in overnight trading. U.S. stock indexes are pointed toward lower openings when the New York day session begins. U.S.-China tensions remain high. A new geopolitical element thrown into the mix is China’s threat to impose new national security laws in Hong Kong to thwart protesters there. Hong Kong’s main stock index, the Hang Seng, saw its worst day in nearly five years Friday—down over 5%.”

Click here to Read Full Article

CNBC/REUTERS

Gold gains as US-China tensions boost safe-haven demand

“Gold prices rebounded on Friday as escalating tensions between the United States and China lifted bullion’s safe-haven appeal, though a stronger U.S. dollar kept gains in check.

Spot gold was up 0.4% at $1,732.60 per ounce, after falling 1.4% on Thursday. U.S. gold futures rose 0.7% to $1,734.

U.S.-China tensions have risen in the past few weeks over the source of the coronavirus pandemic, and China’s proposal on Thursday to impose security laws on Hong Kong prompted a strong warning from U.S. President Donald Trump.”

Click here to read full article.

 

CNBC/REUTERS

Gold prices climb toward 5-week high as doubts grow about coronavirus vaccine

“Gold prices headed higher Wednesday for a second session as investors remain mostly bullish about the prospects for the commodity against the backdrop of economies attempting to reopen from the COVID-19 pandemic.

The precious metal pulled back on Monday after a report from Moderna pointed to progress with an experimental vaccine for the novel strain of coronavirus that has infected nearly five million people globally. However, a report from STAT News on Tuesday raised some doubts about the prospective remedy for the viral outbreak, providing some lift for bullion.

“Speculators do blow things out of proportion the moment they get any news about a Coronavirus vaccine,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a Wednesday research note. “But, when the optimism fades and reality becomes apparent, investors are left with no option but to hedge their bets,” he wrote.”

Click here to read the full article.

KITCO/Video

Peter Schiff: Fed will ‘wipe out’ many investors; gold to return as reserve currency

“The Federal Reserve is going to create an inflationary environment that is like a tax that will hurt society on all levels, according to Peter Schiff, chief executive officer of Euro Pacific Capital.

“I think most people are going to get wiped out by the inflation tax. All of this government is not free. This incredible increase in the size of government is going to cost somebody. Somebody has to pay the bill for all the bailouts and all the stimulus, and if we’re not raising taxes, then how are we doing it?” Schiff told Kitco News.

This “tax” is also going to devalue fiat currencies, and investors should be holding onto physical gold and silver, he continued.

“So what you’ve got to do to mitigate the damage, your share of that inflation tax, is before the dollar collapses, get rid of your dollars and use them to accumulate real money, gold and silver or to buy quality income-producing assets in other countries,” he said.”

Click here to read the full article

CNBC/REUTERS

Gold gains as bleak economic outlook stokes safe-haven demand

“Gold prices gained on Wednesday as bleak data from major economies reflected the fallout from the coronavirus crisis, while the initial euphoria over a potential Covid-19 vaccine fizzled and gave way to safe-haven demand.

Spot gold was up 0.2% to $1,747.19 per ounce, as of 0256 GMT. U.S. gold futures rose 0.4% to $1,753.30.

In testimony before the U.S. Senate Banking Committee, Federal Reserve Chair Jerome Powell said the Fed was looking at extending access to the credit facilities to additional borrowers, including states with smaller populations.”

Click here to read the full article.

KITCO/Tom Horwitz

The buyers are back; gold, silver and platinum surging

“A lot has happened since Monday’s reversal in the metals; the buyers are back. As we wrote yesterday, Monday’s pullback was really a buying opportunity and not a place to panic. None of the action this week has been surprising. In fact, it has almost been to script.

Gold remains the steadiest of the group and is in a long-sustained uptrend with no real sign of weakening. Gold was under a little pressure early in the month and was in danger of reversing; however, buyers stepped in and have not stopped. Gold is now ready to make a big run through the $1,788 June futures high. New support is about $1,730 in the June futures, and until further notice, pullbacks are a buying opportunity.”

Click here to read the full article.

CNBC/Jeff Cox

Most investors don’t think this rally is for real, according to widely followed Wall Street survey

“More than two-thirds of professional investors doubt that the stock market jump off the March lows is the start of a legitimate new bull market, according to the Bank of America Fund Manager Survey for May.

Amid a surge that has seen the S&P 500 rise 32% since the March 23 trough, some 68% of survey respondents called the move a “bear market rally.” The term implies that even though the surge tops the 20% benchmark that would signal a new bull market, the fundamentals tell a more pessimistic story. The Bank of America poll is among the most widely followed surveys of investors on Wall Street.

That said, respondents still see the near-term “pain trade,” or the one that catches most investors off guard, as the market going higher. Current sentiment is consistent with an S&P 500 level of 3,020, or about 2.3% higher than Monday’s close, according to Michael Hartnett, chief investment strategist at Bank of America Global Research.”

Click here to read the full article.

MARKETWATCH/Mark DeCambre

Gold edges higher a day after decline induced by coronavirus vaccine hope

“Although reports indicate that pharmaceutical company Moderna Inc. MRNA, +19.95% has made some early progress toward a vaccine for the virus, some gold bulls say that the outsize fiscal and monetary stimulus measures enacted by governments across the globe will support gold buying over the long term.

“For long-term gold positions, a vaccine may not be an absolute game-changer as central bank balance sheets will not miraculously evaporate, and political/trade tensions between China and the US are unlikely to de-escalate,” wrote Stephen Innes, global chief market strategist at AxiCorp, in a daily research note.”

Click here to read the full article

REUTERS/Brijesh Patel

Gold edges higher as global recession fears persist

“Spot gold was up 0.2% at $1,734.66 per ounce by 0944 GMT. U.S. gold futures rose 0.1% to $1,736.60. On Monday, gold had slipped from a multi-year peak after drugmaker Moderna said its COVID-19 experimental vaccine showed promising results in an early-stage trial, lifting U.S. stocks and oil prices.

The pandemic, which has battered global growth, has prompted nations to roll out massive stimulus measures to limit economic damage caused by the virus. Gold tends to benefit from widespread stimulus from central banks because it is widely viewed as a hedge against inflation and currency debasement.

“Right now, market is focused on the aftermath of the big rally in stock markets yesterday that has taken some of the bid out of gold, but the underlying demand has not gone away,” Saxo Bank analyst Ole Hansen said. “We are looking at weaker economic outlook, massive amount of central bank measures in market and also have the tensions on the geopolitical front which should keep gold prices higher.””

Click here to read the full article

FORBES

Gold Continues To Outperform S&P 500

“A week that was decidedly risk off, with the prior week’s gains erased after multiple poor economic numbers hit the tape. Not to mention, escalating tensions with the U.S. and China after Federal Reserve Chairman Jerome Powell voiced the need for much more stimulus to prevent a depression. So in all, it is not surprising to see mainly outflows from equity funds, while bond and gold funds benefited. There was one bright spot, as tech continues to be the major winner from the pandemic as more businesses are forced to work-from-anywhere and utilize more bandwidth than before. For the week, the S&P 500 lost over 2%, while gold gained over 2%.”

Click here to read the full article

MARKETWATCH/Mark DeCambre

Gold prices jump, rally toward highest close in about seven years

“Gold prices on Monday headed sharply higher, putting the precious metal on track for its highest settlement since 2012.

Bullion has marked mostly rangebound moves from a high of $1,788 to a low of $1,676 an ounce in recent weeks but has been underpinned by higher by worries about the harm to the global economy from the COVID-19 pandemic and the monetary-policy response by central banks to limit the impact of business closures, which were only recently being undone.

“Gold is skyrocketing with the price climbing to its highest in seven years. Dovish comments from the Federal Reserve and concerns about the stock market have lifted bullion,” wrote Carlo Alberto De Casa, chief analyst at ActivTrades, in a daily research note.”

Click here to read the full article.

MARKETWATCH/Mark DeCambre

It’s a runaway; gold, silver and platinum breaking out

“Every day last week, we wrote about the patterns in the metals. They went from the ugly to strong. Those patterns are playing out this morning once again with gold, silver and platinum breaking out to new recent highs. Therefore, you never argue with price, which dictates everything.

Silver is parabolic and looks headed to $18 in the July futures, possibly higher. Platinum is right there and trying to chase down $900 in the July futures. Gold’s pattern is a little more rational but is tracking $1,800 in the June futures. As you can see, the rallies have been powerful and backed with solid volume.”

Click here to read the full article

BLOOMBERG/Ranjeetha Pakiam and Elena Mazneva

Gold Jumps to 7-Year High After Fed’s Warning on Stocks, Growth (Video)

“Gold extended its rally to a fresh seven-year high after the Federal Reserve warned of potential asset-price declines as an economic recovery could stretch through until the end of next year. Palladium jumped.

Haven demand for bullion is being supported by dismal economic data and fears over new infections, even as investors are encouraged by businesses reopening across major economies.

Gold’s recent breakout raised prospects that it could set an all-time high soon as massive stimulus measures push holdings in bullion-backed exchange-traded funds to a record. The market is also being driven by speculation that U.S. interest rates could go negative and increased tensions with China.

“The recovery is probably set to be more problematic than the optimists think, with gold set to benefit from the enormous boost to money supply that is going to ensue,” said Gavin Wendt, a senior resource analyst at MineLife Pty..””

Click here to read the full article

CNBC/REUTERS

Gold price pushes to session highs following 16.4% drop in April retail sales

“Gold jumped more than 1% on Monday to its highest since October 2012 after a batch of weak data knocked hopes for a speedy global economic recovery while auto-catalyst palladium surged to a three-week high.

Spot gold was up 1% at $1,758.55 an ounce by 0931 GMT and U.S. gold futures rose 0.8% to $1,770.70.

“The market continues to speculate about negative interest rates in the U.S. and extremely low interest rates and cheap money all over the world,” said Commerzbank analyst Eugen Weinberg. “Also, fears of economic crisis are unfolding given the very weak data in the United States and elsewhere.”

Data published on Friday showed U.S. retail sales and industrial production both plunged in April, with the coronavirus crisis continuing to pummel the U.S. labour market.”

Click here to read the full article

by Sean Kelly

Few Americans realize the US dollar is more than simply another currency, that thanks to its global dominance the dollar has also been weaponized.  It is not just a unit in commercial transactions; whether for good or for ill, it is a bludgeoning tool of US foreign policy.

President Nixon’s Treasury secretary John Connally rubbed the world’s face in this reality in 1971 when he told a group of foreign finance ministers that “the dollar is our currency, but it’s your problem.”  Connally was right.  Only weeks earlier the US suddenly repudiated its promise to foreigners to redeem the dollar they held with the gold they had been promised.

This vulnerability to US dominance is a remnant of the post-war Bretton Woods agreement.  With that arrangement, most of the world’s countries agreed to hold dollars instead of gold as their own currency reserves.  Having abandoned gold, they became hostages to US policy.

The dollar’s status as the world’s reserve currency has cemented this dominance into geopolitical affairs.  Tools of this reach include the SWIFT system, a global interbank financial communications system used to settle international accounts.  By denying countries at odds with US policy access to SWIFT, the US cuts foreign nations out of international markets and thereby exerts unprecedented control over global economic activity in furtherance of its geopolitical and military objectives.

Sanctions… penalties… asset seizures:  foreign banks have been fined billions of dollars while entire countries have had their foreign assets frozen and claim to have been economically crippled by the US for violation of what they believe are promiscuous, arbitrary, and cruel US sanctions.

Although they have been biting their tongues for years, foreign governments are now openly bristling at this state of affairs and making common cause to change it.  They are racing to establish bi-lateral and multi-lateral institutions to bypass the old order, the “exorbitant privilege” enjoyed by the dollar.

The accompanying movement of central banks around the world, most notably Russia and China, to de-dollarize by repositioning the reserves out of dollars and into gold may prove to be the most significant megatrend of this decade.  It is a shift in global monetary management that can damage the dollar badly and propel gold much higher.  Since 2006 China’s gold reserves have grown from 600 tons to 1,948 tons, while Russia’s have swollen from 400 tons to 2,299 tons today.

Foreign nations aren’t ganging up against the dollar because it is in a position of strength.  The COVID-19 pandemic, with its exponential growth of US debt and warp speed Federal Reserve money printing, provides a fresh opportunity to unite against dollar hegemony.

The president of the Shanghai Gold Exchange, the world’s largest spot physical gold trading center, Wang Zhenying, used this pandemic moment to voice the common dissatisfaction with the dollar.  “When the Fed turns on the liquidity tap, the U.S. dollar will, in theory, be in a long-term depreciatory trend,” he said.  “Future global trade needs a super-sovereign currency system under which no single country has the power to freeze the international assets of another country.”

Talk of a “super-sovereign currency” may ring a bell.  Long ago French President Charles de Gaulle called for a new monetary system “on an indisputable monetary base that does not carry the mark of any particular country. . . . Yes, gold, which does not change in nature, which is made indifferently into bars, ingots and coins, which does not have any nationality, which is considered, in all places and at all times, the immutable and fiduciary value par excellence.”

De Gaulle was on to something.  A few years before dollar holders were left holding the “old maid” when the US suspended the dollar’s convertibility to gold, de Gaulle had sent the French navy across the Atlantic to pick up France’s gold reserves held in the US.

Good move.

The moral of this story is that with the old-world monetary order under growing strain and de-dollarization spreading, moving assets into the global “super sovereign currency” is especially alluring.

For nation states and individuals alike.

Gold is the super sovereign currency today, just as it has been for thousands of years.

CNBC/REUTERS

Gold hits 3-week high as US-China dispute fans growth concerns

“Gold prices gained for a fourth straight session on Friday, hitting a more than three-week high as rising U.S.-China trade tensions added to fears about the global economy already reeling from the coronavirus pandemic.

Spot gold was up 0.2% at $1,732.63 per ounce, after hitting its highest since April 23. Bullion has risen nearly 2% so far this week. U.S. gold futures were steady at $1,740.20.

“Gold has been consolidating for weeks and finally broke free yesterday, the momentum from that move could be sustaining the rally,” OANDA analyst Craig Erlam said. “When something has been consolidating for so long, the breakout can be quite explosive as stops are triggered and longs initiated. I feel it may be a combination of the (U.S.) jobless claims catalyst and technical factors here.”

Click here to read the full article.

MARKETWATCH/Mark DeCambre

Gold heads to highest in May as U.S. economic data highlights impact of coronavirus

“Gold prices headed higher on Friday as U.S. economic data underscored the damage from the COVID-19 pandemic on business activity in the America, providing safe haven support for bullion at around its highest level so far this month.

A reading of U.S. retail sales tumbled by a record 16.4% in April and fell 16.2% excluding automobile sales and gas price, due to lockdown measures implemented to slow the worst outbreak in more than a century.

Meanwhile, a reading on business activity in the New York area, the New York Fed’s Empire State business conditions index, rose 29.7 points to minus 48.5 in May, the regional Fed bank said Friday, marking the second-lowest reading on record. Economists had expected a reading of minus 65, according to a survey by Econoday.”

Click here to read the full article.

BLOOMBERG/Justina Vasquez and Elena Mazneva

Gold, Silver Race Higher on Fear of Second Virus Wave

“Gold jumped to a three-week high after bleak U.S. government data underscored how hard coronavirus-related shutdowns have hit the world’s largest economy.

Bullion headed back toward its peak in April, when prices hit the highest since 2012, after U.S. factory production plummeted in April by the most in records back to 1919. And a gauge of U.S. retail sales plunged through the record set just a month earlier.

“Everybody must have realized it, but it’s just more evidence that the reality is this is a pretty bleak economic picture right now,” Phil Streible, chief market strategist for Blue Line Futures LLC, said by phone. “People are continuing to pile into gold because that weak economic picture is going to continue to drive interest rates lower.”

Click here to read the full article.

KITCO/Neils Christensen

Gold price pushes to session highs following 16.4% drop in April retail sales

“Gold prices are at session highs holding near a one-month high and is reacting slowly to extremely disappointing economic data as U.S. consumers forced to stay at home last month significantly cut back on shopping.

U.S. retail sales fell 16.4% in April following March’s revised decline of 8.3%, according to the latest data from the U.S. Commerce Department, released Friday; the data missed expectations as economists were forecasting an drop of 12%.

According to reports, this is the biggest drop in retail sales since the data has been collected. Last month was the previous record.

“The modern retail sales data series dates back to 1992 and this is double the worst fall on record,” said Adam Button, senior currency strategist at Forexlive.com”

Click here to read the full article

MARKETWATCH/Mark DeCambre

Gold prices climb as investors parse jobless claims report

“Gold futures on Thursday were headed higher as investors digested an economic report on the labor market, which highlights a growing sense of the challenges the U.S. economy may face in recovering from the COVID-19 pandemic.

U.S. unemployment data showed that those seeking jobless benefits rose 2.98 million in week ended May 9. The number is higher than consensus estimates from economists polled by MarketWatch for 2.7 million but indicates that applications for unemployment compensation peaked at a seasonally adjusted 6.9 million in late March and has fallen steadily over the past month.

The precious metal gained support from comments from Federal Reserve Chairman Jerome Powell who on Wednesday described the path forward for the domestic economy from the deadly pathogen as uncertain, though the central-bank boss appeared to reject the idea of pushing key interest rates, which stand at a range between 0% and 0.25%, to subzero levels, which would support bullion prices.”

Click here to read the full article.

KITCO/Todd Horwitz

Gold tests first resistance; silver and platinum quiet

“Gold has been moving up the last couple of days and has reached the first resistance of $1,730 in the June futures. The pattern looks ready to break out out to the upside and may be reversing the recent pressure it has be under. Remember, gold has been consolidating with a lean to the downside since early April but held support.

If gold can break through the $1,730 level in the June futures, the next target is $1,775. The fact that gold has made higher lows for the last week adds momentum to a possible breakout. We remain long and will stay there until the pattern is violated to the downside.

Silver and platinum remain in almost identical patterns, with both looking like they are getting ready to make big moves. Based on our positions, we assume these moves to be higher. However, the pattern itself is based on confusion, which suggests that silver and platinum can go either way. Levels to watch include: silver, $15-$16, July futures; and platinum, $750-$850, July futures.”

Click here to read the full article.

CNBC/Jeff Cox

Weekly jobless claims total 2.981 million, bringing coronavirus tally to 36.5 million

“New filings for unemployment claims totaled just shy of 3 million for the most recent reporting period, a number that while still high declined for the sixth straight week, according to Labor Department figures Thursday.

The total 2.981 million new claims for unemployment insurance filed last week brought the coronavirus crisis total to nearly 36.5 million, by far the biggest loss in U.S. history. The count announced last week count was revised up by 7,000 to 3.176 million, putting the weekly decline at 195,000 between the two most recent reports.

Economists surveyed by Dow Jones had been expecting the latest count of new claims to be 2.7 million.”

Click here to read the full article

KITCO/Neils Christensen

Fed’s Powell sends gold price on rollercoaster ride, dismisses idea of negative rates

“June gold futures rallied to session highs as Powell started to speak during a webinar hosted by the Peterson Institute for International Economics. He reiterating his call that the central bank would continue to do whatever it took to support the U.S. economy that has been devastated by the COVID-19 pandemic.

Powell also went back and forth on his outlook for the U.S. economy. He noted that the U.S. economy was in a good position at the start of the year and the virus is the cause of the unprecedented downturn.

He added that although the Federal Reserve and the federal government have taken historic measures to support the economy, more may be needed. He also said that the virus has created an environment of significant uncertainty.”

Click here to read the full article.

MARKETWATCH/Steve Goldstein

Why Stanley Druckenmiller says the risk-reward of investing in stocks has never been worse

“The famed former hedge-fund manager, who with George Soros famously broke the Bank of England by shorting the pound in 1992, says “the risk-reward for equity is maybe as bad as I’ve seen it in my career.”

The S&P 500 SPX, -0.29% has climbed 28% from the lows of March, even in the face of data showing the economy, at best, plateauing after a severe downturn.

Speaking at a webinar run by The Economic Club of New York on Tuesday night, the chairman and chief executive of Duquesne Family Office says it is just not true that it is profitable to be on the side of the Federal Reserve, which has cut interest rates to nearly zero, swelled its balance sheet and initiated several emergency lending programs. He thinks stocks are at high multiples given the uncertainty of the current environment and looming bankruptcies.

Click here to read the full article.

CNBC/Fred Imbert and Maggie Fitzgerald

Dow drops more than 100 points as Powell sees ‘significant downside risks’

“The Dow Jones Industrial Average and S&P 500 fell on Wednesday as investors pored through downbeat remarks from the top-ranking Federal Reserve official amid jitters about reopening the economy.

The 30-stock Dow dropped 150 points, or 0.6%. The S&P 500 traded 0.4% lower while the Nasdaq Composite climbed 0.4%.

“While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks,” Fed Chairman Jerome Powell said in prepared remarks for a webcast event with the Peterson Institute for International Economics, noting that more needs to be done to sustain the economy. Powell added, however, the economy should see a substantial recovery once the coronavirus is under control.”

Click here to read the full article

FX EMPIRE/Arkadiusz Sieroń

Will Job Market from Hell Support Gold?

“This mammoth increase in the unemployment rate was driven by the giant losses in the nonfarm payrolls. The coronavirus destroyed 20.5 million American jobs in April, an unprecedented monthly change. The number of destroyed jobs has been the largest since the 1939.

Importantly, the real situation in the US labor market is even darker than the Employment Report suggests. Why? First, although the Great Lockdown is gradually unwinding, investors should remember that in the establishment survey, “workers who are paid by their employer for all or any part of the pay period including the 12th of the month are counted as employed, even if they were not actually at their jobs.” It means that the current report does not count workers who lost their jobs after April 12 nor people on temporary layoff. As the BLS admits itself, if millions of Americans who have been furloughed and expect to return to their jobs are counted as unemployed, the unemployment rate would have been almost 5 percentage points higher.”

Click here to read the full article.

KITCO/David Lin

Gold, the sleeping giant: $3,000 price level could happen

“Historically, corrections in gold prices have made for sound buying opportunities, and this time is no different, said Andrew Hecht, of the Hecht Commodity Report.

In a recent article, Hecht noted that gold’s pullback below $1,700 last week could mark the start of a new bull rally.

Long-term, prices are headed towards $2,000 an ounce, with $3,000 or higher within the realm of possibility, he said.

“Gold many be sleeping for now, but much higher highs are on the horizon if the price action that followed 2008 is an example,” Hecht said.”

Click here to read the full article.

CNBC/Thomas Franck

US grocery costs jump the most in 46 years, led by rising prices for meat and eggs

“Prices Americans paid for eggs, meat, cereal and milk shot higher in April as people flocked to grocery stores to stock up on food amid government lockdowns designed to slow the spread of Covid-19.

The Labor Department reported Tuesday that prices U.S. consumers paid for groceries jumped 2.6% in April, the largest one-month pop since February 1974. The spike in supermarket prices was broad-based and impacted items from broccoli and ham to oatmeal and tuna.

The price of the meats, poultry, fish and eggs category rose 4.3%, fruits and vegetables climbed 1.5%, cereals and bakery products advanced 2.9% and dairy goods gained 1.5%.

The grocery numbers stand in stark contrast to the broader trend in U.S. prices, which fell 0.8% in April and clinched their largest one-month decline since 2008 as a swoon in oil and gasoline dragged the headline CPI number lower.”

Click here to read full the article.

MARKETWATCH/William Watts

Gold prices edge higher as traders track weaker dollar

“Gold futures were up modestly Tuesday, with support attributed in part to a weaker tone for the U.S. dollar as investors also weigh efforts to reopen economies that were closed in the effort to contain the COVID-19 pandemic.

Gold for June delivery on Comex GC.1, +0.27% GC00, 0.66% rose $9.80, or 0.6%, to $1,707.80 an ounce, while July silver SI00, 0.61% was up 13 cents, or 0.9%, at $15.81 an ounce.

“Gold continues to float around the $1,700 level. The range is closing in gradually but there’s little to suggest we’re on the verge of an explosive breakout,” said Craig Erlam, senior market analyst at Oanda, in a note.

The ICE U.S. Dollar Index DXY, -0.44%, a measure of the currency against a basket of six major rivals, fell 0.3%. A weaker dollar can be a boost for commodities priced in the unit, making them less expensive to users of other currencies.

The dollar, however, has been largely rangebound, Erlam noted. A drop in the dollar below its April lows could give gold a push higher, Erlam said.”

Click here to read the full article.

REUTERS/Brijesh Patel

Gold gains as dollar rally pauses, new virus cases mount

“Gold prices rose on Tuesday as the dollar slipped from a more than two-week high, amid worries of a resurgence in coronavirus infections in some countries and lingering trade tensions between the United States and China.

Spot gold was up 0.4% at $1,702.96 per ounce by 1212 GMT. U.S. gold futures rose 0.6% to $1,707.90 per ounce.

“We’re seeing a little softness in the dollar this morning which is providing some support for gold,” OANDA analyst Craig Erlam said.

Gold has risen over 12% so far this year as central banks around the world rolled out a wave of stimulus measures to limit economic damage caused by the coronavirus outbreak.

Globally, an estimated $15 trillion worth of stimulus has already been unleashed to cushion the blow from the pandemic, which has infected more than 4.19 million people around the world and killed 285,120.

Gold tends to benefit from widespread stimulus measures from central banks because it is widely viewed as a hedge against inflation and currency debasement.”

Click here to read the full article.

BUSINESS INSIDER/Saloni Sardana

Investors are rushing into gold to maximize returns during the pandemic, but analysts urge investors to “take a breather”

“Reflecting the enthusiasm for gold, Paul Singer’s New-York based Elliott Management, which manages about $40 billion in assets, believes that it was “one of the most undervalued” assets available. In a letter to clients last month, he said its fair value is “multiples of its current price.”

But analysts told Markets Insider that markets are too optimistic about the precious metal and the outlook remains uncertain.

Yung-Yu Ma, chief investment strategist at BMO Wealth Management, said gold prices took “investors on a wild ride”‘ during the great financial crisis.

“Leading up to and during the Financial Crisis, from 2007 to 2009, the price of gold took investors on a wild ride – running up some 30% from mid-2007 to early 2008, only to fall back down around 25% throughout the spring and summer of 2008, and finally to regroup and hit all-time highs later in 2009.”

Click here to read the full article

CNBC/Yun Li

Tudor Jones says this will be the ‘Second Depression’ if we remain in lockdown a year from now

“Billionaire hedge fund investor Paul Tudor Jones said Monday the economy would be in a “Second Depression” if the coronavirus pandemic doesn’t get contained for another year.

“If a year from now, we are still in the same situation, we would be called a Second Depression,” Jones said on CNBC’s Squawk Box on Monday. “Just depends on whether unfortunately this goes to a year with this kind of a lockdown.” The Great Depression from 1929 to 1939 was the worst economic downturn in the U.S. history.

“I think this part of the bounce was easy to forecast, I think what happens from here again depends a lot on Covid stuff. There’ll be a shift in focus from liquidity issues somewhere down the line to solvency issues. If we don’t find a vaccine or a cure, if we don’t find a much better way of testing at scale … then I think the market’s going to have a much more difficult time,” Jones said.

Click here to read the full article

FX EMPIRE/James Hyerczyk

Price of Gold Fundamental Weekly Forecast – Fed Powell’s Comments Should Set the Tone This Week

“Gold could spike higher again if Powell says that negative rates are still on the table. However, that hasn’t been his style so he is likely to downplay the idea, which could drive gold prices lower if he is convincing enough.

Short-term gold traders have a lot on their tables at this time. Some of the factors make sense to the gold bulls. Others are counter-intuitive and make more sense to the bears. However, the price action suggests the market may have to move lower before it makes another major move to the upside.

Last week, June Comex gold settled at $1713.90, up $13.00 or +0.76%.

Gold has been drifting sideways to lower for close to a month. The series of lower tops and lower bottoms serves as technical proof that the short-term trend is down. The long-term trend remains up, however.

Gold hit its last multi-year high on April 14 at $1788.80. This occurred after the bulk of the central bank monetary and government fiscal stimulus hit the global economy. So essentially, the stimulus has been priced into the market. This is why gold is struggling to make new highs at current price levels. This also suggests that it may have to break into a value zone in order to attract new buyers.

Without fresh stimulus concerns or an acceleration in the number of new coronavirus cases globally, gold bulls may be having a hard time justifying putting on new positions at current price levels. They may be having trouble assessing the risk/reward of new long positions.”

Click here to read the full article

CNBC/Stephanie Landsman

US risking a second wave and a depression, Mark Zandi warns

“Mark Zandi of Moody’s Analytics is getting increasingly worried states are taking a large gamble by reopening businesses too quickly.

He warns a spark in new coronavirus infections would send the economy further into tailspin — especially since there’s no vaccine.

“If we get a second wave, it will be a depression,” the firm’s chief economist told CNBC’s “Trading Nation” on Friday. “We may not shut down again, but certainly it will scare people and spook people and weigh on the economy.”

Zandi defines a depression as 12 months or more of double digit unemployment.

On Friday, the Labor Department reported the April jobless rate soared to 14.7%, and non-farm payrolls tumbled by 20.5 million. Both sets of employment data are post-World War II records.”

Click here to read the full article

by Sean Kelly

As if COVID-19 weren’t enough, along with “expert” opinions that conflict with one another, and a lockdown that has given us depression-era levels of unemployment, the US government has now entered a red zone of debt that will plague us even after the coronavirus is just a bad memory.

The latest news this week is that in the current quarter (April-May-June) the US Treasury will have to borrow an unprecedented $3 trillion just to keep operating.

Altogether for fiscal year 2020, the US is on track to add $4.5 trillion in red ink.  That’s more than it borrowed in the previous five years combined!

We’re in this mess because tax revenues have collapsed thanks to shut-down businesses and record unemployment, at the same time government spending is on a booster rocket with more bailouts, stimulus checks, payments to farmers, payroll support, infrastructure spending, and other initiatives on the drawing boards that we won’t even bother to catalog.

It’s not just debt that’s in the red zone.  The Federal Reserve has stepped into the mix, too.

Let me frame it differently.  What does a government that already has $25 trillion in debt that it can’t pay do when it wants to spend trillions more?

It “prints” the money.

Here’s a chart that shows what we mean.  It’s a chart of what the Federal Reserve owns, Fed assets.  As you can see, it shows that the Fed carries more than $6.6 trillion of financial assets on its books — government bonds, mortgage and other securities, junk bonds, and other toxic assets.

The Fed pays money for all these assets, more than $2.7 trillion in the past 12 months alone.  You can see that since late February, with the coronavirus shutdown, the trajectory of its purchases went straight up.

We think that justifies saying Fed money printing has gone stratospheric.

But where did it get the money?

It made it up.

The Fed just printed the money.  (Actually, since this is the digital age, it did it with a few simple computer keystrokes.  That’s even easier than printing money!)

All that new money, those new US dollars created with a keystroke, dilute the purchasing power of every other dollar.  Including the dollars you own.

And that explains why “the smart money” is buying gold.  People everywhere in the financial world are beginning to notice.  Fred Hickey writes an investment newsletter called The High Tech Strategist.  Even though his beat is technology, the other day he tweeted this:  “All the smart money: Dalio, Druckenmiller, Tudor Jones, Zell, Gundlach, Singer, Klarman, Einhorn, Mobius (and some who I know are loading up but are doing it quietly) are long gold…. Question is: What are YOU waiting for?”

Jim Rogers is certainly part of the smart money, too.  He co-founded the legendary Quantuum Fund and Soros Fund Management.  Rogers is buying precious metals for the first time in years because of the money-printing practices we described.

One of the nation’s largest banks summed it all up a few days ago, as it raised its own target price for gold by 50 percent.

It titled the report, “The Fed Can’t Print Gold!”

MARKETWATCH/William Watts

Here’s what gold does when the U.S. government goes on a borrowing binge

The U.S. government is going on a borrowing binge, with the fiscal deficit set to hit $4 trillion this year in the wake of the COVID-19 pandemic. If history is a guide, that should be a positive for gold, a closely followed Wall Street chart watcher noted Thursday.

“What thrives in massive upside changes to Treasury debt outstanding? Gold of course,” wrote Jeff deGraaf, founder of Renaissance Macro.

DeGraaf said a rise in outstanding debt issuance year-over-year tracks very closely to forward returns for gold. The chart shows the average six-month forward return for gold when year-over-year growth in debt issuance hits the 90th percentile is 13%, with the yellow metal rising 79% of the time, or in 39 out of 43 instances, going back to 1984.

“It’s about pace and level, and last time we saw something similar was during the aftermath of 2009 which gave us two solid years of gold performance before the contraction of 2010 portended correctly the cyclical peak,” he wrote.”

Click here to read the full article.

CNBC/Jeff Cox

A record 20.5 million jobs were lost in April as unemployment rate jumps to 14.7%

“The impact of the coronavirus-induced economic shutdown tore through the U.S. labor market in April at historic levels, slashing 20.5 million workers from nonfarm payrolls and sending the unemployment rate skyrocketing to 14.7%, the Labor Department reported Friday.

Both numbers easily smashed post-World War II era records and help reflect the profound damage done through efforts used to combat the virus.

Economists surveyed by Dow Jones had been expecting payrolls to shed 21.5 million and the unemployment rate to go to 16%. April’s unemployment rate topped the post-war record 10.8% but was short of the Great Depression high estimated at 24.9%. The financial crisis peak was 10% in October 2009.

The bleak numbers paint a “pretty dismal picture, but April may be it for job losses going forward with the country starting to reopen,” said Chris Rupkey, chief financial economist at MUFG Union Bank. “If there is a silver-lining in today’s dismal jobs report, it is in the realization that the economy cannot possibly get any worse than it is right now.”

Click here to read the full article.

KITCO/Jim Wyckoff

Gold prices show little reaction to staggering U.S. job losses

“Gold prices are trading modestly lower in early U.S. dealings Friday, in the immediate aftermath of a record-setting plummet in U.S. non-farm payroll jobs by 20.5 million in just the month of April. The U.S. unemployment rate shot up to 14.7% from only 4.4% in March. The marketplace, including gold and silver, showed little reaction to the dour news because it was fully expected. Weekly U.S. jobless claims reports the past few weeks actually show the U.S. workforce has lost over 30 million jobs in less than two months. June gold futures were last down $4.00 an ounce at $1,721.90. July Comex silver prices were last up $0.20 at $15.795 an ounce.”

Click here to read the full article

BARRONS/Brian Klein

China Guards the Keys to an Empire of Debt

“The coronavirus pandemic is bringing out the best and worst in political leadership. For China, it’s the latter. While first to confront the disease, the government initially failed to inform the global community, preferring instead to hoard supplies and information. By the time authorities gave the World Health Organization access to the country, it was too late. The virus had already spread around the world.

This pattern of official obfuscation also applies to China’s international lending practices. For years, the details of China’s bilateral deals have been closely guarded, including the terms of repayment and collateral required. Now developing countries that were eager for easy money are asking how they can possibly make debt payments amid a public health emergency. They’re not hearing answers.

The Covid-19 outbreak will cripple their economies. And while the Chinese government wants to be seen as taking the lead in the global response to the pandemic, no amount of medical supplies will assuage concerns over economic collapse.”

Click here to read the full article.

MARKETWATCH/Arvind Subramanian

The coronavirus has exposed political cracks, leading to a disintegrating Europe, a declining America and a shrinking China

“The COVID-19 crisis augurs three watersheds: the end of Europe’s integration project, the end of a united, functional America, and the end of the implicit social compact between the Chinese state and its citizens.

As a result, all three powers will emerge from the pandemic internally weakened, undermining their ability to provide global leadership.

We have been living for some time in a G-minus-2 world of poor leadership by the U.S. and China. Both have been providing global public “bads” such as trade wars and erosion of international institutions, instead of public goods such as stability, open markets, and finance. By further weakening the internal cohesion of the world’s leading powers, the COVID-19 crisis threatens to leave the world even more rudderless, unstable, and conflict-prone. The sense of three endings in Europe, America, and China is pregnant with such grim geopolitical possibilities.

Click here to read the full article.

CNBC/REUTERS

Gold rises on global growth fear; firm dollar caps gains

“Gold prices gained on Thursday after a batch of somber economic data heightened fears over global growth, while a stronger dollar and the easing of coronavirus-driven lockdowns by many countries limited the upside.

Spot gold was up 0.4% at $1,691.95 per ounce. U.S. gold futures rose 0.6% to $1,698.

Julius Baer analyst Carsten Menke said prices had hovered around $1,700 for a while.

He said there was “a bit of a tussle” as some anticipate another deterioration of the economic backdrop and enter the market while another camp, which anticipates a gradual recovery as lockdowns ease, is considering not adding more gold to portfolios.”

Click here to read the full article.

CNBC/Anjali Sundaram

Barrick CEO says there’s rising demand for gold as a ‘self-funded insurance policy’ in a global crisis

“As gold prices climb back towards their all-time highs, Barrick Gold CEO Mark Bristow sees his industry providing certainty during an uncertain crisis.

“We’re giving investors the opportunity to have a self-funded insurance policy against a global financial crisis,” Bristow told CNBC’s “Squawk Box” on Wednesday.

“In response to Covid, we’ve taken quantitative easing to another level, and of course that puts pressure on paper money, and you measure that with the price of gold,” Bristow noted. “We’ve seen prices go up across the world.”

Gold, seen as a bellwether for economic uncertainty, has crossed the $1,700 mark for the first time in seven years, though it was trading around $1,689 on Wednesday. The commodity hit a high of $1,900 in 2011, but dropped back in 2013 to start a trough..”

Click here to read the full article

MARKETWATCH/Mark DeCambre

Gold gains ground as investors brush off equity strength

“Gold prices rose on Thursday, finding support even as stocks rallied in the wake of aggressive monetary easing by major central banks and efforts to begin or continue reopening economies closed by the COVID-19 pandemic.

June gold GCM20, 0.79% rose $9.20, or 0.5%, to $1,697.70 an ounce on Comex. Meanwhile, July silver SIN20, 1.76% rose 15 cents, or 1%, to $15.165 an ounce. Gold losses of more than 1% on Wednesday, as the U.S. dollar strengthened and the reopening of some economies around the world, appeared to dent demand for the haven.

The U.S. dollar was mixed, with the ICE U.S. Dollar Index DXY, 0.27%, a gauge of the currency against a basket of six major rivals, up 0.1%. Gold often trades in an inverse relationship with stocks and the U.S. dollar.

But some analysts argued that gold was likely to see only limited downside as appetite for risky assets remains strong.”

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CNBC/Thomas Franck

Fed’s James Bullard says the jobs report on Friday will be one of the worst ever

“St. Louis Federal Reserve President James Bullard said Wednesday that the April jobs report being released on Friday will likely be one of the worst in American history.

“But that’s kind of expected because you’re using the unemployment insurance program to provide pandemic relief,” Bullard told CNBC’s Steve Liesman. “That’s exactly what we want to do.”

Bullard’s comments came minutes before ADP reported that private payrolls shed more than 20 million jobs in April as employers slashed worker positions amid widespread shutdowns and forced government closures to help contain the spread of the coronavirus.

The decline totaled 20,236,000 and represented by far the worst loss in the survey’s 18-year history. Despite the eye-watering number, the 20.2 million wasn’t as bad as the 22 million that economists surveyed by Dow Jones had forecast.

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KITCO/Neils Christensen

Gold price holding support above $1,700 as 20 million private sector jobs lost in April

“Gold prices are relatively unchanged on the day, holding support above $1,700 an ounce as the U.S. economy lost just over 20.2 million private sector jobs last month, according data from private payrolls company ADP.

Wednesday, ADP said that 2.02 million jobs were lost in April, slightly better than expectations; consensus forecasts were call for job declines of nearly 21 million.

The ADP report shows that every major sector and labor group saw significant job destruction. For nearly two months the U.S. economy has been shutdown as non-essential business have been closed and people have been asked to stay at home in an atempt to slow the spread of the coronavirus. The U.S. has the highest number of COVID0-19 cases in the world with more than 1.2 million people infected. Nearly 71,000 people have died from the virus according to data from Reuters.”

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MARKETWATCH/Shawn Langlois

The stock market may get cut in half, but this ‘most undervalued’ asset is about to surge, billionaire investor says

“Paul Singer, the hedge-fund billionaire behind Elliott Management, warned last month that the ultimate path of global stock markets is a drop of at least 50% from February highs.

What’s an investor to do in the face of such a grim outlook? Load up on gold, perhaps. After all, according to a report this week from the Financial Times, that’s what the smart money’s doing.

Gold, advised Singer, is “one of the most undervalued” assets available and it’s worth “multiples of its current price” due to the “fanatical debasement of money by all of the world’s central banks.” His fund gained about 2%, the FT reported, thanks primarily to profits from its gold position.”

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KITCO/Anna Golubova

Danger of second COVID-19 wave could ‘kick’ gold prices to new record highs – The Perth Mint CEO

“Gold’s price outlook is to the upside as the world is faced with a slate of bad economic data, possible second wave of coronavirus, and unlimited stimulus, which has triggered massive gold investor demand, this according to The Perth Mint CEO Richard Hayes.

“As we see a gradual easing of all the restrictions and businesses start to reopen, that will certainly have an impact on precious metals prices. What I would say listening to the CDS and the WHO is that there is a significant danger of a second COVID-19 wave,” Hayes pointed out. “If you see a second COVID-19 wave, that will give the gold price a reasonable kick along.”

Hayes said he wouldn’t be surprised to see gold reaching new record highs in U.S. dollar terms in the near future, adding that the levels are not that far off in percentage terms from 2011-2012 all-time highs.”

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REUTERS/David Milliken

British economy on track for biggest contraction ‘in living memory’

“LONDON (Reuters) – Britain’s economy is on course for an unprecedented 7% quarterly contraction after measures to slow the spread of the coronavirus forced company closures across the country last month, a business survey showed on Tuesday.

Adding to the bleak mood, figures earlier on Tuesday showed monthly car sales had dropped to their lowest since 1946 due to the closure of showrooms, while around a quarter of workers are now on a government-funded furlough.

IHS Markit said its Purchasing Managers’ Index (PMI) for the services sector fell to its lowest since the survey started in 1996, dropping to 13.4 in April from 34.5 in March, only a fraction better than an initial flash estimate of 12.3.

Last week’s manufacturing PMI was similarly dire and IHS Markit said that, taken together, they pointed to the deepest economic downturn “in living memory”.

A composite PMI of the two sectors dropped to a record-low 13.8 in April from 36.0 in March, far below the 50 mark that divides growth from contraction, indicating a 7% quarterly fall in gross domestic product, IHS Markit said.

“We expect the actual decline in GDP could be even greater,” IHS Markit economist Tim Moore said.”

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CNBC/Fred Imbert

US services sector posts biggest contraction since 2009 as coronavirus halts economic activity

“The U.S. services sector contracted for the first time in about a decade last month as the coronavirus pandemic brought economic activity in the country to a near-screeching halt, according to the Institute for Supply Management.

The ISM nonmanufacturing index dropped to 41.8 in April from 52.5 in March, showing the first contraction in services since December 2009. It was also the biggest contraction for the sector since March 2009, when the index hit 40. To be sure, the April print was above a Dow Jones estimate of 40.

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KITCO/Jim Wyckoff

Gold, silver prices up on safe-haven bids amid U.S.- China tensions

“Gold and silver prices are posting good gains in early U.S. trading Monday, on safe-haven demand amid increasing U.S.-China tensions that threaten another trade war, or worse. June gold futures were last up $17.40 an ounce at $1,718.80. July Comex silver prices were last up $0.152 at $15.015 an ounce.

The U.S. is ratcheting up its rhetoric blaming China for delaying reporting of the coronavirus outbreak in its early stages, and even implying the virus could have come from a Wuhan laboratory. This escalation in U.S.-China tensions could thwart the partial trade agreement the world’s two largest economies reached in January. President Trump has threatened new trade tariffs and other sanctions could be levied against China.

Global stock markets were mostly down in overnight trading. U.S. stock indexes are pointed toward lower openings when the New York day session begins. On the front burner of the market place this week is strained U.S.-China relations. The Covid-19 pandemic and its destructive impact on the global economy also continue in focus. Purchasing managers’ surveys from around the world, released Friday and Monday, show unprecedented contraction in that important sector of economies during the month of April.

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MarketWatch/Callum Keown

This year is lining up exactly like the 2000 dot-com bubble crash — stocks will drop 40% from here, former Goldman manager says

“It’s Monday and stocks are falling again.

A number of U.S. states have started efforts to restart their economies, but that sliver of positive news has been cast aside by the ramping up of tensions with China and the economic impact of coronavirus.

Billionaire investor Warren Buffett’s gloomy remarks about airlines have also caught investors’ attention, as his company Berkshire Hathaway reported a near $50 billion loss in the first quarter and is sitting on a $137 billion cash pile. April produced the best monthly gains for the Dow Jones Industrial Average and S&P 500 in 82 years — after the worst first quarter in history — but May’s bad start looks set to continue Monday with futures down.

In our call of the day, former Goldman Sachs analyst Will Meade said the rest of the year looked even worse for stocks, predicting a 40% drop over the rest of 2020.”

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CNBC/Eustance Huang

Gold has ‘growing potential’ to break $1,800 an ounce, says UBS

“Gold prices could “break the highs” seen earlier this year, after declining in March along with assets across the board, according to UBS Investment Bank’s Joni Teves.

“There is growing potential (for gold) to break $1,800 (per ounce) in my view,” Joni Teves, precious metal strategist at UBS Investment Bank, told CNBC’s “Squawk Box Asia” on Monday. In the near term, the firm has a target price for gold at $1,790 per ounce.

That comes as “investor interest continues to grow in this environment of uncertainty and negative real rates,” Teves said.”

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BLOOMBERG/Justin Carrigan

Bad Start to May Is a Sign of Things to Come for Markets

“Sell in May and go away? The negative start to the month raises concern that the partial recovery in April is going to be about as good as it gets for risk assets.

For all the optimism stemming from the gradual easing of lockdown measures in some of the biggest economies, there are too many worries on the minds of traders to sustain the momentum from last month. The fear of a second wave of coronavirus infections, the collapse in corporate earnings and the shocks reverberating from the economic data are toxic enough. Now throw in a new eruption of political sparring between the U.S. and China, this time over the origin of the virus.

“A fresh threat of U.S.-China tariff escalation is yet another aftershock of the original crisis that is reinforcing a dollar-supportive backdrop,” said JPMorgan Chase & Co. currency strategists including London-based Paul Meggyesi and Meera Chandan.

On Monday, Asian and European markets provided a taste of how the week may unfold. Hong Kong’s Hang Seng Index tumbled 4.2%, while French and German stocks sank more than 3%. S&P 500 Index futures retreated as much as 1.8%. Japan and China’s onshore markets were shut for holidays.”

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by Sean Kelly

For weeks we’ve been asked to quarantine ourselves, stay indoors, social distance, work from home, wear masks, and avoid outside contact. We’ve become a restless and agitated nation.

Americans were simply not cut out for isolation. After all, we tamed the wild frontiers of the West, pioneered aviation, invented muscle cars and perfected the road trip. We even “slipped the surly bonds of earth” to send a man to the moon.

Can we go back to normal now?

In 2020, cabin fever does not adequately describe the ferment of over 320 million people who love to shop, eat out, travel and socialize. We crave normalcy. But the notion of “normal” is a consequence of conformity. It is the embrace of things considered “ordinary.” In the wake of COVID-19, however, the very word seems inapplicable. Most experts agree that there will never be a precise return to how we once were. Will folks really rush into jam-packed stadiums again? Will Americans embrace busy restaurants and shopping malls as they once did? Who, if anyone, will opt for the middle seat on an airplane? We’re in a precarious place – trapped between wellness and disease, recovery and relapse, and economic rescue and financial ruin.

Are we reopening the economy too early?

While we have segregated ourselves into ‘flattening the curve’ of infection – some states are now relaxing restrictions and others have announced phased re-openings like: Texas, Colorado, Alaska, Oklahoma, Georgia, Tennessee, Idaho, Iowa, Minnesota, Nebraska, Montana, North Carolina, South Carolina, North Dakota, South Dakota, Mississippi, and West Virginia. Despite the mad dash to normal, however, concerns linger about an infection bounce-back. Have we tested enough? How many asymptomatic people are lurking about? Could the virus return in a stronger, second wave? As social interaction increases, a possible rise in new infections could send us back to solitary confinement and side-track any hopes of an economic recovery.

Is Washington fueling an epic stock bubble?

As states and businesses slowly open up, the stock market is rallying. The Dow surged over 350 points yesterday and despite a multi-week economic shut down, it is just 18% off its recent high of almost 30,000 on February 12th. Wall Street has been oddly resilient in the face of what has become the worst economic calamity since the Great Recession. Are traders perhaps overly confident about Americans getting back to work? Is market negativity already priced in? Has massive risk appetite returned? Or are investors betting on endless rounds of stimulus from Washington to make everything okay? More federal money means more risk-taking and bigtime risk, builds bigtime bubbles which almost always wreak economic havoc.

Are we entering dangerous debt territory?

The coronavirus fallout has prompted lawmakers to pass the biggest stimulus package in U.S. history. The $2 trillion Cares Act and over $480 billion dollar coronavirus relief monies have pushed federal deficits to unprecedented levels. And more cash is on the way. Our national debt could eclipse our annual economic output as soon as this year. We’re on track to grow the balance sheet by up to $10 trillion next year and our debt liability could reach 117% of GDP by 2025, far exceeding World War II levels. The Treasury can continue to borrow its way forward as long as interest rates remain low but if inflation returns and rates are forced higher, the weight of that debt could crush our economic future.

Will America’s Cities Go Bust?

With restaurants, bars and businesses suffering under stay-at-home orders, America’s cities stand to lose billions in sales and income tax revenue along with tourism and travel dollars. Shoppers in the nation’s largest municipalities are few and far between, hotels are empty, malls have become ghost towns, trade shows and conferences have all been postponed. And, the loss of these revenues along with skyrocketing pension costs could jeopardize essential city services like school funding, road repairs, sanitation, fire and police protection, medical supplies and infrastructure care. Under these pressures, cities are less likely to pay down their debt. As a result, the coronavirus will severely test finances in places like New York, San Francisco, and Seattle and threaten pensions in Philadelphia, Dallas and Chicago. Insolvent pension plans could push some major metropolitan areas into fast bankruptcy.

Confirmed worldwide cases of the coronavirus have now surpassed 3 million. Over 210,000 people have died, 56,000 in the United States. America is now the epicenter of the virus outbreak. Most of us, just want our life back – but that’s the hard part. The emotional fear and economic fallout will likely linger for a while and uncertainty about the days ahead will be one of our greatest challenges. We should prepare ourselves for anything from a new wave of infections and a broad market bubble – to soaring national debt and the collapse of our most celebrated cities. Tomorrow, however, belongs to those that understand that “normal” may very well be something we no longer recognize – so we should plan accordingly.

CNBC/Fred Imbert

Dow set to fall more than 400 points after best month in three decades, Amazon leading tech lower

“Stock futures fell sharply early Friday as shares of Amazon and Apple dropped following their first-quarter results.

Dow Jones Industrial Average futures fell about 1.9% and indicated an opening drop of more than 450 points. S&P 500 futures fell 2.1%. Nasdaq 100 futures were down 2.3%.

Apple reported quarterly earnings that topped analyst expectations, but its revenue growth remained flat on a year-over-year basis. Also, the company did not offer guidance for the quarter ending in June amid uncertainty over the coronavirus outbreak. The tech giant’s stock traded more than 2.6% lower in premarket trading.

Amazon, another tech giant, saw its shares tumble 4.8% in premarket trading after announcing plans to spend all its second-quarter profits on its coronavirus response. The e-commerce behemoth also posted a first-quarter profit that missed analyst expectations.“

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REUTERS/Tom Arnold

World stocks fall further after Trump’s China tariff threat

“World stocks pulled back further on Friday on grim U.S. economic data and President Donald Trump’s threat to impose new tariffs on China over the coronavirus crisis.

MSCI’s index of global stocks fell 0.4% after a tumble late Thursday broke a six-day winning streak for the index.

London-listed stocks slipped as data showed the UK housing market was grinding to a halt. The FTSE 100 was down 2.1%, wiping out gains posted earlier in the week on hopes of global economies reopening from weeks of lockdowns.

Another report said British manufacturers suffered the biggest fall in output and orders for at least three decades in April.

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KITCO

“Serious damage” to emerge; gold prices yet to show true colors

“Economic data has not yet reflected the true scale of the economic disaster we are facing, but as numbers come out in the coming weeks, a risk-off sentiment could ensue, this according to Jim Wyckoff, senior analyst at Kitco.

“We have big risks still ahead for the U.S. economy and for other economies around the world,” Wyckoff told Kitco News. “We are going to start to see economic data in the U.S. and in Europe show up that’s going to be really staggering, to remind us how serious the damage has been done to the global economy.”

Additionally, there remains uncertainties with how long the shutdown will continue, as well as how a recovery could ensue, he said.

“We don’t know how this COVID-19 is going to play out. Is there going to be a resurgence of sickness later on in the fall? How fast can businesses re-open? Those are just big unknowns right now,” he said.”

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REUTERS/Lindsay Dunsmuir

‘W-shaped’ recovery may be too optimistic, Fed’s Powell suggests

“Federal Reserve Chair Jerome Powell has sketched out an altogether bumpier ride for the U.S. economy than many are predicting – one that sees business activity stop and start for months to come, until an effective treatment or vaccine for the novel coronavirus can be found.

Since the novel coronavirus outbreak in the United States, economic growth stalled almost overnight as “stay at home” orders shut down large parts of the economy. Economists and Trump administration officials have been divided about how deep and long-lasting the economic impact will be.

Some still foresee a “V shaped” recovery, in which the economy rebounds quickly from a temporary shock. Life in the United States could return to “normal” by June, White House senior adviser Jared Kushner said on Wednesday, adding that “the hope is that by July the country’s really rocking again.”

Others predict a “U shape,” where it takes longer to bounce back. The idea of a “W-shaped” recovery has also steadily gained traction as health experts increasingly warn about a resurgence in virus cases come the fall, and with it, a new downturn in economic growth.”

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 KITCO NEWS/Neils Christensen

Gold prices lose some ground as inflation pressures ease

April 30, 2020

“Gold prices are off their highs but still holding on to gains as inflation pressures eased in line with expectations last month. Thursday, the Department of Commerce said that its Core Personal Consumption Expenditures Index, dropped 0.1% in March, in line with expectations. For the year core inflation showed a reading of 1.7%, down from a previous 1.8%. Along with weak inflation the report noted a sharp drop in consumer spending as incomes dropped more than expected.

According to the report, personal spending dropped 7.5% last month. Economists were expecting to see a decline of 4.8%. Meanwhile, income dropped 2%; consensus forecasts were expecting a 1.6% decline. The economic data is appears to be having little impact on gold prices, which have fallen from their overnight highs. June gold futures last traded at $1,722.10 an ounce, up 0.51% on the day.

Some economists are not surprised that personal consumption and income data were weaker than expected as consumers are forced to stay at home after state governments shut down all non-essential businesses.  Economists noted that the sharp drop in consumer spending does not bode well for second quarter economic activity. ‘This provides a taste of what’s to come in Q2, with a dramatic drop in consumer spending behind our forecast for a 40% annualized decline in GDP over Q2,’ said economists at CIBC.”

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FOX BUSINESS/Megan Henney

Over 3.8 million Americans applied for unemployment last week

April 30, 2020

“More than 3.8 million Americans filed for unemployment last week, the Labor Department reported on Thursday, as the tidal wave of job losses triggered by the pandemic continues to grow. The new report, which covers the week ending April 25, pushes the six-week total of job losses to 30.2 million. Unemployment at this scale hasn’t been recorded since the Great Depression, when the jobless rate peaked at 25 percent. With a total workforce of about 162 individuals, this brings the unemployment rate around 18.5 percent. Economists had forecast 3.5 million.

The latest evidence of the virus outbreak’s impact on the labor market follows the Commerce Department’s report on Wednesday that revealed the U.S. economy shrank by 4.8 percent in the first three months of the year. Economists expect growth in the second quarter to hit a historical low, with some estimates as low as a 34 percent decline.”

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CNN POLITICS/Zachary B. Wolf

Welcome to the worst economy ever

April 30, 2020

“Let’s start with some bad news. And we won’t sugarcoat it. This is the worst economy ever. That’s according to Federal Reserve Chairman Jerome Powell, who previewed some truly awful economic data headed our way when he spoke to reporters Wednesday. ‘We are going to see economic data for the second quarter that is worse than any data we have seen for the economy,’ Powell said. ‘There are direct consequences of the disease and measures we are taking to protect ourselves from it.’ It’s worse for minorities than for white Americans. Powell noted that a few months ago, the US labor market was the best ever for minorities. But as stay-at-home orders have shuttered restaurants, movie theaters, retailers and many other businesses, a disproportionate number of non-white Americans have lost their jobs. ‘It is heartbreaking, frankly, to see that all threatened now,’ Powell said of previous gains in non-white unemployment.”

“CNN’s Stephen Collinson put it extremely well (as he always does), when he stated the clear fact that Trump still doesn’t grasp the enormity of this: Humanity is facing three crises at the very least — medical, economic and social — that will cause financial and geopolitical reverberations for years. The grim state of the economy was underscored Wednesday morning when it was reported that first-quarter GDP fell 4.8%, the worst contraction since the Great Recession. Yet Trump says he sees ‘light at the end of the tunnel’ and acts as if America is nearly home free.”

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BLOOMBERG/A. Gary Shilling

Stock Traders Should Heed the Lessons of the 1930s

April 30, 2020

“Don’t be fooled by the recent rebound in stocks; the investment scene is beginning to resemble the 1929 market crash and the early 1930s Great Depression. In the Roaring ‘20s, the Dow Jones Industrial Average jumped 500% from August 1921 to September 1929. It then plunged 48% from Sept. 3 to Nov. 13, 1929. To many, that seemed like a reasonable correction of the 1920s exuberance. The economy was fully employed and growing rapidly and most looked forward to more expansion and higher stock prices. Only days before the crash, prominent economist Irving Fisher stated that ‘stock prices have reached what looks like a permanently high plateau’ and the market was ‘only shaking out of the lunatic fringe.’

Also, a 48% stock drop wasn’t exactly unique. The Dow fell 48.5% from Jan. 19, 1906 to Jan. 7, 1907 in conjunction with the Panic of 1907. Still, the economy didn’t collapse and stocks steadily recovered to close at the Dow’s old high by the end of 1909. If it hadn’t been for what followed, the 1929 Crash would probably have been recorded as just one more correction in the wild stock markets at that time. Despite the widespread interest in equities, only 10% of Americans owned equities in the 1920s, according to the Federal Deposit Insurance Corp. Stocks rallied 48% until April 17, 1930 representing a 52% retracement. But as the Great Depression unfolded, stockholders bailed out and the Dow fell steadily until July 8, 1932, an 86% swoon and a drop of 89% from the September 1929 top.”

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THE WALL STREET JOURNAL/Melissa Korn, Douglas Belkin and Juliet Chung

Coronavirus Pushes Colleges to the Breaking Point, Forcing ‘Hard Choices’

April 30, 2020

“MacMurray College survived the Civil War, the Great Depression and two world wars, but not the coronavirus pandemic. The private liberal-arts school in central Illinois announced recently it will shut its doors for good in May, after 174 years. Like many small schools, it faced declining enrollment and financial shortfalls. To lure prospective students, it was using steep discounts to its $30,000 listed tuition. Then the global health crisis brought unexpected costs for shifting classes online and partially reimbursing room and board for students forced to finish out the spring term at home. The loss of a $3-million-plus bridge loan was the final straw.

The pandemic ‘squeezed out the last rays of hope,’ said President Beverly Rodgers. From schools already on the brink to the loftiest institutions, the pandemic is changing higher education in America. Schools sent students home when the coronavirus began to spread, and no one knows if they will be back on campus come fall. Some colleges say large lecture classes and shared living and dining spaces may not return. Athletics are suspended, and there is no sense of when, or if, packed stadiums, and their lucrative revenue streams, will return. Every source of funding is in doubt. Schools face tuition shortfalls because of unpredictable enrollment and endowment losses. Public institutions are digesting steep budget cuts, while families are questioning whether it’s worth paying for a private school. To brace for the pain, colleges and universities are cutting spending, freezing salaries and halting plans for building.”

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MARKET WATCH/Steve Goldstein

Three years of eurozone economic growth wiped away

April 30, 2020

“Three years of the eurozone’s economic activity have been wiped away, and it is likely going to get worse. Eurostat reported eurozone first-quarter GDP fell 3.8% compared with the fourth quarter. European data is reported on a quarter-on-quarter basis, so on an annualized basis, the economy fell 14.4%, worse than the U.S. gross domestic product decline of 4.8%. ‘In level terms, real GDP is back to its level three years ago, illustrating the scale of the hit to economic activity,’ said economists at Citi.

Separately, France reported a 5.8% decline, Spain reported a 5.2% drop and Italy reported a 4.7% decline after also contracting in the fourth quarter.  Those three countries have been hardest hit from the coronavirus crisis, in terms of confirmed cases, in Europe.  Economists are expecting still worse to come. ‘The gradual, tentative lockdown exit path laid out by Prime Minister Philippe supports our base case of a shallow recovery,’ said François Cabau, an economist at Barclays who forecasts French GDP to drop 11.7% in the second quarter. At a press conference, ECB President Christine Lagarde said the eurozone economy could fall between 5% and 12% this year. While stark, so are other forecasts — the International Monetary Fund in April said the eurozone economy would fall 7.5% this year. The Stoxx Europe 600 extended losses, falling 1%. The euro slipped 0.3%.”

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KITCO NEWS/Jim Wyckoff

Gold prices weaker, show muted reaction to dour U.S. GDP data

April 29, 2020

“Gold prices are trading modestly down in early U.S. trading Wednesday, following the release of U.S. economic data that not surprisingly showed sickly results. The gold market dipped a bit just after the release of the GDP data, but that was also the same time that news reports surfaced that a study showed positive results for the treatment of Covid-19, which in turn boosted the U.S. stock market.

It’s a big day for U.S. economic data Wednesday, starting with the advance estimate for first-quarter U.S. gross domestic product, which was just released and came in -4.8%. The number was expected to show economic growth of around -3.5% to -4.0%. Today’s number is a bad one but most agree the figure for the second quarter will be even worse. The Federal Reserve’s Open Market Committee (FOMC) concludes its two-day meeting this afternoon with a statement on U.S. monetary policy. No changes are expected but traders will parse the statement as well as Fed Chairman Jerome Powell’s virtual press conference.”

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BLOOMBERG/Steve Matthews

Fed to Focus on Next Steps to Save Economy: Decision Day Guide

April 29, 2020

“With interest rates near zero, Federal Reserve policy makers are likely to turn attention to other steps they could take to ensure a strong U.S. economic rebound once the coronavirus lock-down ends. The Federal Open Market Committee is all but certain to keep its benchmark overnight rate in a target range of 0-.25%, where it was lowered at an unscheduled FOMC on March 15 to help soften the pandemic’s blow. The committee will release a statement at 2 p.m.

‘Never underestimate the Fed,’ said Diane Swonk, chief economist with Grant Thornton in Chicago. ‘The Fed will affirm it is still willing to use all tools at its disposal.’ A Bloomberg survey of economists expects the central bank to keep rates near zero for three or more years. Facing an unprecedented disruption that has put 26.5 million people out of work in the last five weeks, the Fed has slashed rates and pledged up to $2.3 trillion in loans to aid businesses and state and local governments. Government data released on Wednesday showed the U.S. economy shrank at an annualized 4.8% pace in the first quarter, the steepest decline since 2008.”

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CNBC/Jeff Cox

US GDP shrank 4.8% in 1^st quarter – biggest contraction since the financial crisis

April 29, 2020

“Gross domestic product fell 4.8% in the first quarter, according to government numbers released Wednesday that provide the first detailed glimpse into the deep damage the coronavirus wreaked on the U.S. economy. Economist surveyed by Dow Jones had expected the first estimate of GDP to show a 3.5% contraction. This marked the first negative GDP reading since the 1.1% decline in the first quarter of 2014 and the lowest level since the 8.4% plunge in Q4 of 2008 during the worst of the financial crisis.

The biggest drags on the economy were consumer spending, nonresidential fixed investment, exports and inventories. Residential fixed investment, which jumped 21%, along with spending from both the federal and state governments helped offset some of the damage. Consumer expenditures, which comprise 67% of total GDP, plunged 7.6% in the quarter as all nonessential stores were closed and the cornerstone of the U.S. economy was taken almost completely out of commission. Durable goods spending tumbled 16.1% while expenditures on services were down 10.2%. Exports dropped 8.7% while imports fell 15.3%, including a 30% drop in services. The count of all goods and services produced in the U.S. shows that even though the first quarter saw only two weeks of shutdown, the impact was pronounced and set the stage for a second-quarter picture will be the worst in the post-World War II era.”

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THE WALL STREET JOURNAL/Dan Strumpf, William Boston and Talal Ansari

Earnings Reveal Coronavirus’s Hit to Big Business

April 29, 2020

“States continued to walk a tightrope on reopening guidelines as confirmed U.S. cases of the new coronavirus topped one million and new data showed widespread economic harm as countries around the world closed down to prevent the spread of the pathogen. Confirmed cases in the U.S. climbed to 1,012,583 about three months since the first reported infection appeared.

Ford Motor Co. said it lost $1.99 billion in the first quarter, and projected an even deeper pretax loss for the second quarter. The company, along with other auto makers, is expected to partially reopen production in the U.S. starting May 18. Coffee giant Starbucks Corp. said its global same-store sales fell 10% in the quarter due to the health crisis, the first time that figure has declined in nearly 11 years. Samsung Electronics Co. Ltd. warned Wednesday of more declines in the coming quarter, with demand for its smartphones, appliances and displays plummeting further as stores remain closed and consumers unlikely to spend in the economic downturn. Even companies whose businesses should be brightening reported a mixed picture. United Parcel Service Inc. reported lower shipments to big businesses and stores, and 3M Co. said sales of office supplies have plummeted, even as face-mask sales have climbed. Google parent Alphabet Inc. said revenue rose in the first quarter, but the company’s performance fell off sharply as the pandemic accelerated, and it cautioned that it couldn’t predict how the coming months would turn out.”

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NPR/Scott Horsley and Avie Schneider

‘Tip of The Iceberg’: Economy Shrinks At 4.8% Pace, But Worst Is Yet to Come

April 29, 2020

“The coronavirus pandemic is likely to trigger the sharpest recession in the United States since the Great Depression. An early signal of that came Wednesday, when the Commerce Department said the economy shrank at a 4.8% annual rate in the first three months of the year — the first quarterly contraction since 2014 and the largest since the Great Recession. For the first 2 1/2 of those months, the economy was chugging along at a steady, if not spectacular pace. But the plug was suddenly pulled in mid-March — when bars, restaurants and retail shops were abruptly closed and tens of millions of Americans were ordered to stay home.

The first-quarter drop was the biggest since an 8.4% dive in the 4^th qtr of 2008. It marked a reversal from the 2.1% growth rate at the end of 2019. The Commerce Department said the decline in gross domestic product was ‘in part, due to the response to the spread of COVID-19, as governments issued stay-at-home orders in March. This led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending.’ Consumer spending — which accounts for about 70% of GDP — plummeted at a 7.6% rate in the first quarter — the most since 1980. More than 26 million people have filed unemployment claims. Half of all Americans say they or someone in their household has either lost hours or a job. ‘Prior to the coronavirus shock, the economy was doing relatively well,’ said Gregory Daco, of Oxford Economics. ‘The shock that we experienced in the second half of March actually has led to a sudden stop in spending on a lot of services and even spending on some goods.’ Analysts say even though that shock was more than enough to erase the gains of the previous 2 1/2 months. Daco said the first-quarter decline is ‘only the tip of the iceberg.’”

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FOX NEWS/Barnini Chakraborty

China lashes out at US, claims country is ‘lying through their teeth’

April 29, 2020

“China’s foreign ministry accused the United States of ‘lying through their teeth’ and suggested the country mind its own business as the war of words between the world’s two biggest economic powers escalated. ‘We advise American politicians to reflect on their own problems and try their best to control the [coronavirus] epidemic as soon as possible instead of continuing to play tricks to deflect blame,’ spokesman Geng Shuang said. The comments came on the heels of President Trump suggesting in a press conference that the U.S. would be seeking ‘substantial’ compensation.

‘We are not happy with China,’ Trump said. ‘We are not happy with that whole situation because we believe it could have been stopped at the source. It could have been stopped quickly and it wouldn’t have spread all over the world.’ He added that the United States is considering several options to

hold them accountable.’ When asked about a recent editorial in the German newspaper Bild that printed a mockup of a $162 billion bill to China for economic damages, Trump replied, ‘Germany’s looking at things, and we’re looking at things, and we’re talking about a lot more money than Germany’s talking about.’”

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KITCO NEWS/Jim Wyckoff

Gold prices near steady as global stock markets gain

April 28, 2020

“Gold prices are not far from unchanged on the day in early U.S. trading Tuesday. More chart consolidation and some profit taking by the shorter-term futures traders are featured early this week. The gold market bulls are still encouraged by their metal’s stability amid rallies in global stock markets recently. This week’s drop in crude oil prices has somewhat curtailed demand for the precious metals. June gold futures were last up $1.60 an ounce at $1,725.60.

Global stock markets were mixed in overnight trading, while the U.S. stock indexes are pointed toward higher openings and at or near seven-week highs when the New York day session begins. Some regions in some countries, including the U.S., are reopening at least some businesses that have been shuttered from the Covid-19-induced lockdown. People around the globe are starting to suffer from what is being called ‘quarantine fatigue,’ which means many are starting to ignore social-distancing guidelines and are eager to see economies reopen—while government leaders debate the timing of reopening commerce. Reports say U.S. automakers plan to restart their plants on May 18.”

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REUTERS/Samuel Shen and Emily Chow

Shanghai gold boss wants super-sovereign currency for post-crisis times

April 28, 2020

“The president of the Shanghai Gold Exchange (SGE) called for a new super-sovereign currency to offset the global dominance of the U.S. dollar, which he predicted would decline long term, while gold prices rally. Concern has mounted among some market participants over the dollar-denominated system as the U.S. Federal Reserve cut interest rates to near-zero and embarked on unlimited quantitative easing to contain the economic damage of the coronavirus pandemic.

The measures have helped to drive gold prices to more than seven-year-highs this month, while the dollar has been range-bound. Wang Zhenying, who heads the world’s largest physical spot gold exchange, said in an interview the gold gains should be sustained, but ultimately a new kind of currency was needed.  ‘Future global trade needs a super-sovereign currency system under which no single country has the power to freeze the international assets of another country,’ said Wang, who held senior roles at China’s central bank, which supervises the SGE.  Wang foresaw a decline in the U.S. currency, triggered by the Fed’s monetary policies.  ‘When the Fed turns on the liquidity tap, the U.S. dollar will, in theory, be in a long-term depreciatory trend,’ he said.”

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BLOOMBERG/Joe Light

Mortgage Chaos Threatens to Worsen Once It’s Time for Repayments

April 28, 2020

“The mortgage market has been disrupted by millions of borrowers postponing payments because of coronavirus. But lenders and veterans of the 2008 financial crisis warn the real chaos won’t start until the pandemic passes. The problem is confusion over what will happen when borrowers have to make up those payments. Federal agencies that back most of the market have introduced policies, some of which could require documentation that overwhelms servicers, leading to lengthy wait times and, in extreme cases, foreclosures.

Industry executives say Fannie Mae, Freddie Mac and their regulator are attempting to unveil a program in coming weeks that could alleviate many of the problems. Mortgage lenders say they hope the companies and their watchdog come up with a plan that prevents a repeat of the turmoil that followed the 2008 financial crisis, when confusion and delays hindered borrowers in trying to resume payments. But unless there are dramatic changes, Americans should ‘expect even more chaos when forbearance ends,’ said Michael Stegman, who served as a senior housing adviser during the Obama administration. The $2.2 trillion stimulus package passed by Congress requires mortgage companies to let borrowers delay payments for at least six months if they have been hurt by the pandemic. Because the government wanted to provide help quickly, borrowers merely need to say they face a hardship to receive aid … But servicers say they’re unsure what will happen when their call centers are flooded in a few months by people ready to resume paying.”

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CNBC/Steve Liesman

US will need to spend trillions more as economy takes until 2022 to fully recover

April 28, 2020

“The economy could take one to two years to rebound to full strength and the Fed and Congress, having already committed historic sums to fight the coronavirus pandemic, will have to commit trillions more, according to a CNBC Fed Survey. With the Federal Reserve’s balance sheet already at an unprecedented $6.45 trillion, the 36 respondents see it rising on average to $9.8 trillion. The additional trillions, respondents expect, will be added by the end of the current quarter. Congress, having already committed about $2.5 trillion, is seen putting in an additional $2 trillion.

‘My guess is that the virus itself will largely disappear within a year, but that the structural social and economic impacts will be with us much longer,’ John Kattar, chief investment officer at Ardent Asset Management said. Jack Kleinhenz, chief economist for the National Retail Federation, said, ‘The policy response has been appropriate, but policy takes time to work its way into the economy and targeted sectors…Many small businesses stand at risk.’ Despite the tsunami of relief, respondents still see the unemployment rate rising to a peak of 19%, hitting that level in August 2020. It’s expected to decline only gradually, falling to 11% by December and to 7% by the end of 2021. That would leave it at about double the rate before the crisis took hold.”

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MARKETWATCH/Callum Keown

Expert who called the 2008 crisis says the signal to sell stocks is coming soon

April 28, 2020

“It is a bumper week of U.S. corporate earnings and one that will tell us more about the devastating impact of coronavirus on the economy. The busiest week of earnings season will see Alphabet, Amazon, Apple, Tesla, Boeing and Exxon Mobil all report results. Despite fears it could be the worst quarterly earnings seasons since 2009, the Dow Jones Industrial Average scored its fourth consecutive session of gains on Monday and was set to open higher on Tuesday. However, former Goldman Sachs hedge-fund manager Raoul Pal said the dollar was the world’s ‘biggest problem’ and that the signal to sell equities was coming soon.

He said the narrative that the Fed printing money would causes a dollar collapse was ‘very wrong.’

The chief executive of Global Macro Investor, who predicted the 2008 financial crisis, said: ‘You see the biggest problem the world faces is the dollar. We are in a vicious doom loop where slowing growth causes the dollar to rise, which causes slower growth, which causes the dollar to rise, as all borrowers play musical chairs to get access to the dollar to service debts. ‘Dollar swap lines, QE, jawboning, etc. have done nothing to stop this,’ he added in a post on Twitter. He said no printing of money by the Federal Reserve would solve what he described as a ‘structural’ problem. ‘All attempts to create more money to solve the dollar standard issue tend to devalue all fiat versus gold. Gold is rallying on debt deflation probabilities.’”

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THE GUARDIAN/Shahin Vallée

Coronavirus has revealed the EU’s fatal flaw: the lack of solidarity

April 28, 2020

“The European summit last week was hailed as a moment of truth. France’s president, Emmanuel Macron, laid out how European leaders had a rendezvous with history and needed to come together and show that Europe under duress was able to respond with a common voice and common means to the Covid-19 crisis. By all measures, this rendezvous with history was missed. European leaders in effect agreed to keep calm and carry on.

They endorsed a roadmap to exit lockdown after each country had in fact already decided and announced their own uncoordinated exit plans. In some countries, such as Germany, deconfinement measures are not a prerogative of the federal government and coordinating between states is challenging enough, let alone coordinating with other countries. As a result of the great disparity in the level of infection in each country, the different endowments in medical supplies and the varying levels of testing capacities (France is 150,000 per week and Germany has capacity for 700,000), each country is striking its own path. This lack of coordination risks a second wave of reinfection as the virus travels from country to country … Similarly, each government’s ability to support economic recovery will be highly constrained by their level of debt. The ability to support households or the unemployed will vary greatly from one country to the next, creating lasting scars on the weakest, such as Italy or Spain, who cannot offer the same level of support as France or Germany.”

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KITCO NEWS/Alan Sykora

Commerzbank: ‘gold should remain in demand as a crisis currency’

April 27, 2020

“The pullback in gold prices early Monday likely will not lead to any prolonged weakness and the metal should remain sought after by investors as a crisis currency, said Commerzbank. Sentimment in financial markets is improving as countries relax strict confinement regulations instituted during the COVID-19 pandemic, said analyst Carsten Fritsch. ‘However, we do not see this as any reason for gold to experience a prolonged phase of weakness,’ he said. ‘Even when the lockdown is lifted, the world will still be far from any kind of normality. In fact, the bigger risk then is economic collapse, as indicated by the disastrous economic indicators virtually everywhere. To counter this, governments around the globe are likely to continue spending unparalleled sums of money – most of which will be created by the central banks.’

Fritsch commented that neither the Fed nor the European Central Bank is likely to decide on any further measures for now at meetings this week. ‘That said, what they have already approved is so far-reaching that hardly any more is even possible,’ Fritsch continued. ‘Gold should remain in demand as a crisis currency in this environment, as reflected in ongoing ETF [exchange-traded-fund] inflows.’”

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CNBC/Matthew J. Belvedere

US economy could contract 30% in second quarter, warns Trump advisor

April 27, 2020

“The U.S. economy could contract at its worst rate since the Great Depression later this year due to the coronavirus crisis, warned Kevin Hassett, who recently rejoined the Trump administration as a senior economic advisor. The initial look at GDP for the first quarter, out on Wednesday, will be negative, he said. However, he said the real damage to the economy from the coronavirus will be revealed further down the road. ‘You’re looking at something like minus 20% to minus 30% in the second quarter.’

The average estimates in the CNBC economic survey showed a 5.3% decline in first-quarter GDP and about a 29% contraction in the second quarter. In a string of dismal data on economic growth as the coronavirus economic halt took hold, the government said that orders for durable goods plunged 14.4% in March. Hassett said he expects April’s unemployment rate, released a week from this Friday, to surge to 16% or 17%.”

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BLOOMBERG/Catherine Bosley

Global $6 Trillion Slump May Be Optimistic, Economists Warn

April 27, 2020

“The coronavirus pandemic will cause the global economy to shrink 4% in 2020, according to a Bloomberg Economics estimate that assumes a recovery starts in the second half of the year.

The economy has ‘entered a downturn of unprecedented speed and severity, with most advanced economies facing their weakest performance since the Great Depression,’ Tom Orlik and Jamie Rush wrote in a report. ‘Relative to expectations at the start of the year, the cost of lost output is more than $6 trillion,’ the wrote.

That a contraction of this magnitude is based on ‘optimistic assumptions about both the outbreak and the recovery’ underscores the challenge facing policy makers trying to cushion the blow of the pandemic. Under such scenario, U.S. gross domestic product will shrink 6.4%, while euro area GDP is set to contract 8.1%. Japan will shrink 4%, while China will expand at the slowest pace on record.

‘Downside risks are significant,’ Orlik and Rush wrote. As governments move to ease nationwide lockdowns, the risk of a second wave of infections could deepen the contraction to 5.6%. If stimulus is insufficient, output could plummet 7.2%.”

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BARRON’S/Leslie P. Norton

The Coronavirus Crisis Is Starting to Hit Muni Bonds. Why That Matters.

April 24, 2020

Delinquencies in the municipal market—already on the rise as counties and cities get squeezed by the coronavirus crisis—are likely to worsen amid soaring unemployment, rising alarm about stressed municipalities, and Federal conflict about aid. This could lead to pernicious consequences for investors, who rely on muni bonds for safety and income, as well as for the people who rely on the multitude of city services—such as schools, hospitals, transportation, and sewers—that these bonds finance.

Sen. Majority Leader Mitch McConnell said he supports allowing states to use bankruptcy protection to reduce debts instead of more federal aid. Trouble is, most cities and states can’t operate on deficit spending and the law currently prohibits bankruptcy for states. Meanwhile, Congress approved a $484 billion coronavirus rescue package, which included no funding for state and local governments.  The past two weeks have seen three significant defaults: Terre Haute, Ind., municipal bonds tied to a tire-recycling plant; Massachusetts bonds linked to skilled-nursing facilities in Boston commuter towns; and a Topeka, Kan., bond associated with the local YMCA … ‘Issuer revenues are at risk of dramatic reductions, leading to requested extensions to pay interest and principal due later than expected,’ says R. Paul Herman, founder of HIP Investor, a ratings, data, and analytics provider. ‘If investors don’t permit extensions or renegotiated timelines, stressed muni issuers may file for bankruptcy, leading to defaults higher than experienced in the past 50 years back to 1970.’”

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THE WALL STREET JOURNAL/Miriam Gottfried

Pandemic Triggers a Wave of Distress, Bankruptcy in Corporate America

April 27, 2020

“Practically overnight, bankers and lawyers who advise companies in distress have become some of the most in-demand workers on Wall Street, ending a long period in which rising markets and abundant capital consigned them to obscurity. Stay-at-home orders and the shutdown of nonessential business have driven broad swaths of the economy into panic mode. In industries that were already in a precarious position before the crisis, including retail and energy, the pandemic has tipped many over the edge. A host of oil companies have sought chapter 11 protection, while J.C. Penney Co. and Neiman Marcus Group Inc. are expected to file for bankruptcy soon.

Companies in areas that were previously stable, such as the automotive, travel and leisure industries—and even health care—may soon face similar pressures. U.S. corporate debt downgraded to selective default, meaning a borrower has failed to meet one or more of its obligations, totaled $64.1 billion for the 12 months ended April 17, according to S&P Global Ratings. That represents only a slight uptick over the pace at the end of January, but the numbers are about to get a lot more bleak.

In the coming months, that figure could top the roughly $340 billion reached at the height of the financial crisis, according to the worst-case scenario estimates from S&P. Even in a less grim scenario, the figure could approach levels reached after the dot-com bust in the early 2000s.”

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MARKET WATCH/Shawn Langlois

Why a ‘return to normal’ could mean disaster for the stock market

April 25, 2020

“It’s hard to deny, although some do, that the stock market, pre-coronavirus, was pushing the limits of what it means to be in a bubble. Of course, bubbles come and go, but as Hofstra University’s Jean-Paul Rodrigue suggests, this one had a particularly fierce tailwind. ‘Although manias and bubbles have taken place many times before in history…’ he once wrote, ‘central banks appear to make matters worse by providing too much credit and being unable or unwilling to stop the process when things are getting out of control.’

Rodrigue explained that bubbles unfold in stages, an observation backed by 500 years of economic history. ‘Each mania is obviously different,’ he said. ‘But there are always similarities. His concept of the bubble has been passed around finance circles for years. Most recently, John Hussman of Hussman Investment Trust used Rodrigue’s chart to warn investors of what’s to come. Hussman, who’s been very vocal about getting burned by his bearish misfires in recent years — ‘Did it take too long for me to abandon my belief in a limit to the stupidity of Wall Street? Yes it did’ — said the current position of this market is reminiscent of Rodrigue’s ‘return to normal’ stage. If that’s the case, fear’ and ‘capitulation,’ followed by ‘despair,’ are still to come.”

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by Sean Kelly

Last week, the White House unveiled Opening Up America Again, its plan to get the country back to work which is presented in three phases, each spaced several weeks apart. It features a state-by-state “Gating Criteria” that should be satisfied before restrictions are lifted in each phase of the plan.

The entire reopening process hinges on the downward trajectory of coronavirus infections, a fall in documented cases, the ability for hospitals to treat all patients needing care, and a robust testing program.

• Phase One, for states and regions that satisfy the gating criteria, loosens the restrictions on access to public places like parks and shopping areas. It allows large venues to resume operation (e.g., restaurants, movie theaters, sporting venues, places of worship) but only if strict physical distancing protocols remain in place.

 

• Phase Two, for states and regions with no evidence of an infection upsurge, allows the reopening of schools, daycares and camps with appropriate distancing measures. In addition, large venues can operate with only moderate distancing protocols. Elective surgeries and non-essential travel can also resume.

 

• Phase Three, permits the return of public interactions. Employers can resume unrestricted staffing. While vulnerable individuals should still practice physical distancing, visits to hospitals and senior care facilities can also resume. Large venues can operate with limit distancing restrictions. Gyms can also re-open and bars can operate with standing room occupancy where applicable.

The plan has been criticized by some state governors as too vague and panned by House Speaker Nancy Pelosi for not mandating mass testing and tracing.  A non-partisan group of 50 House members that call themselves, “The Problem Solvers” also put forth guidelines to re-start the economy called the “Reopening and Recovery ‘Back-to-Work’ Checklist” which emphasizes comprehensive testing and a science-based approach to safely bring the economy back online. It has been offered as a framework for future rounds of economic relief.

These attempts to restart American industry come amid soaring unemployment numbers and mounting “back to work” protests that are gaining momentum across the country. Rallies and demonstrations have erupted in Michigan, Texas, Utah, Maryland, Florida, Colorado, Indiana, Illinois, Nevada, Pennsylvania, Tennessee, Washington, Montana and even in New Jersey and California. Signs reading, “Stop the Shutdown,” “The Cure Has Become the Disease,” “Stop Killing the Economy,” “Let us Work,” and “Give me Liberty or Give me Covid-19!” capture the frustration and anger of Americans worried about their freedom and their livelihood.

Over the past, three weeks U.S. economic activity has come to a complete standstill and what protestors fear most is that the longer businesses remain closed and entire American cities shelter at home, the deeper and darker the economic chasm. The massive layoffs, cratering GDP, and crumbling housing numbers are reminiscent of the financial crisis of a decade ago – except far more severe. The speed and scope of the current financial collapse has been unlike anything experienced in modern times.

While some have accused the protestors of defying science and endangering the public good, their economic reality is fairly straightforward– they can’t pay their bills if they don’t leave the house. Civil liberties, religious freedom and government overreach are undoubtedly part of the dialogue along with something much more fundamental, the “pursuit of happiness” guaranteed by the Declaration of Independence and nearly impossible to enact without a job and a paycheck.

Experts predict that an economic recovery could take many months and depending on the development of effective therapies, treatments and/or vaccines to control the spread of the virus, it may be longer than that. Even as the pandemic fades no one knows how quickly consumers will return to restaurants, theaters and ballgames – and if they’ll ever come back in the same numbers.

As the layoffs, business closures and market losses mount, the hit to retirement and savings accounts could reach catastrophic levels. For those taking to the streets, the recovery will start when they finally return to work. For those in the shadow of retirement, it will start when they finally decide to diversify their portfolio and protect their wealth.

KITCO NEWS/Neils Christensen

Gold prices holding above $1,750 following mixed U.S. durable goods report

April 24, 2020

“Gold prices are holding on to gains ahead of the weekend as the latest data point to mixed health in the U.S. manufacturing sector.  Friday the Commerce Department said that U.S. durable-goods orders declined by 14.4% in March. The data was much worse than expected; consensus expectations compiled by various news organizations called for durables to drop 12%. Excluding transportation, new orders declined by 0.2% the government said. Coe durable goods orders were much better than expected as economists were calling for a decline of 6.5%.

Although the transportation sector was a significant drag on the headline data, market analysts and economists have noted that core goods data is some positive news for a beleaguered economy, impacted by nation-wide lockdowns due to the spreading COVID-19 pandemic. However, while some manufacturing data were held up better last month, many economists are expecting weakness in the months ahead has businesses remain shuttered. ‘With so many businesses either shuttered or facing a severe reduction in demand, including areas that are typically big investors such as oil extraction and airlines, we still think that investment will be a large drag on growth in Q2 and that durable goods orders will weaken in the months ahead,’ said Andrew Grantham, senior economist at CIBC.”

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BLOOMBERG/David Stringer

Gold Bars Are Flying 11,000 Miles to New York to Ease Supply Squeeze

April 24, 2020

“Australia’s largest gold refinery has ramped up production of one kilogram bars to ease the supply squeeze in the U.S. that helped propel a surge in the premium for New York futures. The collapse in air travel that’s grounded passenger jets — frequently used to transport gold products — and virus-related disruptions to some refining capacity has tightened availability of the rectangular bars, typically used to settle the Comex futures contracts.

‘We’re producing as many kilobars as we can, we’re probably churning out seven and a half tons of them a week at the moment and we are forward sold well into May,’ Richard Hayes, chief executive officer of the Perth Mint, said in an interview. ‘A very large portion of those kilobars are ending up as Comex deliveries.’ In a chaotic couple of days in late March, the premium for New York futures over the London spot price rose above $70 — the highest in four decades. The spread has narrowed to about $21, yet that still compares with just a few dollars in normal times.”

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THE ASSOCIATED PRESS/Martin Crutsinger

US factory orders plunge 14.4% as economy grinds to halt

April 24, 2020

“Orders for big-ticket manufactured goods plunged 14.4% in March, the second-biggest decline on record. The worse-than-expected slide underscored the severity of the economic impact from the pandemic.  New orders for commercial airlines actually went negative as cancellations outpaced sales. Those orders plunged 295.7% with skies largely empty of planes. The last time so few people traveled by plane was in the pre-jet era.  The March decline was surpassed only by an 18.4% drop in August 2014. There was a 1.1% gain in February, before the government-mandated shutdowns begun.

The report from the Commerce Department showed widespread weakness, with demand for transportation products falling 41%. Demand for motor vehicles and commercial airliners both tumbled. The dire numbers from Commerce followed a report showing that manufacturing production collapsed in March, with declines that have not been seen since the country demobilized after World War II. And worse is on the way. The numbers from March capture only the beginning of the lockdown in mid-March. When April manufacturing numbers are released next month, the full force of the pandemic will be on display. ‘We expect the coronavirus will deal a severe blow to U.S. business spending via suppressed global and domestic demand, broken supply chains, depressed oil prices, tighter financial conditions and elevated uncertainty,’ said the chief economist at Oxford Economics. ‘This will translate into some of the largest pullbacks in capital spending of all time,’ he said.”

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MARKET WATCH/Shawn Langlois

Bill Gates: As things get back to ‘semi-normal,’ it’s impossible to overstate the pain that lies in the years ahead

April 23, 2020

“‘It is impossible to overstate the pain that people are feeling now and will continue to feel for years to come… No one who lives through Pandemic 1 will ever forget it,’ said Bill Gates, co-chair of the Gates Foundation, sharing his latest thoughts on the coronavirus pandemic in a memo cited by the Seattle Times. The good news, he said, is we can look forward to a semi-normal world over the next two months. ‘People can go out, but not as often, and not to crowded places,’ Gates wrote. ‘Picture restaurants that only seat people at every other table and airplanes where every middle seat is empty.’ He said he believes schools will reopen, but stadiums won’t.

In a separate piece penned for the Economist, the tech billionaire said that, when historians write the book on the pandemic, what we’ve lived through so far will only take up the first third. ‘The bulk of the story will be what happens next,’ he wrote. ‘Even if governments lift shelter-in-place orders and businesses reopen their doors, humans have a natural aversion to exposing themselves to disease. Airports won’t have large crowds. Sports will be played in basically empty stadiums. And the world economy will be depressed because demand will stay low.’ He said life will only return to normal when most of the population is vaccinated, and that could take a while, though he hopes that one will be in mass production by the second half of 2021.”

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CNBC/Jessica Dickler

401(k) balances sink 19% due to coronavirus, Fidelity says

April 24, 2020

“Wild market swings have taken a toll on retirement savers. The average 401(k) balance plunged 19%, to $91,400, in the first quarter of 2020, according to a new report by Fidelity Investments, the nation’s largest provider of 401(k) plans. The financial services firm handles more than 30 million retirement accounts altogether. The average individual retirement account balance also fell, by 14%, to $98,900. Before the coronavirus wreaked havoc on the economy, 401(k) and IRA balances were at record highs. The average 401(k) balance was $112,300 in the fourth quarter of last year, while the average IRA balance was $115,400.

‘Given the unprecedented market volatility this quarter, it’s not surprising that account balances were impacted, although declines were less than the overall market decline,’ Kevin Barry, president of workplace investing at Fidelity, said. Still, the majority of retirement savers continue to contribute, Fidelity found. The average 401(k) contribution rate held steady at 8.9%, while the employer contribution stayed at 4.7%. There was a slight uptick, however, in the number of savers who changed their asset allocation, with most moving their savings into a more conservative investment option, Fidelity said. And only 1.4% of savers took a hardship withdrawal from their 401(k) as of March 31, 2020 — largely before the CARES Act made it easier to access your retirement money.”

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THE WALL STREET JOURNAL/Tim Congdon

Get Ready for the Return of Inflation

April 23, 2020

“The economists Milton Friedman and Anna Jacobson Schwartz demonstrated in ‘A Monetary History of the United States’ that a collapse in the quantity of money was the main cause of the Great Depression. Hoping to avoid a repeat, the Federal Reserve in recent weeks has poured money into the economy at the fastest rate in the past 200 years. Unfortunately, this overreaction could turn out just as poorly; history suggests the U.S. will soon see an inflation boom.”

“Excluding the years immediately after the Revolutionary War, the past few weeks have seen by far the highest rate of monetary expansion in U.S. history. The Fed might defend itself by saying that its ‘shock and awe’ tactics have given financial markets confidence that the coronavirus won’t cause a long and deep recession … It’s reasonable to assume that by spring 2021 the quantity of money will have increased by 15% and possibly by as much as 20%. That wouldn’t quite match the peak rates of expansion seen during and immediately after the two world wars of the 20th century, but it could surpass peacetime records, outpacing previous peaks in the inflationary 1970s. Policy makers have called the battle against the novel coronavirus a war. As in wartime, federal expenditures are rising sharply while tax revenues are being hit by the lockdown. Both World War I and World War II—and, indeed, the Vietnam War—were followed by nasty bouts of inflation. If that happens again, policy makers being cheered for their decisive action will instead have to answer for their lack of foresight.”

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KITCO NEWS/Anna Golubova

Gold prices up 1% as U.S. manufacturing PMI drops to 11-year lows

April 23, 2020

“Gold prices edged up to daily highs after the release of preliminary manufacturing and service-sector sentiment data. The flash U.S. manufacturing Purchasing Managers Index for April dropped to 36.9, marking an 11-year low, research firm IHS Markit reported. The April number missed market’s expectations of a reading of 38.0. ‘Manufacturers recorded the sharpest fall in sales since the depths of the financial crisis in early-2009,’ the HIS Markit’s news release stated. ‘Private sector firms in the U.S. signalled an unprecedented decline in business activity in April, with manufacturing and service sector companies registering marked contractions of output amid the outbreak of coronavirus.’

The service sector saw the worst of it as the PMI reading fell to 27.0 in April, marking the quickest contraction on record. ‘Services companies registered the steepest rate of decline in the survey’s history,’ the report said. ‘The cancellation and postponement of orders led firms to reduce their workforce numbers at a rate far exceeding anything seen previously over the survey history at the start of the second quarter.’”

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MARKET WATCH/Mark DeCambre

Gold prices aim for 2 straight days of gains, briefly rising above $1,750

April 23, 2020

“Gold futures headed higher Thursday as tightening supplies for the commodity and worries about the economic impact of the COVID-19 pandemic and rising tensions in the Middle East buoyed bullion. ‘In a direct opposite to the glut in the oil market, physical gold is seeing a shortage and so the price on the nearest to deliver futures contract is experiencing sporadic $50+ surges in premiums relative to spot,’ wrote Albert Edwards, global strategist at Société Générale.

BofA Global Research notes that exchange-traded funds in metals have increased their holdings in silver, viewed as an industrial and precious metal, and gold, which has helped to lift both prices.

‘In our view, non-commercial market participants have increased their exposure to silver for the same reason as market participants boosted gold holdings: concerns over ultra-loose monetary policy and rising central bank balance sheets,’ wrote analysts. Gold prices held onto their gains after weekly labor-market data showed another 4.4 million people filed for unemployment for the week ended April 18, bringing the total claims over the past month to 26 million since the coronavirus began.”

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BARRON’S/Lisa Beilfuss

4.4 Million More Seek Unemployment Benefits. Virus’s Toll Is 26 Million Jobs.

April 23, 2020

“The ranks of newly unemployed Americans have swelled to more than 26 million as the coronavirus crisis continues to stall almost all nonessential business , a report from the Labor Department showed Thursday. In the week ending April 18, a seasonally adjusted 4.4 million workers applied for unemployment benefits. While that is down from 5.2 million a week earlier , the latest figure shows layoffs continue to mount as businesses across the country stay closed and Americans stay home. Those laid off since the virus began to spread meaningfully in the U.S. and lockdowns began amount to roughly 16% of the U.S. workforce.

For perspective, before the virus struck, just over a million workers applied for unemployment benefits in a typical five-week period. In the worst such span during the Great Recession, it was less than four million. In states including Michigan, Kentucky, and Rhode Island, more than a quarter of the workforce has now filed for jobless benefits … While some economists say the worst may be over in terms of the sheer weekly number of layoffs, the impact will be lasting. Job losses of this magnitude translate to an unemployment rate of 18.3%, though the official unemployment rate won’t reflect that because people are only counted as unemployed if they are actively seeking work, which is currently difficult in many industries, said Heidi Shierholz, director of policy at the Economic Policy Institute and former chief economist at the Labor Department.”

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BLOOMBERG/Eliza Winger and Tom Orlik

High-Frequency Metrics Give a Better Picture of This Recession

April 23, 2020

“Traditional indicators are no match for this fast-paced, virus-induced recession, which is why Bloomberg Economics have assembled an alternative set of high-frequency metrics. Since mid-March, 22 million displaced workers have filed for unemployment benefits, at a pace averaging 5.5 million per week. The more than 40 percentage-point drop in the Mortgage Bankers Association’s Purchase Applications index signals that housing won’t be spared in this recession. Data from the Moovit Public Transit Index show ridership in the three largest U.S. cities down substantially from the level before the virus outbreak.

The lockdowns are having a devastating impact on the restaurant industry, as shown in data from the OpenTable restaurant booking app. The Consumer Comfort index, which is based on Americans’ views on economic conditions, tumbled to 45 in the latest reading, indicating a sharp decline in sentiment. The oil rig count has dropped more than 24% since the beginning of January as prices for crude cratered. Output of raw steel has plunged 34% since the beginning of January, weighed down by idled plants and slumping demand.”

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CNBC/Jesse Pound

Leon Cooperman says crisis will change capitalism and taxes have to go up

April 23, 2020

“Billionaire investor Leon Cooperman told CNBC that the coronavirus crisis will likely change capitalism forever and that taxes will need to be raised soon. ‘When the government is called upon to protect you on the downside, they have every right to regulate you on the upside,’ Cooperman said. ‘So, capitalism is changed.’ The chairman and CEO of Omega Family Office said the country is shifting to the left and that taxes will have to go up regardless of who wins the presidential election. ‘Quickly if Biden wins, slowly if Trump wins, but taxes have to go up. So, things like carried interest, capital gains taxes, the ability to roll over real estate sales tax free, all that stuff is going to have to be eliminated. For the good, by the way,’ Cooperman said.

The billionaire said last week that the U.S. government should not let companies go bankrupt due to economic destruction caused by the coronavirus pandemic. Some of the provisions in the CARES Act directed at major companies, including a program for airlines, included restrictions on stock buybacks and executive pay for those that accepted the money. Cooperman previously supported higher tax rates but strongly opposed the idea of a wealth tax, such as that proposed by Sen. Elizabeth Warren during the Democratic primary … Cooperman said that he was optimistic that the parts of the economy could begin to reopen in May but that he expected the overall recovery to be slow.”

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THE WALL STREET JOURNAL/Paul Hannon

Europe Suffers Record Collapse in Economic Activity

April 23, 2020

“Business activity in Europe and Japan collapsed in April as governments tightened restrictions on movement and social interaction aimed at limiting the spread of the coronavirus, according to surveys of purchasing managers. The surveys suggest governments have effectively closed parts of the economy where face-to-face interaction is unavoidable—such as restaurants and barbers—and activity has tumbled in parts of the economy less directly affected. The drop in services sector activity is unprecedented in the history of the surveys, even in the wake of the global financial crisis.

According to data firm IHS Markit, the composite Purchasing Managers Index for the eurozone—a measure of activity in the private sector—fell to 13.5 in April from 29.7 in March. A reading below 50.0 indicates activity has fallen. The April reading was a record low. The lowest level reached in the wake of the global financial crisis was 36.2 in February 2009. ‘April saw unprecedented damage to the eurozone economy amid virus lockdown measures coupled with slumping global demand and shortages of both staff and inputs,’ said the chief economist at IHS Markit. In the U.K., the composite PMI fell to 12.9, a record low, from 36.0 in March. Germany fell to 17.1 from 35.0 in March … The declines were larger than expected, suggesting economic contractions in the 2^nd quarter of 2020.”

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KITCO NEWS/Jim Wyckoff

Gold prices sharply up as U.S. stocks, crude oil rebound

April 22, 2020

“Gold prices are posting strong gains in early U.S. trading Wednesday, as the U.S. stock market has rebounded from selling pressure seen on Monday and Tuesday, while crude oil prices are also posting solid advances at mid-week. There also could be some safe-haven demand amid talk some Asian investors and financial markets have been badly hurt by the collapse in crude oil prices this week. A weaker U.S. dollar index is also working in favor of the precious metals markets bulls.

Global stock markets were mostly up in overnight trading. U.S. stock indexes are solidly higher in early New York trading. The U.S. stock indexes are seeing a corrective bounce at mid-week, following solid losses scored on Monday and Tuesday. The U.S. equity traders are watching corporate earnings reports that have started to come out this week, but have been mostly overshadowed by the collapse in the global crude oil market. The marketplace is showing some reaction to a tweet from President Trump Wednesday morning that said, ‘I have instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea.’ A while after the tweet, gold prices slightly extended gains, while crude oil prices rallied.”

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MARKET WATCH/Mark DeCambre

Gold price surge 2% to retake $1,700 as BofA forecasts metal will surge to $3,000

April 22, 2020

“Gold futures were higher Wednesday morning as weakness in the U.S. dollar and nagging concerns about the global economy, supported a rally in the precious metal.  ‘All the bullish reasons to belong to gold in the medium term still apply—notably, the incomprehensible amount of money being printed by central banks and fiscal spending by governments to offset the impact of the coronavirus outbreak,’ wrote Stephen Innes, of AxiCorp,

BofA Global Research raised its 18-month price target for gold to $3,000 an ounce from $2,000 or more than 50% above a nine-year old record at around $1,921, citing the prospects of endless monetary expansion from central banks, including the Federal Reserve, to limit the economic damage from the COVID-19 pandemic. A slide in the dollar, off 0.3% against a basket of a half-dozen currencies, as gauged by the Intercontinental Exchange Inc. also was helping to support an advance for precious metals. A softer greenback can make commodities priced in the currency more attractive for buyers using other monetary units.”

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BLOOMBERG/Noah Smith

How Bad Might It Get? Think the Great Depression

April 22, 2020

“As the economic carnage from the coronavirus pandemic continues, a long-forbidden word is starting to creep onto people’s lips: ‘depression’ … Since the 1930s, economists and commentators have used the word ‘recession’ to describe economic slumps, and none of them have been nearly as severe as the Great Depression. The only time this convention was really challenged was after the financial crisis of 2008. The global nature of the downturn, sparked by troubles in the financial industry, led many to draw parallels with the Great Depression. In the end, the term ‘Great Recession’ stuck.

The economic damage from coronavirus, however, threatens to dwarf the 2008 downturn. More than 22 million people, or about 13% of the U.S. labor force, have already filed for unemployment. Current forecasts are for the unemployment rate to reach 20% this month. Some predict it could go as high as 30% this year. That would eclipse even the Great Depression in severity. So, if severity alone is the criteria for a depression, this one will certainly deserve the moniker. President Ronald Reagan once quipped that ‘recession is when your neighbor loses his job; depression is when you lose yours.’ There will be few people whose economic livelihoods are not hurt by the coronavirus.”

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BARRON’S/Reshma Kapadia

Earnings Season Has Been Bad. Next Quarter Will Be Even Worse.

April 22, 2020

“About one-fifth of S&P 500 companies report earnings this week, so many investors are looking for signs of how bad the hit from Covid-19 will turn out to be. The worst news may not come until later in the year, bringing trouble for stocks … The first quarter was the relatively easy part of the coronavirus outbreak for many companies. Businesses didn’t see much of a pandemic-related hit until the country went into different stages of lockdown in the last three weeks of the quarter. Extrapolating from those final weeks could offer a ballpark view of the worst-case scenario of how the second quarter will look, said Jonathan Golub, chief U.S. equity strategist for Credit Suisse, in an interview. 

The real challenge will be in forecasting the rest of the year, given the magnitude of the uncertainty over when the economy will reopen, what that will look like, and what happens to the virus as restrictions are eased. Many companies aren’t ready to make those calls … That lack of guidance could leave analysts’ estimates for future quarters too high, meaning a slow drip of bad news and a period of revisions to earnings forecasts lie ahead, Golub said. ‘If analysts or companies took a harsher view on where things are going, then you would have earnings bottom more quickly,’ he said. About 41 companies reported earnings last week, with their results broadly suggesting a 15% drop in earnings per share from the prior year. Banks’ results were the most disappointing so far, but analysts foresee trouble in the oil patch.”

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CNBC/Ylan Mui and Karen James Sloan

Massive layoffs and pay cuts are likely coming to state and local governments

April 22, 2020

“State and local governments are warning of a wave of layoffs and pay cuts after getting left out of the federal coronavirus relief package expected to pass Congress this week. In many places, those painful reductions are already taking shape. Los Angeles plans to force city workers to spend 26 days on unpaid leave as revenues are forecast to drop as much as $600 million next fiscal year. Detroit has proposed laying off 200 workers and furloughing thousands more. Ohio’s Hamilton County, Commissioner Denise Driehaus is taking a 10% pay cut alongside county workers.

‘We are really struggling,’ Driehaus said. The $2.2 trillion emergency legislation known as the CARES Act, which President Donald Trump signed late last month, included $150 billion in direct help for state and local governments grappling with the impact of the deadly outbreak. Democrats pushed to include another $150 billion in the next tranche of aid, but Republicans sought to keep the bill narrowly focused on support for small business. Local jurisdictions may not be able to wait that long. They’re facing higher expenditures on health care and other services to combat the disease at the same time that revenues are plunging as Americans stay home and businesses remain shuttered. According to the Center on Budget and Policy Priorities, states could be $500 billion in the hole over the next two years. ‘The approaching state budget cuts … will cause the U.S. economy to contract further — making the economic downturn deeper and more protracted,’ CBPP President Robert Greenstein said.”

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BLOOMBERG/ Matthew Boesler and Yuko Takeo

The Fed Is Buying $41 Billion of Assets Daily and It’s Not Alone

April 20, 2020

“Central-bank balance sheets are expanding to record levels amid their latest buying spree, raising questions about how big they can get and whether those assets can ever be sold back to markets. Policy makers didn’t have much luck paring down much smaller portfolios in the decade since the financial crisis. And now they have to bankroll a coronavirus economy that’s putting government budgets under unprecedented strain and threatening to drive companies everywhere out of business.”

“Central banks in Group of Seven countries purchased $1.4 trillion of financial assets in March, nearly five times as much as the previous monthly record set in April 2009, according to a Bloomberg Economics analysis. Morgan Stanley analysts estimate that the Federal Reserve, European Central Bank, Bank of Japan and Bank of England will expand their balance sheets by a cumulative $6.8 trillion when all is said and done … Central bankers in the euro area, Japan and the U.K. — old hands at so-called quantitative easing programs by now — have all ramped up buying, while those in Canada, New Zealand and Australia have embarked on large-scale purchases for the first time, joining Sweden among smaller economies to do so.”

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REUTERS/Swati Verma and Harshith Aranya

Gold sheds 1%, palladium 10% as oil rout prompts dash for cash

April 21, 2020

“Gold prices fell more than 1% to a near two-week low on Tuesday, while palladium tumbled 10% as a rout in oil markets prompted panic selling across assets and forced investors to sell precious metals to cover their losses.  Spot gold was down 0.8% at $1,678.68 per ounce by 1050 GMT. U.S. gold futures dropped 1.2% to $1,690.40.  Palladium was last 9.4% down at $1,962.45 an ounce, while platinum dipped 3% to $747.82 and silver fell 2.4% to $15.01.

‘The collapse in oil prices has continued today, creating another dash for cash, and no market is being left unscathed,’ Saxo Bank analyst Ole Hansen said, adding the $1,635 level could be the next target for gold.  Worries about credit defaults are rising and ‘into that environment, gold is not able to withstand the pressure coming from the need to de-leverage’, he added. U.S. oil futures traded in negative territory, after sinking below zero for the first time ever on Monday, as concern grew the sector will run out of storage. The nose-dive in U.S. crude prices and dismal corporate earnings reports prompted concerns about the lasting damage to the global economy from the pandemic.”

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KITCO NEWS/Neils Christensen

Hold gold as exit from COVID-19 stimulus measures will be messy – CIBC

April 21, 2020

“A global economy that has grounded to a halt because of the global COVID-19 pandemic is raising concerns of a deep deflationary environment, which could be negative for gold; however, one Canadian Bank, said that investors should pay more attention to the inflationary risks, being driven by central bank monetary policy and fiscal spending, as the economy recovers. Analysts at CIBC said that an inflation storm is brewing in the gold market that will continue to support higher prices. Looking at interest rates, the analysts said that during periods of negative interest rates, gold prices have at least doubled. ‘So far, the move has been about 50%,’ the analysts said.

Investors can’t underestimate the impact central bank monetary policy will have on financial markets. ‘We have never seen governments and central banks as involved in the global economy as they are today,’ they said. ‘While that is clearly needed given the state sanctioned stay-at-home directives to deal with the health risks associated with the COVID-19 virus, the disruption arising from public sector involvement and ultimate exit from the corporate world will likely be messy.’”

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CNBC/Fred Imbert and Yun Li

Dow tumbles for a second day, falls more than 300 pts amid a relentless oil drop

April 21, 2020

“U.S. stocks fell sharply once again on Tuesday as oil prices continued their unprecedented wipeout. The Dow Jones Industrial Average slid 368 points, or more than 1%. The S&P 500 dropped 1.6% while the Nasdaq Composite dropped also fell 1.6%. Traders were focused on the strange happenings with oil futures once again, which raised concern about deep losses for the energy industry hitting the U.S. economy even further. On Monday, the May contract for oil futures expiring Tuesday fell to zero and then went to an actual negative price, meaning producers would pay for someone to take the oil off their hands. The bizarre move has to do with the fact that because of the coronavirus shutdowns, big buyers of oil like refineries don’t need any more oil because their tanks are nearly filled.

That May contract clawed back into the back in early trading on Tuesday.  “If we ever needed a reminder for the extent of the abrupt decline in global economic activity, it is the fact that WTI oil futures saw a negative price,” said Tom Lee, head of research at Fundstrat Global Advisors, in a note. ‘But oil is a residual issue of the broader global stay at home and this situation will not change until Western nations and US states begin opening up. And they cannot open up until each jurisdiction feels they have a handle on the healthcare crisis.’ More concerning to traders on Tuesday was the selling now occurring in later month contracts for oil futures. The more actively traded June oil contract was down 29% to $14.56 Tuesday. That contract expires on May 19.”

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MARKET WATCH/Shawn Langlois

‘The world is more screwed up’ than the stock market is currently reflecting, warns billionaire investor

April 20, 2020

“‘We’re only down 15% from the all-time high of Feb. 19… it seems to me the world is more than 15% screwed up.’ That’s the position of Howard Marks, the billionaire founder of Oaktree Capital, commenting in an interview Monday on what he sees as a huge disconnect between what the coronavirus pandemic is doing to the global economy and what we’re seeing in the stock market. ‘It took seven years to get back to the 2000 highs in 2007. It took 5½ years to get back to the 2007 highs in late 2012,’ Marks explained. ‘So, is it really appropriate that, given all the bad news in the world today, we should get back to the highs in only three months? That seems inappropriately positive.’

Separately, he echoed that bearishness in a recent memo, saying that the chances are high that the Dow, S&P and the Nasdaq Composite Index will all slip below those recent nadirs. ‘It’s not easy to buy when the news is terrible, prices are collapsing and it’s impossible to have an idea where the bottom lies,’ he wrote. ‘But doing so should be the investor’s greatest aspiration.’ The S&P 500, getting a boost from an unprecedented stimulus has bounced back nicely from its March 23 low, but it’s still down more than 15% from its record as the U.S. economy continues to grapple with historic job losses and plunging retail sales. ‘People are traumatized, and not just because of the performance of their stocks,’ Marks said. ‘Everybody’s life is hugely changed.’”

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BLOOMBERG/Christopher Condon and Dave Merrill

U.S. Debt to Surge Past Wartime Record, Deficit to Quadruple

April 21, 2020

“The U.S. budget deficit may quadruple this year to almost $4 trillion. Projections from the Committee for a Responsible Federal Budget (CRFB) say that by 2023 U.S. debt held by the public will surpass records set in the post-World War II years. And these projections only include spending enacted so far—in a three-month-old crisis that has seen emergency Congressional appropriations top $2.3 trillion. Additional spending is almost certain as the pandemic destroys millions of jobs and thousands of businesses while slashing tax revenues for local and state governments.

Even before the crisis, U.S. debt-to-GDP had more than doubled to 79% in 2019 from 35% in 2007. Deficit hawks, already hard to find, disappeared once the virus shut down whole swaths of the U.S. economy. The Coronavirus Aid, Relief, and Economic Security (CARES Act) legislation passed on a unanimous voice vote. Lawmakers understood that frugality made no sense in the face of impending economic collapse.”

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BUSINESS INSIDER/Ben Winck

Chicago Fed’s top economic index suggests US entered a recession in March

April 20, 2020

“The Federal Reserve Bank of Chicago’s benchmark economic measurement plummeted to recessionary levels in March as the nation grappled with business closures, skyrocketing unemployment, and feeble demand. The central bank’s National Activity Index declined to -4.19 across the four broad segments creating the metric, its lowest level since the financial crisis. Of the 85 indicators used in the metric, 65 read negative, 18 gained, and two stood neutral. February’s reading was revised lower, to 0.06 from 0.16. The index’s three-month moving average tanked to -0.32 from -0.21 in February.

The index’s zero value suggests the economy isn’t growing at its expected trend. Values for the three-month average below -0.7 indicate ‘an increasing likelihood of a recession,’ the Fed said. The index’s bleak reading arrived as numerous other indicators have forecast a sharp economic downturn through the first half of the year. Retail-sales data published Wednesday showed a record 8.7% decline in March as consumers braced for prolonged economic lockdowns. Unemployment has also surged amid the virus-induced slump. Jobless claims filed over the past four weeks surpassed 22 million, effectively erasing all jobs created since the 2008 recession. The Fed’s index reflects data up to April 16. The metric’s next update is scheduled to be released at 8:30 a.m. ET on May 26.”

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REUTERS/Swati Verma and Harshith Aranya

Gold’s rally will be tamed by dollar strength, weak physical market – Reuters poll

April 20, 2020

“Gold prices are expected to consolidate below recent highs during 2020 and 2021 as increased demand from investors for the ‘safe haven’ asset is offset by dollar strength and weak retail consumption, a Reuters poll showed on Monday. Spot gold has surged more than 10% this year, reaching an around 7-1/2 year high of $1,746.50 on April 14, as the coronavirus pandemic roiled global markets and central banks unleashed a wave of monetary stimulus.  Gold is often sought as a safe store of value in times of economic turmoil and benefits from central bank easing which pushes down bond yields and raises fears of inflation that erodes the value of other assets, making the metal attractive.

The poll of 37 analysts and traders returned a median forecast for gold prices to average $1,639 an ounce in 2020 and $1,655 in 2021.  The forecasts are sharply higher than in a similar poll in January. Bullion will likely be pressured by a strong U.S. dollar, which makes gold more costly for buyers with other currencies, and plummeting demand in India and China where many consumers are locked down and losing income, analysts said … But low bond yields and expectations of further economic stimulus measures should keep demand for gold healthy over the longer term.”

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KITCO NEWS/Allen Sykora

Long-term investors are the ones boosting gold, not futures traders – analysts

April 20, 2020

“Longer-term investment buying such as exchange-traded funds has been the main fuel pushing gold prices higher in recent weeks, with Commodity Futures Trading Commission (CFTC) data showing the net-bullish posture of money managers in the futures market has not changed much so far this month, analysts said … Money managers trading in the futures market have been ‘hardly involved at all’ in the price rise, commented Commerzbank analyst Carsten Fritsch. ‘For five weeks now, their net-long positions have remained virtually unchanged at a comparatively moderate level,’ Fritsch said.

‘The price rise…was not driven by speculation, in other words, which also means there is no need for any correction on the part of this group of investors.’ ‘The robust purchases of gold ETFs did play an important role in the gold-price upswing, on the other hand. They have totaled 112 [metric] tons since the beginning of the month.’ … ‘This is now the 20th instance of inflows [of gold] into ETFs, and silver is being added into ETFs as well,’ he said.”

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CNBC/Fred Imbert

Dow drops more than 300 points as oil prices fall on energy demand concerns

April 20, 2020

“Stocks fell sharply to start the week on Monday as investors weighed the latest coronavirus news along with a sharp decline in U.S. crude prices. The market was coming off its first back-to-back weekly gains in more than two months. The Dow Jones Industrial Average traded 390 points lower, or 1.6%. The S&P 500 slid 1.2% while the Nasdaq Composite dropped 0.9%. Chevron and Exxon Mobil fell more than 5% each to lead the Dow lower. The S&P 500 energy sector lost more than 6% in early trading as Occidental Petroleum and Halliburton both fell more than 10%.

Equities were following a decline in U.S. oil prices, which raise concerns about how deep the economic slowdown will be this quarter and also hit the prices of energy stocks. The May contract for West Texas Intermediate, which expires on Tuesday, plunged more than 32% to $12.30 per barrel on weak demand outlook and storage capacity issues. The negative impact on stock futures from oil likely would have been worse were it not for lesser declines in oil contracts expiring during future months. WTI’s June contract slid over 7% to $23.14 per barrel. July’s oil contract was down 4%. Analysts chalked it up to the collapse in demand for oil contracts expiring this week. Refineries don’t need the oil and are near storage capacity with most of the country shut down.”

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BLOOMBERG/Alex Longley and Javier Blas

Oil Plunges by Record to Below $11 With Storage Rapidly Filling

April 20, 2020

“Oil suffered its biggest one-day price plunge in the modern era, at one point crashing about 40% to below $11 a barrel as traders contended with an historic glut. Despite OPEC+’s unprecedented output deal agreed a week ago, the oil market remains massively oversupplied as the lockdowns to fight the spread of the coronavirus reduce global crude demand by about a third. Storage tanks across the globe are rapidly filling.

‘There is no limit to the downside to prices when inventories and pipelines are full,’ tweeted Pierre Andurand, the head oil hedge fund. ‘Negative prices are possible,’ he added. In early trading in New York, West Texas Intermediate fell to as low as of $10.96 a barrel, the weakest level since 1998. The plunge was exaggerated as the May futures contract expires on Tuesday, leading to a fire-sale among traders. The June contract fell 13% to $21.80 a barrel at 9:13 a.m. local time. Brent declined 7.1% to $26.08. There are signs of weakness everywhere. Buyers in Texas are offering as little as $2 a barrel for some oil streams, raising the possibility that producers may soon have to pay to have crude taken off their hands. The nearest time spread for the U.S. benchmark has fallen to its weakest level on record … Crude explorers shut down 13% of the American drilling fleet last week. While production cuts in the country are gaining pace, it isn’t happening quickly enough to avoid storage filling to maximum levels, said Paul Horsnell, head of commodities at Standard Chartered.”

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MARKET WATCH/Steve Goldstein

The S&P 500 may slump below 2,000 by summer, even with the Fed’s help

April 20, 2020

“Charles Dumas, a veteran of General Motors in the 1970s and JPMorgan in the 1980s, has seen a market downturn or two. Now chief economist at TS Lombard in London, Dumas recalls a story told by TS Lombard colleague Larry Brainard, when Mexico in August 1982 told the U.S. and the International Monetary Fund it couldn’t service its debt.  About a month later at the IMF’s meetings, few were concerned, Brainard recalled.  ‘What in fact [Mexico’s announcement] was, was a sign of the so-called MBA problem (Mexico, Brazil, Argentina) — and six months later, everyone realized just how much trouble there was,’ Dumas says.

He uses that as analogous to why the current stock market isn’t correctly pricing in the economic deterioration. Consumer spending is getting obliterated at the moment, and won’t recover quickly once the shutdowns across the U.S. and Europe are lifted, in part because of the virus risk at sports events, theaters, restaurants and bars. He notes that consumer spending is larger than labor income — which itself is getting ravaged because of the spike in unemployment — because of profit income. ‘Profit income is likely to be very bleak indeed in the second quarter, causing a knock-on effect towards more savings,’ he says. Tax cuts won’t lead to much in the way of consumer spending, and businesses will cut capital spending aggressively.  The economy will probably fall at an annual rate of around 20% in 2^nd quarter, and will fall further in 3rd quarter. He said the firm’s modeling suggests earnings per share will fall about 20% and 30% this year. Giving the S&P 500 a price-to-earnings ratio of about 16 for a ‘reasonably depressed environment,’ leads to an S&P 500 below 2000.”

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THE ECONOMIC TIMES/Business Desk

World economy bound to suffer ‘severe recession’: IMF

April 18, 2020

“The world economy, already ‘sluggish’ before the coronavirus outbreak, is now bound to suffer a ‘severe recession’ in 2020, IMF chief Kristalina Georgieva warned and said the current crisis posed daunting challenges’ for policymakers in emerging markets and developing economies.  Addressing the Development Committee Meeting during the Spring Meeting of the International Monetary Fund and the World Bank, the IMF Managing Director said a large global contraction the first half of this year was inevitable.

She said the coronavirus pandemic hit the world economy when it was already in a fragile state as it was weighed down by trade disputes, policy uncertainty and geopolitical tensions. ‘The global coronavirus outbreak is a crisis that is like no other and poses daunting challenges for policymakers in many emerging market and developing economies (EMDEs), especially where the pandemic encounters weak public health systems, capacity constraints, and limited policy space to mitigate the outbreak’s repercussions,’ Georgieva said. ‘Medium-term projections are clouded by uncertainty regarding the pandemic’s magnitude and speed of propagation, as well as the longer-term impact of measures to contain the outbreak, such as travel bans and social distancing,’ she said.”

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by Sean Kelly

Back in mid-March President Trump declared war on coronavirus and labeled himself a wartime President. During a series of press briefings at the White House, the president called the virus an “invisible enemy” and deemed the fight against it a “medical war.”

When we think of war time presidents – Abraham Lincoln, Woodrow Wilson, FDR, and Lyndon Johnson all come to mind. Each placed their trust in a team of key advisors, worked to protect the country, had a plan for victory and often warned that things would get worse before they got better.

Such has been the case in the war against COVID-19. A formidable foe also known as SARS-CoV-2, silently and imperceptibly makes its way into the human body through droplets from an infected sneeze or cough – typically lodging in the nose and throat. It can also slip into the lungs triggering an inflammatory response that causes oxygen levels to plummet, patients to gasp for air, and in severe cases respiratory ‘death by drowning.’

It is an invisible enemy indeed, as a matter of fact, it’s not even alive. The Washington Post reports that, “viruses have spent billions of years perfecting the art of surviving without living — a frighteningly effective strategy that makes them a potent threat in today’s world.” The novel coronavirus is technically a spike protein with a spherical structure that helps it gain entry into the body by binding to cell membranes. Once it hits the lungs, it divides and conquers, creating infinite versions of itself.

In terms of warfare, COVID-19 is always mobilizing. It never regroups or falls back, requires no munitions and has unlimited reinforcements. It has effectively shut down the globe in terms of business, industry, commerce, social contact and human interaction.

For our part, we’ve taken mass casualties. Worldwide coronavirus infections are approaching 2 million, with over 118,000 deaths. More than 580,000 Americans have been infected and over 23,000 have died. Our only offensive has been to retreat, hunker down, take shelter and hope the enemy withdraws. Is there a winning wartime precedent for such a tactic? Not really.

Carl von Clausewitz, a Prussian general and military theorist famously said, “four elements make up the climate of war: danger, exertion, uncertainty and chance.” There’s no doubt that we’re in a dangerous place mercilessly trapped between a killer virus and a collapsing economy. We’ve extended ourselves emotionally and monetarily. Things are wildly unclear and events are unfolding so rapidly we have little time to prepare ourselves for what happens next.

“We went from full throttle to 90% revenue loss in three weeks,’’ said the CEO of a New Jersey

car service company last month. “We’ve been through 9/11. We’ve seen recessions. We’ve never seen anything like this.’’  In just two weeks, more Americans were put out of work than in the most brutal months of the Great Recession. Slumping economic indicators and crumbling consumer sentiment have historically fallen over consecutive quarters of dismal economic news. Now, life is turning on the daily media counts of the pandemic’s relentless advance.

“The economy has never gone from healthy to disaster so quickly,” said Jason Furman, who served as an economic advisor to President Obama. “The housing bubble burst in 2006, the first financial tremors were in 2007, and the major financial events were spread out from February through September of 2008. What would take years in a financial crisis has happened in days in this health crisis.’’

As we continue to shelter in place and quarantine in our makeshift trenches, no one knows how or precisely when this will end. “We had the best economy we’ve ever had,” said President Trump. “And then, one day, you have to close it down in order to defeat this enemy.” And in our efforts to win the fight – generations of wealth, a collective lifetime of savings and the financial future of millions of Americans are being systematically destroyed.

This is our “big war” as the president calls it. We face an existential threat from the unrelenting advance of a deadly disease and the scorched economic earth left in its wake. We can endure, however, in the same way that the survivors of previous big wars have, by doubling down on the safety, liquidity and certainty of holding solid gold.

KITCO NEWS/Jim Wyckoff

Gold, silver prices down as risk appetite up late this week

April 17, 2020

“Gold and silver futures prices are trading lower in early U.S. trading Friday, on some profit taking from recent gains and on some normal chart consolidation in price uptrends. Also, traders and investor risk appetite that is more robust late this week is working against the safe-haven metals. However, as has been the case lately, don’t be surprised to see traders step in to ‘buy the dip’ in the metals, especially gold.

Global stock markets were mixed to mostly firmer in overnight trading. U.S. stock indexes are pointed toward sharply higher openings and five-week highs when the New York day session begins. Traders and investors are more upbeat to end the trading week. President Trump Thursday afternoon laid out plans to reopen the U.S. economy in stages that could begin as early as today, as there are early signs the Covid-19 pandemic in North America and Europe has hit a peak for new infections. Also, there is new hope that a drug being tested by Gilead can greatly reduce the severity of the respiratory illness, based on early clinical trials. As one market analyst put it, the marketplace is presently viewing the Covid-19 situation as ‘the glass being half-full.’”

Click here to read the full article.

CNBC/Jeff Cox

New York Fed President Williams says the economy won’t be back to ‘full strength’ by end of 2020

April 17, 2020

“New York Federal Reserve President said he sees some parts of the economy coming back online but doubts growth will return to normal this year. Construction should be among the first to return, he said. That echoed comments from the Philadelphia Fed on Thursday. ‘I expect that to be able to bounce back a little bit more quickly than maybe some of the other sectors,’ Williams said. ‘But I don’t see the economy getting back to full strength by the end of the year.’

The central bank official spoke ahead of what looked like a big day on Wall Street. Stock futures pointed to a sharply higher open on news of progress in coronavirus treatment from Gilead Sciences and as President Trump set out a three-stage plan to get the economy moving again. While Williams expressed some optimism about the longer-term growth prospects, he sees ‘some tough days ahead’ and ‘horrible’ second-quarter economic data.”

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MARKET WATCH/Chris Matthews

Slow Chinese economy casts doubt on speed of U.S. recovery, analysts say

April 17, 2020

“Investors have taken some solace in signs that China is beginning to dig itself out of the economic hole created by the coronavirus pandemic as restrictions aimed at fighting the disease have been lifted in recent weeks.  Analysts warn though that one should not extrapolate too much from the Chinese experience when predicting how the U.S. economy will rebound, given the varying government responses to the COVID-19 outbreak and significant differences between the U.S. and Chinese economies.

‘China has had a less terrible experience than we’ve had,’ said Carl Weinberg, chief international economist at High Frequency Economics in an interview. ‘The very drastic lockdown in the city of Wuhan and [the surrounding provence of] Hubei appears to have worked.’  Late Thursday China’s National Bureau of Statistics reported that economic growth in the first quarter shrank by 6.8% year-over-year, the sharpest contraction on record, while retail sales for the month of March fell by 15.8% and industrial production fell 1.1% … Meanwhile, the part of the Chinese economy that appears to be recovering more slowly is consumer spending, as economists polled by the Wall Street journal were expecting an 8% contraction in consumption, versus the nearly 16% contraction that occurred. If the American consumer mounts a similarly disappointing recovery, it could spell bad news for the U.S. economy, which is much more dependent on consumption than the Chinese.”

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THE WALL STREET JOURNAL/John Lyons and Bojan Pancevski

U.S. Coronavirus Infections Top 671,000 as China Revises Death Toll Higher

April 17, 2020

“China revised its coronavirus death toll upward and recorded its steepest quarterly economic slide on record, as the U.S. braced for prolonged pain from extended lockdowns in some hard-hit states and the White House charted a gradual path to reopening. The confirmed U.S. death toll from the Covid-19 disease caused by the virus continued to rise a day after it nearly doubled to 4,591 over 24 hours Thursday, with New York, New Jersey and Michigan among the hardest-hit states. After appearing to stabilize, new confirmed cases in the U.S. have risen for three consecutive days, with the total now over 671,000, data showed.

With more than 2.1 million cases reported world-wide, the global death toll exceeded 146,000 on Friday, according to Johns Hopkins. Of those, more than 33,000 were in the U.S. China raised its official coronavirus death toll by almost 40% to 4,632 after officials in Wuhan, where the virus first emerged, declared the discovery of 1,290 previously uncounted cases. Wuhan health officials told China’s official Xinhua News Agency that some patients who died at home weren’t recorded in the system, while overwhelmed hospitals had mishandled the recording of other deaths. Epidemiologists, U.S. intelligence sources and some local residents have said in recent weeks they believe Chinese authorities substantially undercounted coronavirus infections and deaths. China’s government has defended the accuracy of its data.”

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FORBES/Christian Weller

The Recession Hits an Already Hollowed-Out Middle Class

April 17, 2020

“A massive recession is coming. Already financially weakened American families are desperate. In many regards, America’s middle class has not yet fully recovered from the last big recession, more than a decade ago. The government’s response to the current crisis thus has to do a heavy lift or fail to help millions of struggling families because of massive and growing wealth inequality in the past. The early signs of the recession point to a massive onslaught on jobs and economic growth.”

“Massive wealth inequality among American families is another reason why the government’s response needs to be big. Families build savings during good times to help pay their bills in an emergency and to allow them to plan for their future. Yet in many parts of the economy wealth has not recovered from the massive job losses, slow wage growth, falling house prices and rising health care and education costs from the Great Recession of 2007 to 2009. Broken down by income quintiles, average inflation-adjusted wealth was still lower at the end of 2019 than it was in December 2007, just before the Great Recession started, for the bottom 60% of the income distribution. In fact, for the bottom 40% of the income distribution, average wealth at the end of 2019 was either at or below the levels recorded in March 2001, before the recession before the Great Recession got underway. The current recession hits as many families are woefully unprepared.”

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MARKET WATCH/Paul Brandus

Thanks to COVID-19, Social Security’s day of reckoning may be closer than we thought

April 17, 2020

“Social Security is now dipping into its reserves—the so-called ‘trust fund’ to pay benefits. That’s because the system isn’t taking in enough cash from payroll taxes, which is how the Social Security program, the single biggest source of federal spending, is financed. Prior to the economic downturn that we’re now experiencing, the trust fund was projected to run out of money by 2035. This has gotten worse. Why? Because some 22 million Americans lost their jobs in the last four weeks. This means there are a lot fewer—millions fewer—people paying into the system.

And on top of a lot less money coming in, a lot more will soon be going out. People who are now out of work and eligible to draw benefits may do so, out of sheer economic need. This one-two punch could mean the depletion of the trust fund sooner than 2035. Perhaps two years earlier says one of the country’s leading experts on Social Security, Alicia H. Munnell, the director of the Center for Retirement Research at Boston College. ‘We are going to lose a lot of payroll tax revenue this year,’ Munnell says, while ‘expenditures keep at their regular pace, if not at an immediately higher pace, because older people who can’t find a job might turn to claiming early.’  This means the gap between what Social Security takes in and what it pays out … will widen further. ‘The trust fund has been filling that gap,’ Munnell adds, ‘but as that gap gets bigger, the trust fund will be used up faster.’”

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KITCO NEWS/Jim Wyckoff

Gold prices solidly up as bulls again hit the accelerator

April 16, 2020

“Gold futures prices are trading solidly higher in early U.S. trading Thursday, following a corrective pullback in a strong uptrend that was seen Wednesday. Gold market bulls are presently seeing every downside price correction as a buying opportunity, which is typical in a market that is trending strongly higher. Silver prices are also posting gains on the day. June gold futures were last up $19.20 an ounce at $1,759.60. May Comex silver prices were last up $0.30 at $15.805 an ounce.

The key U.S. data point today is be the weekly jobless claims report, which came in at up 5.2 million–just above the expected million in new claims in the latest week. The Covid-19 pandemic that has mostly shuttered the U.S. economy has seen over 20 million American workers lose their jobs up to this point. Just recently, U.S. economic data covering the past few weeks is showing just how much damage has been inflicted on U.S. businesses. U.S. retail sales in March were down over 8 percent, it was reported Wednesday. Global stock markets were mixed in overnight trading. Asian stocks were mostly down and European stock indexes were mostly up. U.S. stock indexes are pointed toward modestly higher openings when the New York day session begins.”

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ASSOCIATED PRESS/TASSANEE VEJPONGSA

With price high, Thais with dwindling incomes sell off gold

April 16, 2020

“With gold prices rising to a seven-year high, many Thais have been flocking to gold shops to trade in their necklaces, bracelets, rings and gold bars for cash, eager to reap profits during an economic downturn.  In Thailand, where measures against the spread of COVID-19 have been less severe than in other countries, gold shops are de facto financial institutions, and generally remain open. Long lines formed all week outside major gold shops in Chinatown in the capital Bangkok.

The sell-off has some gold shop owners claiming they are facing a liquidity crunch, leaving them short on cash to continue purchasing. They are unable to carry out their normal practice of quickly reselling the gold abroad because of the greatly reduced number of flights to ship the gold and a shortage of buyers in other countries, restricted by lockdown orders … The price of gold has been rising since the coronavirus crisis began. That’s typical of times of uncertainty as people shift their wealth into what they believe is a hedge against uncertain financial markets … Many Asians hold gold as savings and investments. In Bangkok, gold shops are clustered in Chinatown, where long lines were stretched even further by social distancing.”

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CNBC/Thomas Franck

The US economy has erased nearly all the job gains since the Great Recession

April 16, 2020

“It took only four weeks for the U.S. economy to wipe out nearly all the job gains in the last 11 years. The coronavirus and the forced closure of business throughout the country again fueled the number of Americans applying for state unemployment benefits, which last week totaled 5.245 million. Combined with the three prior jobless claims reports, the number of Americans who have filed for unemployment over the previous four weeks is 22.025 million. That number is just below the 22.442 million jobs added to nonfarm payrolls since November 2009 after the Great Recession. Only 417,000 more U.S. workers need to file for unemployment benefits to erase all nonfarm gains since 2009, a figure likely to be easily surpassed this week.

The rapid nature of the job losses will be unprecedented, wiping out more than a decade’s worth of job gains in five weeks. ‘While today’s jobless numbers are down on last week, they still mean that all the job gains since the financial crisis have been erased,’ wrote Seema Shah, chief strategist at Principal Global Investors. ‘What’s more, with many workers, including those in the gig economy, not included in these numbers, labor market pains may be even worse than these numbers suggest.’

‘Concerns for the second half of the year may be underestimated,’ she added. ‘Although governments are looking to lift lockdowns, the re-opening of economies will be only gradual, compounding financial strains for businesses and households, suppressing demand and suggesting a slower recovery.’”

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MARKET WATCH/Mark DeCambre

The next 45 days are the ‘most critical period in U.S. financial history,’

April 16, 2020

“After recovering a chunk of the losses racked up during the worst of the coronavirus-induced selloff last month, the stock market finds itself at a crucial inflection point, writes Alan B. Lancz. ‘The next 45 days may just become the most critical period in U.S. financial history … While on average we may face a bear market every 10 years, this one is like no other,’ he said. The contrarian money manager, a disciple of Sir John Templeton, said that the timing and execution of the reawakening of the U.S. economy could be one of the biggest factors in determining how the market recovers as swaths of businesses have been shut down to help stem the spread of the deadly contagion that has infected more than 2 million and claimed 137,000 lives.

And even if the economic revival is flawless, the founder of the Ohio-based investment advisory firm said the result will be will be long and slow. ‘Even if we execute properly, the recovery will take time and a best-case scenario is a U-shaped recovery,’ he wrote. ‘The much talked about ‘V’ shaped recovery is no longer in the equation because of the unprecedented combination of negatives with this crisis,’ he said, referring to hope for a recovery that is sharp and fast.”

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THE NEW YORK TIMES/Neil Irwin

It’s the End of the World Economy as We Know It

April 16, 2020

“Experts suggest there will be ‘a rethink of how much any country wants to be reliant on any other country.’ When big convulsive economic events happen, the implications tend to take years to play out, and spiral in unpredictable directions. Who would have thought that a crisis that began with mortgage defaults in American suburbs in 2007 would lead to a fiscal crisis in Greece in 2010? Or that a market crash in New York in 1929 would contribute to the rise of fascists in Europe in the 1930s? The world economy is a complicated web of interconnections. We each have a series of direct economic relationships: the stores we buy from, the employer that pays our salary, the bank that makes us a home loan. But once you get two or three levels out, it’s impossible to know with any confidence how those connections work. And that, in turn, shows what is unnerving about the economic calamity accompanying the spread of the novel coronavirus.

In the years ahead, we will learn what happens when that web is torn apart, when millions of those links are destroyed. And it opens the possibility of a global economy completely different from the one that has prevailed in recent decades. ‘As much as I hope we are able to get ordinary economic activity back up, that’s just the beginning of our problem,’ said Adam Tooze, a historian at Columbia University and author of Crashed, a study of the global ripple effects of the 2008 financial crisis. ‘This is a period of radical uncertainty, an order of magnitude greater than anything we’re used to.’ It would be foolish, amid such uncertainty, to make overly confident predictions about how the world economic order will look in five years, or even in five months.”

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BLOOMBERG/Bloomberg News

Wuhan’s 11 Million People Are Free to Dine Out. But They Aren’t

April 16, 2020

“After more than two months of being confined to their homes, most of Wuhan’s 11 million residents are now free to venture out, with infections dwindling. But for restaurant owner Xiong Fei, the end of the lockdown in the Chinese city where the coronavirus pandemic began hasn’t brought relief, just a new set of challenges. While factories around Wuhan are working to get back up to speed, the recovery of consumer-focused businesses such as Xiong’s won’t be so straightforward. Although people are cautiously taking to the streets again, they remain subject to curbs on their movements aimed at keeping the virus at bay.

Residents are encouraged to stay home and still must have their temperatures checked before entering any building. It’s far from business as usual, stoking fears among small businesspeople that the lockdown has changed customers’ behavior for good. ‘People in the past dined out with their colleagues in their lunch hour, now they’re all getting lunchboxes,’ he says, at an empty Sichuan restaurant he operates. ‘They’re more likely to cook at home than go out.’ Of the 10 restaurants of Xiong’s company none have reopened for dining in. And while three have resumed making food deliveries, Xiong has already decided to shutter three other locations for good.”

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REUTERS/Brijesh Patel

Gold drops as dollar rises, investors book profits

April 15, 2020

“Gold slipped on Wednesday as the dollar strengthened and some investors locked in profits from a surge in prices, but mounting fears of a global recession kept bullion firm above $1,700 per ounce. Spot gold was down 0.7% at $1,714.88 per ounce. In the previous session, it jumped as much as 1.9% to its highest level since November 2012 at $1,746.50.  U.S. gold futures dropped 1.4% to $1,744.10. ‘It’s a small correction. We’re seeing some profit-taking … Also, a stronger dollar is not helping gold prices,’ UBS analyst Giovanni Staunovo said.

‘However, we still believe there is some upside from here. So, we now target the move up to $1,800 an ounce and essentially believe aggressive monetary stimulus by central banks, such as the U.S. Federal Reserve, will keep real assets like gold supported.’ Gold tends to benefit from widespread stimulus measures from central banks, as it is often seen as a hedge against inflation and currency debasement …The Fed last week announced a broad, $2.3 trillion effort to bolster local governments and small and mid-sized businesses hit by coronavirus outbreak. Gold prices have risen nearly 9%, or more than $130, so far this month after many countries have extended lockdowns and central banks around the world have rolled out a flood of fiscal and monetary measures.”

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CNBC/Keris Lahiff

Gold could reach $2,000 this year, but it’s not a buy until this level, analyst says

April 15, 2020

“Gold is on a tear this month. The precious metal is up 11% in April, its best month since 2011, and has reached levels not seen in nearly eight years. Bill Baruch, president of Blue Line Capital, says its technical setup suggests even more upside. ‘I love gold, and you need some in your portfolio,’ Baruch said Tuesday on CNBC. The charts show ‘an inverse head and shoulders pattern — a beautiful technical pattern that played out through March into April and we’re now breaking out above. It broke out above it.’

An inverse head and shoulders pattern forms when an asset makes a low, a lower low, and a higher low – it implies a bottoming and change in trend direction. ‘I do believe gold over the rest of this year will get to $2,000. I think it should be in your portfolio. The massive liquidity injected by the Federal Reserve, it’s going to support asset prices like equities, but it’s also going to support gold,’ said Baruch … A move to $2,000 represents 13% upside and would take gold to record highs.”

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MARKET WATCH/Jeffry Bartash

Retail sales plunge a record 8.7% in March as coronavirus crisis freezes U.S. economy

April 15, 2020

“The onset of the coronavirus pandemic triggered a record 8.7% slump sales at U.S. retailers in March as large swaths of the economy shut down — and there’s no light at the end of the tunnel. Sales fell for the second month in a row in what’s likely to be a prolonged period of agony for an industry that still relies heavily on foot traffic and customers bunched together when they shop. It’s unclear when states will allow stores to fully reopen, and even then, there’s no guarantee Americans will return to them in great numbers.

The plunge in sales last month was more than double the biggest one-month decline during the 2007-2009 Great Recession. Sales sank 27% at auto dealers and 17% at gas stations, two of biggest segments of the retail industry, according to government figures. Fewer people are buying cars with millions of Americans losing their jobs and millions more worrying about their next paycheck. Americans also drove less as an economic shutdown spread across the country, exacerbating already steep price declines caused by a global price war that has cut the cost of crude oil by two-thirds in just a few months. Sales fell a smaller but still crushing 3.1% excluding those categories, but the damage was still unprecedented. Receipts plunged 50% at clothing stores, 26.5% at restaurants and 20% at department stores.”

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YAHOO FINANCE/Emily McCormick and Javier E. David

Stocks fall after grim economic, earnings data

April 15, 2020

“Stocks fell Wednesday morning after new economic data showed U.S. retail sales and manufacturing output each declined by massive margins in March amid the coronavirus pandemic. Big banks including Goldman Sachs and Bank of America reported steep year on year declines in profitability for the first quarter. Meanwhile, the federal government made progress in helping to provide aid to companies and industries most deeply undercut by the pandemic. The U.S. Treasury announced preliminary agreements to provide at least 10 U.S. airlines with access to billions of dollars in funds to help support the carriers as demand – and revenues – drop off. A new method of counting coronavirus deaths in New York City to include victims who had not been hospitalized sent the region’s death toll soaring on Tuesday. At the state level, coronavirus deaths benchmarked to the previous counting method also rose as of the state’s latest reports, but new hospitalizations declined.

Globally, the number of confirmed COVID-19 cases crossed two million for the first time on Wednesday. While death tolls remain elevated, widespread social distancing measures have mostly showed signs of ‘flattening the curve’ in hot spots across the U.S. Governor Gavin Newsom unveiled his plan Tuesday late afternoon, which outlined the state’s list of considerations for easing social distancing standards without providing a specific timeline.”

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FOX NEWS/Brooke Singman

Fauci says US ‘not there yet’ on reopening economy, May 1^st a ‘bit’ too optimistic

April 15, 2020

“Dr. Anthony Fauci said Tuesday that the U.S. does not have the testing and tracing procedures necessary to safely begin reopening the economy amid the coronavirus crisis, while warning that the White House’s May 1 target may be a ‘bit’ too optimistic. In an interview Tuesday with The Associated Press, Fauci, the director of the National Institute of Allergy and Infectious Disease and a member of the president’s coronavirus task force, underscored the need for critical testing before returning to normal. ‘We have to have something in place that is efficient and that we can rely on, and we’re not there yet,’ Fauci said during his interview with The Associated Press.

Fauci’s comments come as President Trump and others in the administration are weighing how to reopen sectors of the nation’s economy during the pandemic. The White House extended social distancing guidelines through April 30, and has floated the possibility of potentially reopening some areas by May 1. Fauci told the AP that May 1 is ‘a bit overly optimistic’ for many areas of the country, while suggesting that much of the social-distancing rules should occur on a ‘rolling’ basis, rather than all at once … Fauci also warned, yet again, that once restrictions are rolled back and the economy begins to reopen, there are likely to be new outbreaks of COVID-19.”

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BLOOMBERG/John Authers

Gold Still Shines 50 Years After Nixon. Will Netflix?

April 14, 2020

“The stock market, home of optimists everywhere, is doing very well at present. But gold, where pessimists find a home, is doing even better. In dollars, the shiny metal closed on Tuesday at its highest since 2012. The all-time high is in sight, and it has gained more than 60% since its nadir in 2015. At one point, gold was selling off amid denunciations that it had failed as a safe harbor. That was more or less entirely due to its inverse relationship with real yields on bonds. Gold’s greatest weakness as an asset is that it pays no income. Hence, when real yields go negative, gold grows much more attractive. As the bond market melted down last month, real 10-year yields touched -0.6%, before gaining more than a full percentage point. They are now back around -0.6%, near an all-time low.

The bond move has been driven more by a shift in inflation expectations than by the underlying yield. Inflation break-evens remain at levels lower than anything in the last 15 years bar the Lehman crisis and the Chinese devaluation of 2015. There’s no way gold’s rally can be seen as an attempt to hedge against an expected return of inflation … What does gold tell us about the stock market? I am not a fan of returning to the gold standard, but it is undeniable that the decision by President Richard Nixon to break that link in 1971 had a profound effect on what followed. If we regard gold as the continuing true measure of monetary stability, it suggests that stock markets’ gains in the almost 50 years since are almost entirely due to ‘money illusion,’ or the erosion of the dollar’s buying power.”

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KITCO NEWS/Todd ‘Bubba’ Horwitz

Gold steadies near 1-month peak as recession risks rise

April 14, 2020

“Gold printed a new high overnight and has pulled back to Monday’s levels. The high in the June futures was $1,785 Monday night around 11 p.m. EDT. Gold since has pulled back, trading as low as $1,758. Our first target of $1,790-$1,800 in the June futures is in play, which includes a run over $1,800.

Silver and platinum are charging higher this morning, with July silver futures trading at $16.25, around the high of the overnight trade. July platinum is breaking out with July futures trading $791 on the way to $800. Silver and platinum remain strong and could reach our targets today. The metals all look strong and are showing no sign of weakness. The patterns are powerful, and we see no issue in reaching our first objectives. Things can change at a moment’s notice, but based on what we can see now, we expect the rally across the board to continue. We remain long and look for new highs to continue.”

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CNBC/Elliot Smith

The ‘wind is very likely in gold’s sails’ as it hits a seven-year high

April 14, 2020

“Gold prices surged to seven-year highs on Tuesday as rising fears over the scale of the impending economic downturn continue to drive investors away from risk. Spot gold climbed 1.5% to surpass $1,739 per troy ounce (/oz) during afternoon trade in Europe, its highest point since October 2012. The precious metal has now recaptured all of the ground it lost during the initial broad market meltdown as the coronavirus pandemic spread rapidly last month. This latest resurgence, according to AJ Bell Investment Director Russ Mould, could perhaps ‘lay the groundwork for a return to the all-time high of $1,900 reached in autumn 2011.’

Gold tends to benefit from stimulus measures by central banks, which have been abundant in recent weeks as monetary policymakers scramble to cushion the economic blow from prolonged lockdowns around the world. ‘I think it’s important to say now that the wind is very likely in gold’s sails,’ Rick Rule, president and CEO of Sprott, said, suggesting that the macro factors strongly favor gold … A second factor driving prices, Rule told investors, was the increasing U.S. federal debt burden.”

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BLOOMBERG/Eric Martin

IMF Sees Great Lockdown Recession as Worst Since Depression

April 14, 2020

“The International Monetary Fund predicted the ‘Great Lockdown’ recession would be the steepest in almost a century and warned the world economy’s contraction and recovery would be worse than anticipated if the coronavirus lingers or returns. In its first World Economic Outlook report since the spread of the coronavirus and subsequent freezing of major economies, the IMF estimated that global gross domestic product will shrink 3% this year.

That compares to a January projection of 3.3% expansion and would likely mark the deepest dive since the Great Depression. It would also dwarf the 0.1% contraction of 2009 amid the financial crisis. While the fund anticipated growth of 5.8% next year, which would be the strongest in records dating back to 1980, it cautioned risks are tilted to the downside. Much depends on the longevity of the pandemic, its effect on activity and related stresses in financial and commodity markets, it said.”

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MARKET WATCH/Raymond Scheppach

States are facing a fiscal crisis as brutal as that of the Great Recession

April 14, 2020

“When former governors Ronald Reagan, Bill Clinton and George W. Bush later became president and had to work with the U.S Congress, they wished they still had the line-item veto powers they had as governors, which allowed them to cut individual items in the budget. Today, as governors continue to provide leadership on the coronavirus crisis they’re about to confront a second crisis, as their state’s fiscal positions will rapidly deteriorate. In my view, it will be as bad as the Great Recession and its aftermath. The magnitude of the crisis that governors and their states will have to face is starting to emerge. And that crisis will affect states’ abilities to do everything from paying teachers to paving roads to providing social services.

Total state spending in 2019 was about $2.1 trillion. In national summary figures, the largest state program is Medicaid, which is about 28.9% of total spending, substantially above the 19.5% for elementary and secondary education and the 10.1% for higher education. The other major spending is for transportation, which is about 8.1%. The remaining 33.4% is for a catch-all category of smaller programs like the environment and economic development. On the revenue side of the equation, which is also about $2.1 trillion, the three major taxes on sales, personal income and corporate income make up 40.8% of the total. Special fees and other taxes represent 28.5%. The federal government, through grants and contracts, contributes 30.7%. There are five key components in understanding the seriousness of the challenge to states and their governors. They reflect the complex interplay between the federal and state levels of government, commercial activity and a state’s need for money to operate and provide services … 1. Rainy day funds will quickly evaporate. 2. Revenues will collapse. 3. Medicaid spending will explode. 4. Governors will cut spending and increase taxes. 5. Federal action will be required.”

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THE WALL STREET JOURNAL/Eric Morath, Harriet Torry and Gwynn Guilford

A Second Round of Coronavirus Layoffs Has Begun. No One Is Safe.

April 14, 2020

“The first people to lose their jobs worked at restaurants, malls, hotels and other places that closed to contain the coronavirus pandemic. Higher skilled work, which often didn’t require personal contact, seemed more secure.  That’s not how it’s turning out. A second wave of job loss is hitting those who thought they were safe. Businesses that set up employees to work from home are laying them off as sales plummet. Corporate lawyers are seeing jobs dry up. Government workers are being furloughed as state and city budgets are squeezed. And health-care workers not involved in fighting the pandemic are suffering.

The longer shutdowns continue, the bigger this second wave could become, risking a repeat of the deep and prolonged labor downturn that accompanied the 2007-09 recession. The consensus of 57 economists surveyed this month by The Wall Street Journal is that 14.4 million jobs will be lost in the coming months, and the unemployment rate will rise to a 13% in June, from a 50-year low of 3.5% in February. Already nearly 17 million Americans have sought unemployment benefits in the past three weeks, dwarfing any period of layoffs recorded since World War II. Gregory Daco, chief economist of Oxford Economics, projects 27.9 million jobs will be lost, and industries beyond those ordered to close will account for 8 to 10 million, a level of job destruction on a par with the 2007-09 recession.”

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THE NEW YORK TIMES/Peter Eavis and Matt Phillips

How Bad Will the Economy Get? Companies Will Provide Clues

April 14, 2020

“The coronavirus pandemic has pushed the economy into a slowdown of unknown severity. It could be a long, drawn-out recession, or a sharp dip followed by a swift recovery. The stock market, which has soared 23% from its low, is signaling that many investors expect a quick rebound. But that optimism will be tested over the coming weeks when large companies report their quarterly financial results for the first three months of the year and predict the pandemic’s effect on their business. ‘Earnings season,’ as it’s known on Wall Street, usually fascinates only professional investors. And corporate executives, always reluctant to discuss problems, may be even less forthcoming about them now. But with millions of jobs on the line and businesses shuttering every day, this deluge of company information, and any light it sheds, will take on a new importance.

Investors are already anticipating several epicenters of economic pain. Oil companies, airlines, hotels, restaurants, retailers and automakers will report steep losses and issue forecasts for the coming months. Ford Motor, for example, said on Monday that it would lose $600 million in the first quarter — not counting some expenses like interest and taxes — down from a $2.4 billion profit in the first three months of 2019 … If earnings disappoint investors and management’s forecasts are worse than expected or vague, share prices could plunge back toward their recent lows. That would add to the gloom about the economy and cast doubts on the government’s ability to revive the economy …

If bank executives fear that a recession will make it harder for borrowers to pay back loans, they will not lend as much money in the coming months, which would, in turn, further weaken the economy.”

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REUTER’S/Brijesh Patel

Gold steadies near 1-month peak as recession risks rise

April 13, 2020

“Gold prices held steady near a one-month high on Monday, supported by growing concerns over the extent of the economic hit from the coronavirus pandemic. Spot gold was up 0.1% at $1,690.08 per ounce by 0916 GMT, having risen to its highest since March 9 on Friday … ‘Gold has been on the positive side from the last two to three weeks; mostly it’s safe-haven buying and that the global economy is likely to face a recession because of the COVID-19 issue,’ Hareesh V, at Geojit Financial Services, said.

The coronavirus pandemic, which has battered global economic growth, has forced nations to extend lockdowns to curtail its spread, and central banks have announced a wave of fiscal and monetary support measures to mitigate the financial toll. The Fed announced a broad, $2.3 trillion stimulus package to weather the outbreak, which has forced 16.8 million Americans to file for unemployment benefits since the week ended March 21. ‘COVID-19’s deflationary effect has been a headwind for gold. But this trend should reverse in 2H20 as policy responses by governments and central banks gather traction,’ UBS analysts said in a note.”

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BLOOMBERG/Rita Nazareth and Sarah Ponczek

U.S. Stocks Decline Before Earnings; Oil Advances: Markets Wrap

April 13, 2020

“U.S. stocks fell before the start of an earnings season marked by the extraordinary uncertainties caused by the pandemic. The S&P 500 Index dropped after rallying almost 25% from its March low, equities declined in Asia’s main financial centers while markets across Europe were closed for the Easter holiday. Crude rallied as top producers pulled off a historic deal to cut output by nearly a 10th, and extended gains after President Trump said ‘the number that OPEC+ is looking to cut is 20 Million Barrels a day.

With the coronavirus pandemic sowing chaos across the world, the investment community has been lost in a fog when it comes to corporate profits. As the earnings season kicks off this week, traders might get a sense of how bad the hit to global earnings could be as the outbreak upends the global economy. ‘Companies, analysts, traders, investors and strategists to some extent are flying into earnings season without instruments’,’ said John Stoltzfus, the chief strategist at Oppenheimer & Co. The unprecedented nature of the economic shutdown, social distancing and sheltering in place ordered by officials provides an overhang of uncertainty.’”

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MARKET WATCH/Shawn Langlois

America should be ready for 18 months of shutdowns in ‘long, hard road’ ahead, warns the Fed’s Neel Kashkari

April 12, 2020

“‘This could be a long, hard road that we have ahead of us until we get to either an effective therapy or a vaccine. It’s hard for me to see a V-shaped recovery under that scenario.’ Neel Kashkari, the head of the Federal Reserve Bank of Minneapolis, painting a rather gloomy picture in an interview on Sunday morning of what lies ahead for the U.S. economy as the country continues to battle the coronavirus pandemic. Kashkari, while acknowledging the downside of what a prolonged shutdown could mean for the economy, said the U.S., ‘barring some health-care miracle,’ is looking at an 18-month strategy of rolling shutdowns based on what has happened in other countries.

‘We could have these waves of flare-ups, controls, flare-ups and controls, until we actually get a therapy or a vaccine,’ he said. ‘We need to find ways of getting the people who are healthy, who are at lower risk, back to work and then providing the assistance to those who are most at risk, who are going to need to be quarantined or isolated for the foreseeable future.’ Looking ahead, Kashkari doesn’t envision a quick rebound for the U.S. economy, which has already suffered more than 16 million job losses in the past three weeks.”

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THE WALL STREET JOURNAL/Miriam Gottfried

Private-Equity Firms Scramble to Shore Up Coronavirus-Hit Holdings

April 13, 2020

“Private-equity executives have spent the past five years bemoaning the difficulty of investing profitably with stocks at elevated levels. Now, they’re getting a taste of what they wished for. As the coronavirus spreads and stay-at-home orders cut deeply into the economy, buyout firms are scrambling to triage investments in industries that are particularly vulnerable. Entertainment powerhouse Endeavor Group Holdings Inc., backed by Silver Lake, and Legoland owner Merlin Entertainments Ltd., a recent Blackstone Group Inc. bet, are among those that have been walloped. Revenue at both companies has declined dramatically as Hollywood productions, concerts and sporting events have been canceled and amusement parks are forced to close.

Meanwhile, upheaval in the credit markets and economic uncertainty have brought buyout volume, already sluggish before the virus, to a virtual standstill. With the IPO and merger markets all but shut down and valuations depressed, any hope of selling investments profitably is also out the window for now. During back-to-back calls from their Hamptons beach houses, Lake Tahoe ski cabins and Florida vacation rentals, private-equity managers have worked frantically to group their investments, with some using color-coded buckets. Green companies have escaped largely unscathed. Yellow means ‘Keep an eye on this one.’ Red equals serious trouble … Firms have told their most-affected portfolio companies to draw down their revolving lines of credit and instructed them to find ways to free up cash, like waiting longer to pay suppliers, negotiating with landlords, furloughing or laying off employees and putting capital investments on hold.”

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BARRON’S/Matthew C. Klein

The Coronavirus Has Already Made Us Poorer for Years to Come

April 13, 2020

“Whatever happens next, the events of the past six weeks will scar the U.S. economy well into the 2030s, if not beyond.  The Fed, Congress, and the U.S. Treasury may believe they have acted quickly and decisively to support the economy, but they were nevertheless too slow to prevent trillions of dollars of lasting damage. Tens of millions of Americans are already paying the price, and they will continue to do so for a long time. Between March 15 and April 4, a staggering 16.8 million Americans filed initial claims for unemployment insurance benefits. Based on the historical relationship between the number of Americans receiving unemployment benefits and the level of the joblessness, the unemployment rate was probably around 13% by the end of March and perhaps close to 20% by the end of last week. That would be comparable to the Great Depression. As stark as these numbers are, they nevertheless understate the magnitude of the job losses that have already occurred.

Restaurants, bars, and hotels have been hit especially hard, but so has nearly every other sector. The Texas Workforce Commission highlighted layoffs in a variety of sectors including manufacturing, construction, health care, retail, scientific research, agriculture, and warehousing. Preventing those job losses should have been the government’s first priority, but it was too slow … Looking further out, economists have found laid-off workers lose about 2½ years of income over the rest of their professional lives through lower wages and lower employment. If the number of unemployed Americans rises by 30 million people from February levels – which would be consistent with a peak unemployment rate of about 22% — that would end up costing the economy the equivalent of 75 million work-years over the next two decades.”

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USA TODAY/Russ Wiles – Arizona Republic

Retirement planning during coronavirus pandemic: Here’s what to watch for

April 12, 2020

“Retirement in the age of coronavirus isn’t going to be easy. True, seniors and pre-retirees can take advantage of some flexible and lenient new rules on retirement accounts. Some might see new opportunities for part-time employment, especially those who can work from home. In other ways, things could get tougher, especially for people already behind on retirement preparations. As happened during prior recessions, older workers will lose their jobs, possibly their businesses and perhaps a chunk of their retirement accounts because of stock market declines.

As a result, some will claim Social Security retirement benefits earlier than planned … The longer disruptions last, the more intense this reliance could be. Some will tap into retirement accounts. One option, for both Individual Retirement Accounts and 401(k)-style programs, is to withdraw money permanently. Another choice, in 401(k)-style plans, is to take out a loan. But even before coronavirus hit, many Americans were baffled by many of the rules affecting 401(k) plans and especially IRAs. Now that the CARES Act has become law, look for more uncertainty and confusion.”

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by Sean Kelly

As we struggle to social distance, engage in frequent handwashing, don mouth coverings, and toss our delivery boxes outside until the germs dissipate – we anxiously wait for the coronavirus to weaken and fritter away. Some of us follow the daily virus tolls, others bury ourselves in remote work, still others watch re-runs of old NBA and MLB games as a distraction from the daily gloom.

America is clearly in the midst of a collective anxiety attack. We will get through this but when we finally gather, engage and exhale again – we’ll have to contend with a world that looks a bit different than the one we knew just a few months ago.

When the virus arrived in the U.S. in late January, the Dow Jones was nearing 29,000. Today it has slipped more than 21%. Unemployment was sitting at an historically low 3.6%. The latest jobs report shows up to 10 million new jobless claims and an unemployment outlook that could go as high as 32%, worse than the darkest days of the Great Depression. Back in January the International Monetary Fund projected global GDP to hit 3.3% for the year, but the latest estimates suggest that the world economy will shrink.

Jamie Dimon, the chief executive officer of JPMorgan Chase & Co. and the only current bank CEO to weather the subprime mortgage meltdown and crisis, believes were heading into a recession similar to 2008. So do economists at Goldman Sachs, Deutsche Bank, Bank of America, Pacific Investment Management Co., and UBS. While we find ourselves in a place we’ve never been before, we’re also revisiting some financial era lingo like quantitative easing, stimulus spending, and bailout packages.

On March 6^th, the federal government appropriated $8.3 billion in emergency funding for state and local health departments to use for hiring and purchasing medical equipment. On March 12^th, the Fed announced it would inject $1.5 trillion worth of liquidity into the banking system. On March 18^th, the $183 billion Families First Coronavirus Response Act was signed into law requiring paid leave for small-business employees affected by the virus along with tax relief for employers. On March 27^th, the president approved CARE (Coronavirus Aid, Relief, and Economic Security), a massive $2 trillion aid package designed to help American workers, small businesses and industries grappling with the disruption and hardship of the economic shutdown.

CNN is now reporting that this level of spending could push federal debt as a share of the economy, “to levels not seen since World War II.” And it still may not be enough. The White House and Congressional Democrats are already considering another round of stimulus as well as a massive infrastructure bill.

In terms of severity and communicability, COVID-19 has been a formidable foe that has stressed world markets, corporations, and financial institutions as well as small businesses, hourly workers, and U.S. households. The hospitality, retail, transportation, and entertainment industries – along with professional sports leagues have all come to a halt resulting in millions of furloughs, scores of layoffs, and a mountain of lost paychecks. Economic disruption is now spreading as fast as the rate of new infections.

The outlook is exasperating and while we’re doing all that we can to safeguard our lives, we must also remember to protect our retirement. The coronavirus has triggered an irrefutable and irreversible demand for gold and silver and as one analyst states, “There’s no putting the genie back in the bottle, an unprecedented shift to precious metals has begun.”

KITCO NEWS/Neils Christensn

Gold price spikes higher after Fed announces $2.3 trillion in loan program

April 9, 2020

“The U.S. Federal Reserve continues to throw more money in to the U.S. financial system to support the sputtering economy.  Thursday, the U.S. central bank said that it would provide up to $2.3 trillion dollars in loans for all businesses impacted by the growing COVID-19 pandemic. ‘Our country’s highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus,’ said Federal Reserve Board Chair Jerome H. Powell. ‘The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible,’ he added.

Gold prices have shot higher in reaction to the latest central bank announcement. Commodity analysts have said previously that they can’t be anything but bullish on gold as governments and central banks around the world flood financial markets with liquidity. Jim Wyckoff, senior analyst at Kitco.com said investors should forget about bazooka analogies to previous stimulus measures. He said this is another atomic bomb of liquidity. ‘The $2.3 trillion stimulus means the Fed is all-in and then some on getting the U.S. economy back in shape as soon as possible,’ he said.  Wyckoff added that he expects the latest announcement to continue to drive gold prices higher.”

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MARKET WATCH/Myra P. Saefong and Mark DeCambre      

Gold rallies to highest since 2012 as dollar declines on Fed’s new lending plans

April 9, 2020

“Gold futures rallied to reach their highest levels since late 2012 on Thursday, getting a boost as the U.S. dollar declined on the back of the Fed’s new lending plans, which aim to support the hit to the economy from the coronavirus pandemic. The Federal Reserve on Thursday set up new loan programs and bolstered existing ones in an effort to provide $2.3 trillion to boost the economy. The ‘take away for gold is extreme bullish,’ said Jeff Wright, executive vice president of GoldMining Inc. ‘This will lead over long term to a much weaker U.S. dollar.’

The ‘goal is to reopen economy quickly, but the price will be a long-term weak U.S. dollar, which is good for gold as well,’ Wright said. June gold on Comex was up $45.90, or .7%, at $1,730.20 an ounce in Thursday dealings after trading as high as $1,735.50. It marked the highest intraday level since November 2012. For the week, the precious commodity is on track to gain more than 5%.”

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FORBES/Bob Haber

The United States Desperately Needs Inflation and You Need Gold

April 7, 2020

“The United States fiscal and monetary worlds have entered a paradigm shift. Hard money, the Gold standard, fiscal austerity, the Federal Reserve as liquidity provider at a penalty rate with strong collateral: all of these are now squarely in the rear-view mirror. We have further moved on from ZIRP (Zero Interest rate policy), past Quantitative Easing (QE – AKA money printing), and have entered the world of Modern Monetary Theory (MMT). What is MMT? The federal government, through the Fed, prints as much money as politicians need for whatever purpose, and when you get inflation you tax the rich to slow it down.”

“If the Fed wants more inflation, I want more gold. Our portfolios have had 5-10% for a while and we’re moving up to 15% – 20% is not out of the realm of possibilities. I want it before inflation arrives. Wayne Gretsky said ‘skate to where the puck is going to be, not where it has been’. Gold will be where the money supply (m2) and inflation will take it. CPI is still a distant dream for the Fed, but the M2 money stock is exploding and gold will follow that up. M2 money stock can be followed weekly by visiting the St Louis Fed website. Back in the ‘80’s, macro nerds would wait for the numbers to come out before making allocation decisions. We were fighting inflation and winning. Maybe the releases will get some attention again … Investors are catching on. According to Bloomberg, there are now 91.2M ounces of gold in ETFs worldwide. At gold’s 2012 peak, that number was 82.5M ounces. The price peak that year was in the $1900s. Commercials, (miners and jewelry companies), are net long gold futures which is rare after a rally. Most importantly the CEO of Canadian gold miner Novagold recently said; ‘What we’ve seen in the gold industry is that gold production has effectively peaked’.”

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BLOOMBERG/Reade Pickert

Third Week of Big U.S. Jobless Claims Sees 6.61 Million Filings

April 9, 2020

“Americans applied for unemployment benefits in massive numbers for a 3rd straight week, bringing the total to about 16.8 million during the pandemic’s economic shutdown. A total of 6.61 million people filed jobless claims in the week ended April 4, according to Labor Department, as more states ordered residents to stay home and overwhelmed unemployment offices continue to work through applications. The figure compared with a median forecast of 5.5 million, and the prior week’s upwardly revised 6.87 million.

As wide swaths of the economy shut down, workers have been laid off with unprecedented speed. Filings will likely stay elevated in the coming weeks, after more states issued stay-at-home orders and Americans get through to file claims on jammed websites and phone lines. The 3-week tally implies an unemployment rate approaching 15%, well above the 10% peak reached in the last recession. The rate was 4.4% in March data that covered the early part of the month, up from a half-century low of 3.5% in February. California reported the most initial claims last week, at an unadjusted 925,000.”

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CNBC/Catherine Clifford

Bill Gates: This is how long it may take before Americans ‘can be completely safe’ from COVID-19

April 8, 2020

“It might not be until fall 2021 that Americans ‘can be completely safe’ from COVID-19, Bill Gates said in a Tuesday interview with Judy Woodruff on PBS Newshour. That’s because it will take more than a year before a vaccine can be developed and deployed, according to researchers working to develop a treatment for COVID-19. ‘The vaccine is critical, because, until you have that, things aren’t really going to be normal,’ the billionaire philanthropist told Woodruff. ‘They can open up to some degree, but the risk of a rebound will be there until we have very broad vaccination.’

Social distancing is helping to lower the number of COVID-19 cases. The goal, Gates explained, is to get that number down to a point where ‘contract tracing’ (a process in which those within close contact with an infected person are closely monitored) can be done, in order to maintain necessary quarantines. To understand what life in the U.S. will look like six to 12 months from now, Gates suggested China as a good model. ‘They are sending people back to work, but they’re wearing masks. They’re checking temperatures. They’re not doing large sporting events. And so, they have been able to avoid a large rebound,’ he said … Beyond that, ‘returning to some semblance of normal,’ as Woodruff put it, can be predicted by watching the behaviors of other countries. Sweden, for example, isn’t ‘locking down quite as much,’ so their experience will be informative, Gates explained. Gates has been partnering with The Institute for Health Metrics and Evaluation, a global health research center at the University of Washington.”

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MARKET WATCH/Jeffry Bartash

Consumer sentiment sinks to 9-year low and likely to go even lower as coronavirus slams economy

April 9, 2020

“Millions of coronavirus-related job losses and the shutdown of large parts of the U.S. economy have battered consumers and dragged confidence down to a nine-year low, a new survey shows. The preliminary reading of the consumer sentiment survey sank to 71 in early April from 89.1, marking the biggest-ever one-month decline and putting the index at lowest level since 2011, the University of Michigan. Almost overnight consumers have turned from being optimistic to deeply pessimistic. The spread of COVID-19 has not only destroyed lives, it’s delivered the deepest blow to the economy since the Great Depression. If the crisis drags on for months, the sentiment survey might very well fall below its previous record low of 55.3 in 2008 during the middle of the last recession, one of the worst in modern U.S. history.

Just two month ago consumer sentiment stood close to a 15-year high, but the coronavirus and attempts to curtail its spread has upended the U.S. and world economies … The U.S. economy has already begun a sharp contraction and it’s entering the first recession in 11 years … Barring a sudden cure for the virus, it could take the U.S. economy a long time to return to pre-crisis levels.”

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REUTERS/Brijesh Patel

Gold ticks higher as coronavirus worries deepen, Fed minutes eyed

April 8, 2020

“Gold edged higher on Wednesday as the rising coronavirus death toll hammered risk sentiment, while investors await the release of the U.S. Federal Reserve’s policy meeting minutes for clues on further stimulus measures. Spot gold ticked up 0.1% to $1,650.40 per ounce by 1030 GMT, after climbing to its highest since March 10 on Tuesday, at $1,671.40. U.S. gold futures rose 0.1% to $1,685.90. ‘Gold is relatively stable, the market is quite anxiously waiting for OPEC meeting results, which could go either way. On the other hand, we cannot say the pandemic in Europe and the U.S. have finished yet, there is still uncertainty,’ said Bank of China International analyst Xiao Fu.

‘People are also waiting for FOMC minutes to see whether there will be any indication for next round of stimulus, we’re in extremely volatile times and there could be some policy surprises.’ European stock markets snapped a two-day rally, as the coronavirus death toll rose in some of the worst-hit parts of the continent. More than 1.38 million people have been reported infected by the novel coronavirus across the world and 81,451 have died, according to a Reuters tally.”

THE WALL STREET JOURNAL/ Harriet Torry and Anthony DeBarros

WSJ Survey: Coronavirus to Cause Deep U.S. Contraction, 13% Unemployment

April 8, 2020

“The coronavirus pandemic will cause a severe economic contraction, 14.4 million job losses and a spike in the unemployment rate this spring, with an economic recovery starting the second half of the year, economists forecast in a Wall Street Journal survey. Business and academic economists in this month’s survey expect, on average, that the unemployment rate will hit 13% in June this year, and still be at 10% in December. The jobless rate was 4.4% in March. Relative to February 2020, they expect employers to cut 14.4 million jobs overall, with about a third of economists predicting the labor-market’s low point will be in May this year.

Economists predict gross domestic product will contract at an annual rate of 25% in the second quarter. That is a sharp downgrade from the March survey of economists, when they expected GDP to shrink just 0.1% from April to June. ‘This is the worst external shock in anyone’s living memory; it is as if a meteor hit the Earth and now, we have to put it back on its axis,’ said Grant Thornton economist Diane Swonk. Still, nearly 85% economists expect the economic recovery will start in the second half of the year.”

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MARKET WATCH/William Watts

Coronavirus stock-market volatility is creating the largest daily price swings since 1929 crash

April 8, 2020

“Talk about a tough trading environment. Analysts at Bespoke Investment Group, as illustrated in the tweet below, noted Tuesday that the S&P 500 index’s average absolute daily percentage change over the past five weeks has been plus or minus 4.8% — a historic achievement. ‘That’s higher than we saw at the height of the financial crisis, after the 1987 crash, and in the late stages of the Great Depression. The only time the S&P’s average daily move over a five-week period was greater was after the Crash of 1929,’ the analysts said in a note.

Stocks ended slightly lower Tuesday, but only after erasing large early gains that saw the Dow Jones Industrial Average and the S&P 500 post their biggest blown gains since October 2008. Wild intraday swings in both directions lead to what some investors have described as ‘treacherous’ conditions. Elevated volatility is also a characteristic of bear markets, which often produce rip-roaring short-covering rallies but remain in a downtrend. Further illustrating the degree of daily price swings, the S&P 500 ended a 12-day streak of 1% moves up or down, the Bespoke analysts noted. That comes on the heels of a 13-day streak of 1% moves that ran from March 2 to March 18. A 13-day run is longer than anything seen during the 2008 financial crisis and just two shy of the 15 straight days of plus or minus 1% moves seen in October 2002 at the lows of that bear market, they said, observing that the only other period with a longer streak of 1% daily moves came during the Great Depression of the 1930s. ‘Looking at this another way, in the last five weeks (25 trading days) the S&P 500 has seen a 1% move 24 times,’ they said.”

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YAHOO FINANCE/Sarah Paynter

Coronavirus fallout: One-third of Americans missed rent payments in April

April 8, 2020

“As the novel coronavirus slows the U.S. economy, many renters — now unemployed — wondered how they would pay April rent. New data shows that one-third of Americans did not pay April rent before the due date. As the novel coronavirus pandemic causes mass layoffs and financial disruption, 31% of U.S. renters did not pay April rent on time, up from 19% a month earlier and 18% in April 2019, according to a new report by the National Multifamily Housing Council (NMHC) based on 13.4 million rentals. Among U.S. renters, only 69% paid April rent on time.

‘I started worrying when restaurants and public spaces started shutting down. I know it was necessary, but, man, it’s painful… When our tenants started getting laid off, I knew we had a huge problem,’ said Granger MacDonald, a Kerrville, Texas landlord with over 4,500 units. Renters are particularly exposed to financial risk during the pandemic. Renters tend to have lower income and less stable jobs than homeowners, contributing to some 35% who have lost income due to COVID-19, according to a March 31 survey of 500 renters by St. Louis-based listing website Clever. Forty-five percent of renters do not have enough savings to cover rent payment for a single month.”

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THE NEW YORK TIMES/by Raymond Zhong and Vivian Wang

China Ends Wuhan Lockdown, but Normal Life Is a Distant Dream

April 8, 2020

“China on Wednesday ended its lockdown of Wuhan, the city where the coronavirus first emerged and a potent symbol in a pandemic that has killed tens of thousands of people, shaken the global economy and thrown daily life into upheaval across the planet. But the city that has reopened after more than 10 weeks is a profoundly damaged one, a place whose recovery will be watched worldwide for lessons on how populations move past pain and calamity of such staggering magnitude.

In Wuhan, sickness and death have touched hundreds of thousands of lives, imprinting them with trauma that could linger for decades. Businesses, even those that have reopened, face a wrenching road ahead, with sluggishness likely to persist. Neighborhood authorities continue to regulate people’s comings and goings, with no return to normalcy in sight. Chinese authorities sealed off Wuhan, an industrial hub of 11 million people, in late January, in a frantic attempt to limit the outbreak’s spread. At the time, many saw it as an extreme step, one that could be tried only in an authoritarian system like China’s. But as the epidemic worsened, governments around the world enacted stringent restrictions on their citizens’ movements … the full measure of the sacrifice such policies entail — in jobs and income lost, in lives disrupted — might first be taken in Wuhan.”

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Deutche Welle/Business News

Economic researchers see Germany head toward deep recession

April 8, 2020

“In their latest regular report on the state of the economy, Germany’s leading institutes said Wednesday the coronavirus pandemic was triggering a full-blown recession in Europe’s powerhouse. The researchers agreed that gross domestic product (GDP) would dip by 4.2% this year due to the virus-induced lockdown. The experts said economic output was likely to have shrunk by 1.9% in the first three months of the year alone, with the Federal Statistics Office (Destatis) expected to come up with a concrete figure for Q1 on May 15. More alarming, though, will be the toll that COVID-19 is expected to take on the economy in the second quarter. The research institutes on Wednesday predicted a GDP slump by 9.8%, emphasizing that this would be the sharpest decline ever recorded in the country since quarterly national accounts became available in 1970.

The expected Q2 decrease would be more than twice as steep as the decline during the global financial crisis in the first quarter of 2009, as the Munich-based ifo institute noted in its press release. “The recession is leaving very clear marks on the labor market and the government budget,” the head of Forecasts at ifo, Timo Wollmershäuser, warned. ‘At its peak, the unemployment rate will jump to 5.9% this year, and the ranks of short-time workers will swell to 2.5 million year over year.’ The institutes pointed out that the measures taken to weather the crisis would lead to a record combined deficit of €159 billion ($173 billion). Gross debt is expected to rise to 70% of GDP in 2020.”

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REUTERS/Brijesh Patel

Gold dips on modest progress against coronavirus

April 7, 2020

“Gold prices fell on Tuesday, retreating from a one-month high hit earlier in the session as risk sentiment improved on wider market optimism after tentative signs of progress against coronavirus outbreaks in some countries. Spot gold lost as much as 1% and was 0.4% down at $1,654.83 an ounce by 1212 GMT, having touched a one-month high of $1,671.40. ‘Risk appetite is back in the markets as new infections are declining. That’s weighing on gold prices. Also, higher yields are negative for gold,’ said analyst Peter Fertig.

‘However, some investors fear that monetary policy would lead to inflation. For them, buying gold at these levels remains attractive.’ Cautious optimism around a slowdown in reported cases of thenew coronavirus in some countries lifted European shares for a second day, even as companies continued to take steps to shore up cash after lockdowns crushed global demand. More than 1.32 million people worldwide have been reported as infected by the virus and 74,087 have died … The pandemic has rattled financial markets over the course of the past quarter and prompted nations to extend lockdowns to curtail its spread.”

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KITCO NEWS/David Lin

Gold is cheap; prices to hit $5,000 in medium-term, says economist

April 7, 2020

“Gold prices could climb to $5,000 in a few years, this according to John Butler, author of ‘The Golden Revolution.’ Butler attributed this price growth to the longevity of loose monetary and fiscal policies that will come as a result of COVID-19, as well as gold’s performance during periods of declining economic growth. ‘Based on the historical pattern of the 1970s, and stagflation, and other times these sorts of things have come about, I think gold is going to rise, by orders of magnitude,’ Butler told the Macro Hive podcast. ‘I think it is perfectly realistic to see gold closer to $5,000 than where it is today in a few years’ time.’

On the lasting effects that the pandemic will leave on the economy, Butler said that policy reforms are here to stay. ‘Politicians jump on whatever opportunity to try and push their pet agenda forward, and in some cases, it might be a very well-meaning program and in other cases it might be a way to try to increase their power and influence. I see all of the above right now,” he said. ‘The other thing is what Milton Friedman said decades ago, [which is that] there is nothing more permanent than a temporary emergency government program.’”

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CNBC/Jacob Pramuk

More Americans worry about losing wages and covering costs as coronavirus spreads, poll finds

April 7, 2020

“As the coronavirus pandemic clobbers the U.S. economy, more voters in pivotal 2020 election states are worrying about losing their jobs or wages, a poll released Tuesday found.  More than a third of respondents in the six key states who have already lost income or employment said they could afford food, housing and other essential costs for less than a month, according to States of Play, a joint CNBC/Change Research survey of swing states. Even so, the likely voters polled in Arizona, Florida, Michigan, North Carolina, Pennsylvania and Wisconsin — which will play an enormous role in deciding the 2020 election winner — overwhelmingly said they are more worried about their health than their finances.

The COVID-19 outbreak has ripped through the United States, infecting more than 368,000 people and leading to at least 10,993 deaths, according to data compiled by Johns Hopkins University as of Tuesday morning. Business shutdowns across the country caused the economy to shed 701,000 jobs in early March — though a tally of roughly 10 million new jobless claims over two weeks indicates the economic destruction is much worse than the employment report showed. 81% said they had significant concerns about a recession, a jump from 57% last month. Fears about lost wages spiked, with 65% now seeing it as a very or somewhat serious concern in April, versus 35% in March. 39% said the same about losing a job, an increase from 16% last month.”

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THE NEW YORK TIMES/Paul Krugman

Will We Flunk Pandemic Economics?

April 6, 2020

“Just a month ago Donald Trump was still insisting that Covid-19 was a trivial issue, comparing it to the ‘common flu.’ And he dismissed economic concerns; after all, during flu season, ‘nothing is shut down, life & the economy go on.’ But pandemics come at you fast. Since Trump’s blithe dismissal, something like 15 million Americans have lost their jobs — the economic implosion is happening so quickly that official statistics can’t keep up.

In our last economic crisis the economy shrank around 6 percent relative to its long-run trend, and the unemployment rate rose around five percentage points. At a guess, we’re now looking at a slump three to five times that deep. And this plunge isn’t just quantitatively off the charts; it’s qualitatively different from anything we’ve seen before. Normal recessions happen when people choose to cut spending, with the unintended consequence of destroying jobs. So far this slump mainly reflects the deliberate, necessary shutdown of activities that increase the rate of infection. As I’ve been saying, it’s the economic equivalent of a medically induced coma, in which some brain functions are temporarily shut down to give the patient a chance to heal. While a deep slump is unavoidable, however, good policies could do a lot to minimize the amount of hardship Americans experience. The problem is that the U.S. political landscape has long been dominated by an anti-government ideology that left us unprepared, intellectually and institutionally, for this crisis.”

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MARKET WATCH/Barbara Kollmeyer

As hopes rise that worst of Spain’s pandemic is past, fear emerges of equally traumatic economic downturn

April 7, 2020

“Over the weekend, more than 2,100 people died in Spain as a result of the coronavirus, yet here we are, allowing ourselves to feel hopeful. The neighbors looked weary but clapped and cheered enthusiastically from their Madrid balconies. The weekend’s tally was lower than the previous weekend’s death toll of 2,500. Alas, any celebrating may have been premature, as a four-day string of declines was broken on Wednesday by 743 more deaths. Still, recuperations are rising, and the number of those requiring intensive care is stabilizing, a trend that overwhelmed hospitals here have desperately needed to see materialize.

Wall Street has rallied, inspired in part by signs that Spain and Italy could be ‘bending the curve.’ But getting to this moment, after Spanish Prime Minister Pedro Sánchez warned two-plus weeks ago that the ‘worst’ was yet to come, has been soul-destroying. Since his March 21 address to the nation, the death toll has climbed tenfold from 1,300 to 13,055 … Talk is also turning of how to exit the crisis, which has grown so deep economically here that the government is now discussing the a universal basic income.  A record number of Spaniards claimed unemployment benefits in March, and claims are bound to rise. When the battle against the virus is over, many predict Spain’s struggle to rebuild will be arduous. ‘On one side, we are now more hopeful,’ says a young mother, ‘but with much fear because we know what is coming after is even harder.’

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SOUTH CHINA MORNING POST/Neal Kimberley

What follows a pandemic, unemployment and emergency stimulus? Inflation?

April 7, 2020

“In the field of epidemiology, there’s a saying: ‘If you’ve seen one pandemic, you’ve seen one pandemic.’ But while global disease outbreaks are epidemiologically unique, their likely economic consequences may be easier to discern. The longer-term consequences, however, sometimes bear little relation to the immediate economic challenges arising from the pandemic and efforts to tackle it. As governments around the world impose business lockdowns to cut the rate of Covid-19 transmission, the initial effect of the global pandemic has been an epidemic of  joblessness.

The economic legacy, however, might be price inflation. Already, although the pandemic is still raging, there is a risk of food price inflation emerging. Qu Dongyu, the Chinese director general of the UN’s Food and Agriculture Organisation, last week argued for keeping global food supply chains moving. ‘Restricting trade is not only unnecessary, it would hurt producers and consumers and even create panic in the markets,’ he said. Hopefully, nations will heed Qu’s warning, but Thai rice export prices hit a seven-year high last week, in part due to temporary export restrictions imposed by Vietnam and Cambodia … It’s rare to see the world economy hit simultaneously by demand and supply shocks, but that is what the global spread of Covid-19 has caused.”

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KITCO NEWS/Jim Wyckoff

Gold prices sharply up amid Goldilocks environment for the metal

April 6, 2020

“Gold prices are trading sharply up in early U.S. trading Monday, as the global marketplace has seen in uptick in sentiment to start the trading week, on reports the coronavirus outbreak may be de-escalating. This somewhat encouraging news appears to be a goldilocks scenario for gold, as buyers are more confident to step in and purchasing the safe-haven metal, while knowing there are still very tough times ahead, including the specter of problematic inflation farther down the road.

Global stock markets were mostly higher in overnight trading. The coronavirus outbreak that has crippled the global economy appears to be de-escalating a bit, according to some models. However, the coming week is going to be ‘our Pearl Harbor moment, our 9/11 moment,’ said U.S. Surgeon General Jerome Adams, regarding an expected wave of coronavirus deaths across the U.S. New York City, New Orleans and Detroit face especially tough days ahead. The debate in the coming days, especially if the outbreak starts to de-escalate, will be when to restart global economies. Traders and investors are also handicapping when economies will get back to full speed when they do start back up. There are complicated supply chains that have been severely disrupted.”

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MARKET WATCH/Mark DeCambre

Gold rises, aims for highest close in a month, ahead of difficult virus news

April 6, 2020

“Gold futures were headed higher Monday, supported partly by expectations that the days and weeks ahead may prove grim for investors with an appetite for assets perceived as risky. Bullion’s early gain comes even as stocks looked set to surge higher after tumbling on Friday, in the wake of data that showed job losses in March exceeded many economists’ worst-case-scenario.

‘The bottom line is that the worst may not be over, and it seems premature to say that the bottom is in for stocks,’ wrote Marios Hadjikyriacos, investment analyst at XM. ‘Arguing in the same direction, gold is trading well higher today, indicating that many investors are still ‘playing defense’ even as stocks recover,’ he wrote. ‘With a close at or above its current level, the precious metal would mark its highest settlement since March 9. Optimistic equity investors have clung to hopes that the global outbreak of COVID-19, which was first identified in December in Wuhan, China, is starting to show signs of stabilizing.”

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THE WALL STREET JOURNAL/Chong Koh Ping and Nick Kostov

U.S. Braces for Pivotal Week as Global Coronavirus Death Toll Passes 70,000

April 6, 2020

“U.S. officials anticipated America’s most difficult week yet in the coronavirus crisis and some Asian countries braced for a surge in infections as the global death toll passed 70,000. Some European nations showed signs that restrictions were helping to slow the spread of the disease. Infections in the U.S. stood at more than 337,000 Monday, with the death toll at 9,653, according to data from Johns Hopkins University. Surgeon General Jerome Adams said Sunday that this week would be ‘the hardest and saddest week of most Americans’ lives’ as cases are expected to peak in some of the hardest-hit cities, including New York.

Globally, more than 1.28 million people have been infected by the coronavirus in 183 countries and regions as of Monday, according to the data from Johns Hopkins. A total of 70,356 people have died of the Covid-19 respiratory disease caused by the virus. Heath officials in the U.S. said the number of new infections would start to stabilize if people follow state government orders to stay home. In some of the hardest-hit American cities, including New York, Detroit and New Orleans, infections are expected to peak in the coming days, new models suggested. Strict containment measures appeared to be helping to contain the spread in Europe’s worst-hit countries. In Italy and Spain, the rate of infection has slowed down, with the number of confirmed cases increasing less than 5% from the previous day in both countries.”

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BLOOMBERG/Michelle F. Davis

Jamie Dimon Sees ‘Bad Recession’ and Echoes of 2008 Crisis Ahead

April 6, 2020

“Jamie Dimon said the coronavirus pandemic will lead to a major economic downturn and stress mirroring the meltdown that nearly brought down the U.S. financial system in 2008. ‘At a minimum, we assume that it will include a bad recession combined with some kind of financial stress similar to the global financial crisis of 2008,’ the chief executive officer of JPMorgan Chase & Co. said Monday in his annual letter to shareholders. ‘Our bank cannot be immune to the effects of this kind of stress.’ The 23-page letter came less than a week after Dimon returned to work after undergoing emergency heart surgery. It was his first public commentary about the coronavirus since Feb. 25.

Dimon, the only current CEO who steered a major U.S. bank through the financial crisis, said JPMorgan’s earnings will be ‘down meaningfully’ this year, though the bank is ‘unlikely’ to cut its dividend. Such a move would only result from ‘extreme prudence.’ he said, adding that JPMorgan will give more details on the impact when it reports first-quarter earnings later this month. The 64-year-old CEO outlined initiatives his bank is taking to support employees, businesses and the community, but refrained from offering long opinions about public policy that marked previous missives. He said 180,000, or about 70%, of the firm’s employees are working from home, and the bank is giving payments of $1,000 to those whose jobs don’t allow them to work remotely.”

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SEEKING ALPHA/Lyn Alden Schwartzer

The $40 Trillion Problem

April 6, 2020

“Over the past several weeks in response to the COVID-19-induced global economic shutdown, the U.S. Federal Reserve has announced an unprecedented number of operations to relieve or bail out various markets, as the lender of last resort … The Fed has expanded the monetary base to buy Treasuries and other securities at a record pace, has put in place various lending facilities, and has opened a record number of currency swap lines with other countries … Many analysts are focused on the impact of the virus itself, which is indeed very large. Nearly 10 million jobless claims were filed in the U.S. in the past two weeks due to the shutdown of restaurants, travel businesses, casinos, physical retail, and parts of several other industries, and that can’t be understated. Job losses are likely to continue. However, the sheer speed of the market’s crash, and the unprecedented actions by the Fed and other central banks around the world to support the credit market, point to a larger issue: the later stages of a global debt supercycle.

The sheer amount of debt in the world makes temporary income disruptions a lot more financially impactful than they would be in a system with less leverage. As of 2019, global debt surpassed $250 trillion, more than 250% of the world’s GDP. In the U.S., our total debt (government, corporate, and household) is around 350% of GDP, the same ratio we had back in 2007 at the start of the previous financial crisis … We have less mortgage debt relative to GDP, but most other types of debt are higher as a percentage of GDP in 2020 than in 2007. We just re-arranged where the debt is concentrated, and pushed it up especially to the sovereign level … Foreigners own $40 trillion in U.S. assets, including portions of our government debt, corporate debt, stocks, and real estate.”

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SOUTH CHINA MORNING POST/Sidney Leng

Half a million Chinese companies close in 1st qtr as pandemic batters economy

April 6, 2020

“More than 460,000 Chinese firms closed permanently in the first quarter as the coronavirus pummeled the world’s second largest economy, with more than half of them having operated for under three years. The closures comprised of businesses whose operating licenses had been revoked, as well as those who had terminated operations themselves, and included 26,000 in the export sector. At the same time, the pace of new firms being established slowed significantly. From January to March, around 3.2 million businesses were set up, a 29% drop from a year earlier.

The number of business closures underlines the challenges facing China as it tries to revive its economy, which is at risk of a contraction in the first quarter for the first time since 1976. ‘China has managed to get the Covid-19 outbreak largely under control and domestic supply disruptions have now mostly dissipated,’ economists from Société Générale, said in a recent note. ‘However, there are signs of lasting damage to domestic demand, and on top of that the external shock resulting from widespread lockdowns in other major economies is arriving fast and furious.’”

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by Sean Kelly

We’re several weeks into the federal social distancing mandate and things have gotten very quiet. Faced with new U.S. projection models for coronavirus infections in the millions and possible deaths in the hundreds of thousands, most Americans are staying home. Stores are closed, restaurants are shut, businesses are dark – and our cities and towns have slowed to a crawl.

The start of a new month presents a slew of payment due dates, however. For consumers there are mortgages, rents, credit card statements, car payments, phone and utility bills, etc. For businesses there’s operating expenses like equipment leases, fixtures, inventory, storage, licenses, tax deposits and payroll. So, what happens when the hourly worker that was recently laid off and the shuttered business that employs hundreds of workers can’t pay the bills?

Some 3.3 million Americans are now unemployed and millions more have lost pay or had their salaries cut, particularly in vulnerable industries. But months before COVID-19’s infiltration into the U.S. via ‘patient zero’ back in mid-January – Americans were struggling with debt and affordability. According to CNBC, last year U.S. households saw the largest annual increase in debt since the financial crisis, rising over $600 billion and topping $14 trillion for the first time ever. Mortgage debt also made the largest gains since 2007 while car loans and credit card debt increased by $57 billion. To make matters worse, according to a 2019 GoBankingRates’ savings survey, 70% of Americans have just $1000 or less tucked away for a crisis. The key findings of the survey concluded that: 45% of respondents had no monies in savings whatsoever and another 24% had $1000 or less. The top reason cited for not being able to put money away was ‘living paycheck to paycheck’ – while 20% named the ‘high cost of living.’

A lot of businesses are in no better shape. According to the Wall Street Journal, the restaurant industry has lost an estimated $25 billion since March 1^st and nearly 50,000 stores of major American retail chains have closed. For the travel, leisure and hospitality industries, the coronavirus threatens their very existence. Airlines are flying near empty planes. TSA screening records showed just 180,000 screenings on March 29, 2020 compared to over 2.5 million on the same date last year. The International Air Transport Association is estimating that over a million flights worldwide will be canceled by June 30^th with a loss of over $250 billion in revenue. The loss for the U.S. and Canadian airlines will top $50 billion. Demand for hotel rooms has also plummeted. InterContinental Hotels Group (IHG) whose properties include Holiday Inn, Staybridge, Kimpton, Crowne Plaza and Candlewood Suites announced $150 million in cost cutting measures and said it expected revenues to plunge by about 60% in March. And in light of the various on-board infections, in-dock quarantines, and a complete halt in global operations – some analysts are predicting that the $45 billion cruise industry may never recover.

The domino effect of all this will be swift and severe for all consumer groups and across all categories of business. The job losses triggered by the restaurant and retail industry is a snapshot of what the economic halt can do the rest of the economy. Already mortgage companies are expecting scores of missed payments. Car dealers are fielding calls from consumers that cannot make their next lease or loan installment and commercial landlords are being inundated by companies of all sizes that cannot make their April rent. Suspending foreclosures, banning evictions and a $1200 check from the government won’t curb the damage. Morgan Stanley is projecting that job losses could hit 17 million by May and the unemployment rate could soar over 12% by June. Their analysts also expect GDP to slump by an astonishing 30.1% in the 3^rd quarter of this year. But, the worst part of the forecast is the uncertainty. Dire predictions are being made about conditions that could easily worsen if the pandemic is not stopped or if governments around the world enact the wrong measures to try to prop up their economies. And we simply do not know how many jobs will be lost or how fast – or how many payments will be skipped or for how long.

What we do know is that regaining a sense of normalcy could take months, even years. The coronavirus has delivered an acute economic disruption at a rate of speed never seen in modern history. Consumers are feeling panicked and disconnected. Businesses are feeling stressed and overleveraged. And both are worried that bailouts won’t arrive in time, and the money won’t be sufficient to keep them afloat.

We are in the midst of a culture-changing journey to a place we’ve never been – and for those of us trying to ride out the unknown, we need both a short-term and a long-term financial strategy. Perhaps this is why gold, often popular with survivalists and those looking for a hedge against economic volatility is being acquired at record levels. We are, after all, in a ‘survival of the fittest’ scenario in arguably the most volatile economic moment in history.

KITCO NEWS/Jim Wyckoff

Gold prices up as U.S. monthly non-farm payrolls see big drop

April 3, 2020

“Gold prices are trading moderately up in early U.S. trading Friday, in the wake of another dour U.S. economic report that shows a crippled U.S. economy. June gold futures were last up $5.30 an ounce at $1,643.50. May Comex silver prices were last down $0.029 at $14.625 an ounce.  Friday’s monthly employment report for March showed an unemployment rate of 4.4% (3.5% in February) and a big non-farm payroll decline of 701,000 (up 273,000 in February). Analysts were looking for a 10,000 decline in payrolls. This is the first decline in monthly non-farm payrolls in nine years. The monthly employment report for April is likely to be much grimmer.

In a stark show of how much damage the coronavirus outbreak has done to the Euro zone economy in such a short period of time, the bloc’s March composite purchasing managers’ index (PMI)—which includes both the manufacturing and services sector—came in at a record low of 29.7 versus a reading of 51.6 in February. A reading below 50.0 suggests contraction.”

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BLOOMBERG/Ranjeetha Pakiam

Gold Squeeze Had Traders Looking for Bars as Far Away as Sydney

April 3, 2020

“The historic squeeze in New York that roiled the gold market last week had investors looking as far as Sydney for supply. Logistical disruptions due to the coronavirus pandemic had led to fears there wouldn’t be enough bullion in New York to meet delivery obligations for contracts traded on the Comex. Investors scoured the globe to track down physical gold, with independent Australian refiner ABC Refinery reporting a surge in demand from North America for deliverable bars last week.

‘We have received increased demand from North America, obviously with the recent Comex liquidity shortage,’ said Managing Director Phillip Cochineas. Demand also picked up from Europe. ABC makes products including 100-ounce, 1-kilogram and 400-ounce bars, with the latter now deliverable after CME Group rushed the launch of a new futures contract to address supply issues … Investors are pouring into exchange-traded funds, gold sales at Australia’s Perth Mint jumped to the highest since 2013, while the U.S. Mint sold the most bullion coins in three years.”

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CNN BUSINESS/Anneken Tappe and Annalyn Kurtz

The US economy lost 701,000 jobs in March — worst report since 2009

April 3, 2020

“The American economy lost more jobs than it gained for the first time in a decade. In March, the economy shed 701,000 jobs, according to the Bureau of Labor Statistics. It was the first time the economy lost jobs in a month since September 2010, and the worst month for American jobs since the depths of the Great Recession in March 2009. The unemployment rate shot up to 4.4%, from a near 50-year low of 3.5%. It was the highest unemployment rate since August 2017 and the largest single-month change in the jobless rate since January 1975.

Most of the job destruction took place at restaurants and bars, where the economy lost 417,400 jobs. Retailers cut 46,200 jobs and health care employment fell by 43,000 jobs as routine visits at dentists and physicians offices fell. If there’s an ounce of good news in the March report, it’s that bulk of the layoffs were temporary: 1.8 million people were unemployed temporarily last month, up from 1 million in February. But the labor market will probably start to look a whole lot worse starting next month.”

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CNBC/Jeff Cox

Another figure in the jobs report paints an even gloomier picture of the coronavirus damage

April 3, 2020

“The government’s survey of establishments painted a grim picture of the U.S. employment situation through early March, but its poll of households was far worse. The household survey, which asks individual residents how many people are working there, showed a stunning drop of 2,987,000 workers for the month.  That compares to the 701,000 nonfarm payrolls decline reported in the establishment survey and gives another perspective to just how bad the situation has gotten since the economy has all but shut down to protect against the coronavirus spread.

When releasing its headline nonfarm payrolll numbers, the government focuses on the establishment survey as it captures a larger sample size and is considered less volatile than the household count. The establishment survey captures about 145,000 businesses and work sites, while its counterpart focuses on 60,000 eligible households and includes agricultural workers.  Both use the week up to the 12th of the month for sampling, which in this case was before the worst of the job losses began. The Labor Department uses the household survey to calculate the headline unemployment rate, which jumped from 3.5% to 4.4%.  In the March survey, the household survey’s numbers are stunning. They show a decline of employment from 158,759,000 in February to 155,772,000 in March. That came amid a drop of 1.6 million in the civilian labor force and a 1.1 percentage point tumble in the employment-population ratio to 60%. The labor force participation rate contracted 0.7 percentage points to 62.7%.”

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MARKET WATCH/Quentin Fottrell

‘Far more extreme than anything we’ve ever seen, including worst weeks of the Great Recession’ — economist gasps as jobless claims jump 3,000% in 3 weeks

April 2, 2020

“Initial unemployment claims jumped 3,000% to 6.6 million last week from 211,000 for the week ending March 7, the Labor Department said Thursday. Businesses have closed in an effort to stop the spread of coronavirus, as millions of Americans practice ‘social distancing’ at home. ‘This kind of upending of the labor market in such a short time is unheard of,’ said Heidi Shierholz, a senior economist and director of policy at the progressive Economic Policy Institute, a Washington, D.C.-based think tank. She called the latest numbers, ‘A portrait of disaster.’ The $2 trillion stimulus package, passed by the Senate last week, will help the U.S. through the COVID-19 pandemic, of which New York City is now the epicenter, Shierholz added.

‘The spike at the end shows the unprecedented territory we are in right now,’ she said, citing this graph, showing labor market trends over the last 50 years. ‘What the labor market is currently experiencing is far more extreme than anything we’ve ever seen, including the worst weeks of the Great Recession.’ The number of unemployed Americans is likely to surpass the prior record of 15.3 million, also seen during the Great Recession after the subprime-mortgage market crashed. Economists predict 25 million Americans could lose their jobs in the next few months.”

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YAHOO FINANCE/Myles Udland

The U.S. economy is entering the ‘deepest recession on record’

April 2, 2020

“The U.S. economy is struggling right now. On Thursday, we learned that initial filings for unemployment insurance totaled a record 6.648 million for the week ending March 28, more than doubling the prior week’s reported total of 3.238 million that had also marked a record high. Distressingly, last week’s data was also revised higher on Thursday to 3.307 million. And while the labor market fallout from the coronavirus-related economic hard-stop we’re experiencing has been the most abrupt and severe so far, economists at Bank of America Global Research believe the broader economic downturn we’re entering will result in the worst recession in modern U.S. history.

‘The recession appears to be deeper and more prolonged than we were led to believe just 14 days ago when we last updated our forecasts, not just in the U.S. but globally as well,’ said BofA.

‘We now believe that there will be three consecutive quarters of GDP contraction with the economy shrinking 7% in 1Q, 30% in 2Q and 1% in 3Q. We expect this to be followed by a pop in growth in 4Q. We forecast the cumulative decline in GDP to be 10.4% and this will be the deepest recession on record, nearly five times more severe than the post-war average.’ In 2008, the economy experienced a cumulative recessionary decline in GDP of 4%, the most since World War II. BofA is expecting the 2020 recession will be more than twice as severe in terms of the total GDP decline.”

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KITCO NEWS/Neils Christensen

Gold price jumps after U.S. weekly jobless claims rise to 6.6 million

April 2, 2020

“The gold market continues to make further gains as the U.S. labor market continues to deteriorate as weekly jobless claims see another 3 million-claim rise. First-time U.S. jobless claims skyrocketed during the week to Saturday to a record seasonally adjusted 6.64 million, up 3,341,000 from the previous week’s revised level of 3.307 million. ‘This marks the highest level of seasonally adjusted initial claims in the history of the seasonally adjusted series,’ the report said.

The new record comes after last week’s historic report, as claims rose above 3 million. Economists were expecting to see jobless claims rise to 3.5 million. Gold prices are pushing higher following the record rise. June gold futures last traded at $1,626 an ounce, up more than 2% on the day. Andrew Grantham, senior economist at CIBC markets might not be completely prepared for the latest employment data. ‘While markets would have been prepared for a bad print in today’s claims figures, the sticker shock of just how bad it was could still see some modest market reaction,’ he said. ‘These data certainly suggest that the unemployment rate will peak higher than we previously assumed in the near-term, with a rise above 10% now likely in the coming months.’ ‘The weekly claims report further confirms U.S. economy has been severely crippled by the coronavirus outbreak,’ said Jim Wyckoff, senior analyst at Kitco.com … The U.S. has become the new epicenter for the global pandemic.”

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BLOOMBERG/Elena Mazneva

Gold Dealers Report Big Shortages of Small Bars and Coins

April 1, 2020

“When people are worried about the future, they turn to gold to protect their savings. That’s rarely been more true than today. Surging demand and disruptions from the coronavirus pandemic have created a shortage of the small gold bars most popular with consumers. Those who do manage to get their hands on metal have to pay up –- well above the per-ounce prices being quoted on financial markets in London and New York.

Some dealers are desperately contacting clients to see if anyone is willing to sell their gold bars and coins, and offering a rare premium over spot prices. Others have given up trying to trade altogether.

‘People want to buy, not to sell gold,’ said Mark O’Byrne, the founder of GoldCore, a dealer based in Dublin. ‘We have a buyers’ waiting list and we emailed our clients seeing who wished to sell their gold. At this time there is roughly only one or two sellers for every 99 buyers.”

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THE WALL STREET JOURNAL/Phred Dvorak and Amira El-Fekki

Global Cases Approach One Million, as Economic Toll Mounts

April 2, 2020

“The economic toll of the coronavirus pandemic continued to mount in the U.S. as a record 6.6 million workers applied for unemployment benefits last week, while the number of reported cases of the new virus world-wide approaches one million.  With large segments of the economy shut down, jobless claims, a proxy for layoffs, far exceeded estimates.  The bleak report came as some of the last remaining open borders start to close.

President Trump said Wednesday that he was considering grounding flights to and from U.S. cities that are virus hot spots. As of Thursday, the U.S. had 216,722 reported cases of the coronavirus, which has spread with ferocious speed across the world, driven initially by global travel. The U.S. number is just under a quarter of the global total of 951,901 cases, and nearly twice that of the next-highest country, Italy, according to data compiled by Johns Hopkins University—although the toll of death and illness might be underreported there and in other countries. About 75,000 new coronavirus cases were recorded Wednesday, the same as the day before, according to Johns Hopkins data, setting the stage for the global count to break one million by Friday. The world-wide count of deaths from the Covid-19 respiratory disease caused by the virus exceeded 48,000, according to Johns Hopkins. Spain on Wednesday reported 950 deaths, the country’s biggest one-day toll.”

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MARKET WATCH/Barbara Kollmeyer

Bear-market survival tips from an analyst who spent years warning of a bubble

April 2, 2020

“A rally for oil prices is helping spark stock gains on Thursday, as investors struggle through what they hope is the eye of the coronavirus storm right now. There is the grim health front, then the economy. Weekly jobless claims showed 4 million people filed for unemployment benefits, beating last week’s record 3.3 million jump as the virus continues to hack away at the global economy. Our call of the day comes from Jesse Colombo, an independent economic analyst who predicted the 2008 crash, and has been warning of an ‘everything bubble’ for years as underlying issues from that crisis were never fixed.

Colombo says the virus is the pin that just happened to prick the bubble, and as a ‘prepper’ he has tucked away a year’s worth of food as he foresees social unrest and economic strife ahead. As for markets, he tells MarketWatch the selloff for equities and many other assets will continue until speculative excesses get corrected first. He’s not buying stocks bonds, or any paper assets ‘inflated’ by central banks, or residential or commercial real estate. ‘What I believe in this point is hard assets and alternative assets…physical gold, physical silver, some bitcoin and then some survival-type investments…homestead out the country, ranch, farmland,’ he says.  … He warned that household wealth had been dangerously outpacing the economic expansion.”

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CNBC/Natasha Turak

Whiting Petroleum is the ‘first domino’ to fall in US shale wipeout, strategist says

April 2, 2020

“Wednesday’s Chapter 11 bankruptcy filing for Colorado-based Whiting Petroleum is a grim omen of things to come, experts say, as oil prices face historic collapse amid the coronavirus crisis and the Saudi-Russia oil price war.   The company is the first U.S. shale producer to go under since the start of the year, when oil prices began to fall. ‘I don’t want to be a doomsayer, but I think Whiting is just simply the first domino that’s going to fall,’ John Driscoll, chief strategist at JTD Energy Services, told CNBC’s Capital Connection on Thursday. ‘It’s a fairly substantial company, but the smaller producers, if they don’t have the hedging in place, it’s going to be a tough route — Chapter 11 might be the only way to go.’

The shale industry, responsible for America’s vault to become the world’s largest oil producer in 2018, already faced problems generating cash and holding investor support. In 2019, 42 oil companies with more than $25 billion in cumulative debt filed for U.S. bankruptcy protection, according to restructuring law firm Haynes & Boone.  The U.S. shale patch also bears some of the highest production costs in the world, requiring a breakeven price of between $50 and $55 per barrel.  Now, with Saudi Arabia and Russia’s planned production increases to battle for market share exacerbating the price crash brought on by the coronavirus pandemic, the sector faces what may well be a bloodbath: U.S. benchmark West Texas Intermediate is now trading at around $22 per barrel, down more than 60% year-to-date, and forecasters expect it to fall further. ‘U.S. shale is now economically unviable,’ Chris Midgley, global head of analytics at S&P Global Platts, told CNBC. ‘Some areas will come back as prices return. First hit will be the more capital-intensive crudes.’”

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MARKET WATCH/Mark DeCambre

Brace for the ‘deepest recession on record,’ says BofA analysts

April 2, 2020

“There are no parallels for the pandemic fueled slowdown that the U.S. economy is currently contending with, and that is forcing economists like those of Bank of America Global Research to forecast a decidedly grimmer outlook for the American economy than they offered just two weeks ago.  The BofA researchers on Thursday said the coming recession ‘appears to be deeper and more prolonged than we were led to believe just 14 days ago when we last updated our forecasts, not just in the US but globally as well.’

The April 2 report comes as the number of Americans who applied for unemployment benefits last week soared by a record 6.6 million, bringing the increase in new jobless claims in the last two weeks to 10 million. The scale of the shutdowns intended to help mitigate the spread of the deadly pathogen, is having a substantial negative impact on the labor market and the broader economy. To that end, BofA sees between 16 and 20 million job losses, which could send the unemployment rate, which stands at 3.5% as of February’s report, surging within a few months to 15.6%, which would far outstrip the unemployment rate during the 2007-09 recession …The BofA team forecast three consecutive quarters of contraction in gross domestic product.”

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REUTERS/Asha Sistla

Gold rises on flight to safety driven by pandemic fears

April 1, 2020

“Gold rose on Wednesday as fears over a worsening coronavirus pandemic triggered a flight to safety, with expectations of further monetary easing by central banks adding support. Spot gold rose 0.8% to $1,582.78 per ounce by 0326 GMT, having slumped 3.1% in the previous session on a strong dollar. U.S. gold futures were unchanged at $1,596.50. ‘Investors may be shifting to gold for safety,’ said CMC Markets analyst Margaret Yang Yan, who saw the rebound spurred by President Trump’s remarks that the next two weeks of the pandemic could be painful for the United States.

‘The ramification of easing monetary policy cycle and trillion dollars of stimulus means the market will be full of liquidity and ample supply of paper money in months, quarters or years to come, and that’s definitely supporting gold’s rally amid very limited supply (of physical bullion).’ Gold is considered an attractive investment during times of political or economic uncertainty. It is highly sensitive to

interest rates, as lower rates reduce the opportunity cost of holding the non-yielding bullion. The Fed broadened the ability of dozens of foreign central banks to access U.S. dollars during the crisis.”

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MARKET WATCH/Mark DeCambre

Gold attempts to bounce higher to start April, second quarter amid virus spread

April 1, 2020

“Gold futures were attempting to regain some traction higher on Wednesday to start the new month and quarter, amid expectations of increasingly poor economic data due to the pandemic which has helped to partly support gold buying or at least limited downside for the precious metal. ‘Gold prices are rising as investors brace for a steady flow of ugly data that will get much worse and probably for a lot longer than what was initially expected,’ wrote Edward Moya, senior market analyst at Oanda.

Moves for gold came as global stocks were under renewed pressure amid growing concerns about the economic implications for the epidemic … The White House released new projections for 100K to 240K deaths in the U.S. from the coronavirus pandemic even if current social-distancing guidelines are maintained. Meanwhile, the number of COVID-19 cases world-wide have risen to 862,234, while the number of deaths have climbed to 42,404.  ‘Gold prices should rise as the virus spread is intensifying alongside lockdown efforts to mitigate it,’ Moya wrote. Gains for bullion are supported by fears the measures being implemented will result in a global recession, a boon for gold buyers.”

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CNBC/Fred Imbert and Maggie Fitzgerald

Dow tumbles as Trump warns of ‘very painful two weeks’

April 1, 2020

“Stocks fell sharply on Wednesday as Wall Street begins the second quarter on a sour note amid mounting concerns over the coronavirus outbreak. The Dow Jones Industrial Average traded about 620 points lower, or 2.8%. The S&P 500 slid 3.0% while the Nasdaq Composite lost 2.6%. President Donald Trump said Tuesday evening the U.S. should prepare for a ‘very, very painful two weeks’ from the rampant coronavirus. White House officials are projecting between 100,000 and 240,000 deaths in the U.S.

‘This is going to be a rough two-week period,’ Trump said. ‘When you look at night the kind of death that has been caused by this invisible enemy, it’s incredible.’ Data from ADP and Moody’s Analytics showed U.S. companies cut 27,000 jobs through March 12. Actual losses for the month were far worse, as shown by the record number of jobless claims. Meanwhile, ISM manufacturing index fell to 49.1 in March from 50.1 in February, signaling a contraction in U.S. manufacturing activity amid the pandemic. ‘There’s still tremendous uncertainty,’ said a portfolio manager at Brandywine Global.”

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BLOOMBERG/Sally Bakewell, Sridhar Natarajan and Nabila Ahmed

Supercharged Debt Bets Unravel and Expose Wall Street’s Big Risk

April 1, 2020

“For years, regulators have tried to make the financial system safer by blocking banks from taking on the extreme leverage that almost toppled the industry in 2008. Turns out, the risks just moved. In a matter of days, a slew of trades unraveled to expose various forms of soured levered bets at their heart. Citigroup Inc. was among banks that tried to sell off $1.3 billion of risky loans to unwind leveraged wagers by clients. Funds that borrow to load up on mortgage bonds fed a flood of liquidations. Large municipal-bond funds are selling billions of dollars in positions, too. In 2008, the culprits were real estate speculators, investments banks that fueled the bubble while leveraging books about 40 to 1, and investors who failed to conduct their own due diligence. A wave of defaults caused that system to come crashing down.

This time, another long period of rock-bottom interest rates, cheered on by President Trump, has let companies go into record debt while showering cash on shareholders. The enablers are banks eager to facilitate deals and investors desperate for higher returns. They borrowed to multiply profits on mortgages, junk debt and municipal and government bonds. The leverage means losses are getting amplified. ‘Everyone knows you are playing with fire with leverage,” said Michael Terwilliger, portfolio manager at Resource Credit Income Fund. ‘Response to the last panic has built the new panic.’ After years of relatively sedate markets, trades are suddenly getting tested by the Covid-19 pandemic.”

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MARKET WATCH/William Watts

Stocks could face crucial April test of market bottom as grim news mounts

April 1, 2020

“April will pose a crucial test for stock-market investors looking for signs that the worst of the market carnage triggered by the global COVID-19 pandemic is past, as the outbreak continues to claim lives and promises historic, near-term economic pain. Bears contend the sheer uncertainty surrounding the impact of the pandemic is likely to pave the way to further waves of selling. ‘The coming weeks will be a blizzard of bad news — both on the economy and public health,’ said Zach Pandl, macro strategist at Goldman Sachs. ‘We doubt that markets will be able to price out adverse tail risks against that backdrop, and new challenges might emerge, including sovereign downgrades, FX peg breaks, or a wave of business failures.’

Stocks fell in early trade Wednesday as President Trump warned that a ‘rough’ two weeks lies ahead, with the White House projecting that the pandemic could result in a U.S. death toll of 100,000 to 240,000 …Even hopeful investors often caution that bear markets are typically volatile and often see sharp rebounds before retesting lows or going on to decline even further before finding a bottom. But the fast and sizable policy response by central banks and governments have some market watchers arguing that the probability that the recent lows will hold may be better than in past major selloff. Keith Lerner, market strategist at SunTrust Advisory, said the lessons of past bear markets would normally lead him to place the probability of a retest of the market low somewhere between 70% and 80%.”

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THE NEW YORK TIMES/Peter S. Goodman

Why the Global Recession Could Last a Long Time

April 1, 2020

“The world is almost certainly ensnared in a devastating recession delivered by the coronavirus pandemic. Now, fears are growing that the downturn could be far more punishing and long lasting than initially feared — potentially enduring into next year, and even beyond — as governments intensify restrictions on business to halt the spread of the pandemic, and as fear of the virus reconfigures the very concept of public space, impeding consumer-led economic growth. The pandemic is above all a public health emergency. So long as human interaction remains dangerous, business cannot responsibly return to normal. And what was normal before may not be anymore. People may be less inclined to jam into crowded restaurants and concert halls even after the virus is contained.

The abrupt halt of commercial activity threatens to impose economic pain so profound and enduring in every region of the world at once that recovery could take years. The losses to companies, many already saturated with debt, risk triggering a financial crisis of cataclysmic proportions. ‘I feel like the 2008 financial crisis was just a dry run for this,’ said Kenneth S. Rogoff, a Harvard economist and co-author of a history of financial crises, ‘This Time Is Different: Eight Centuries of Financial Folly.’ ‘This is already shaping up as the deepest dive on record for the global economy for over 100 years,’ he said. ‘Everything depends on how long it lasts, but if this goes on for a long time, it’s certainly going to be the mother of all financial crises.’”

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REUTERS/Brijesh Patel

Gold dips over 2% as dollar rises, but heads for quarterly gain

March 31, 2020

“Gold dropped as much as 2.4% on Tuesday as the dollar strengthened and strong Chinese economic data boosted risk appetite, but bullion was heading for a sixth straight quarterly rise amid fears over a global shutdown due to the coronavirus. Spot gold was down 1.1% at $1,604.91 per ounce by 1306 GMT. It has gained 5.7% for the quarter, and more than 1% this month. U.S. gold futures fell 1% to $1,606.70. ‘The combination of a strengthening dollar and better risk appetite is weighing on gold,’ OANDA analyst Craig Erlam said.

Strong Chinese factory data lifted world stocks on Tuesday but markets were heading for their worst quarter since 2008 on jitters about the economic hit from the coronavirus. More than 777,000 people have been infected by the new virus across the world and 37,561 have died, according to a Reuters tally. Central banks around the world have announced major fiscal and monetary packages to try to limit economic damage, as governments have extended lockdowns to combat the virus’ spread. ‘With central banks unleashing a tsunami of quantitative easing (QE) at a time when fear is running rampant in markets and (as) government debts are about to explode, it seems like the perfect cocktail that could push gold back to record highs,’ said Ajay Kedia, director at Kedia Commodities.”

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MARKET WATCH/ William Watts

The stock market might not bottom until the VIX comes down

March 31, 2020

“Here’s one reason investors aren’t convinced the bear-market rout triggered by the global COVID-19 pandemic hasn’t bottomed out: a stubbornly high reading for an index known as the VIX. A closely watched measure of stock-market volatility, the Cboe Volatility Index typically was lower Monday at 58.74. That puts it on track to break a 10-session streak of closes above 60, a run that’s eclipsed the previous record eight-day stretch in November 2008, in the midst of the financial crisis. The index, which has a long-run average around 20, hit an all-time high earlier this month as stocks plunged into a bear market.

‘While the S&P 500 rallied 20%+ from its low during the week, VIX remained stubbornly elevated along with stock implied correlations,’ said Julian Emanuel, chief equity strategist at BTIG. ‘True bull markets tend to be low volatility and uncorrelated — December and January seem so long ago.’ It would likely take a sustained move below 50 by the VIX for stocks to make sustainable upside progress, he said, while a retest of the March 23 lows is ‘entirely possible as a base is built.’”

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CNN BUSINESS/Christine Romans

It will be a devastating week for the US economy. There is no playbook — and stimulus must come fast

March 31, 2020

“The economy is cratering deeper than we have seen in our lifetimes. Layoffs are coming so quickly, the state unemployment offices can’t keep up. Banks are flooded with calls about upcoming mortgage and loan payments. Downtowns are deserted, malls are closed, bars are empty, and airplanes are grounded.  A sudden stop in the economy so severe, Goldman Sachs economists now forecast real GDP growth of negative 9% in the first quarter and down an astonishing 34% in the second. Economists at Goldman Sachs expect the economy to recover mid-year with a 19% gain in the third quarter.

The biggest economy in the world has stopped. The demise is so swift, it hasn’t been reflected yet in the monthly data.  Consider Tuesday morning’s consumer confidence report. It will likely show consumers’ confidence commensurate with a healthy economy.  Friday’s monthly jobs report will barely begin to reflect the devastating fallout in the jobs market. The survey period was the second week in March, a time when Americans were just waking up to the threat of the virus and social distancing had not yet been implemented.  Economists at Goldman Sachs predict the jobless rate with hit 15% by mid-year. The window into the carnage comes in the weekly data. We learned last week 3.28 million Americans filed for jobless benefits for the first time.  This week will probably show millions more layoffs. Moody’s Analytics chief economist forecasts another 4.5 million first-time filings for jobless benefits this week, which would be the highest in history.”

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CNBC/Jeff Cox

Coronavirus job losses could total 47M, unemployment may hit 32%, Fed says

March 30, 2020

“Millions of Americans already have lost their jobs due to the coronavirus crisis and the worst of the damage is yet to come, according to a Fed estimate. Economists at the Fed’s St. Louis district project total employment reductions of 47 million, which would translate to a 32.1% unemployment rate, according to a recent analysis of how bad things could get. The projections are even worse than St. Louis Fed President James Bullard’s estimate of 30%. They reflect the high nature of at-risk jobs that could be lost to a government-induced economic freeze aimed at halting the coronavirus.

‘These are very large numbers by historical standards, but this is a rather unique shock that is unlike any other experienced by the U.S. economy in the last 100 years,’ St. Louis Fed economist Miguel Faria-e-Castro wrote last week. There are a couple of important caveats to what Faria-e-Castro calls ‘back-of-the-envelope’ calculations: They don’t account for workers who may drop out of the labor force, thus bringing down the headline unemployment rate, and they do not estimate the impact of recently passed government stimulus, which will extend unemployment benefits and subsidize companies for not cutting staff. However, the jobless picture already looks bleak. A record 3.3 million Americans filed initial jobless claims for the week ended March 21. Economists surveyed by Dow Jones expect another 2.65 million to join them this week.”

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BLOOMBERG/Ben Holland

Economists Are Losing Hope in a ‘V-Shaped’ Post-Virus Recovery

March 31, 2020

“The base case for forecasters is that a recovery, perhaps even a vigorous one, gets under way in the second half of 2020. But as the pandemic spreads through Europe and the Americas, and the wide range of knock-on effects comes into clearer view, caveats to that call are piling up. Underlying all of them is the simple fact that economic outcomes hinge on something that’s beyond the professional competence of most economists to forecast: the trajectory of the disease itself.

‘We have no certainty the virus will be gone by the end of the second quarter,’ said Nobel prizewinner Joseph Stiglitz, a professor at Columbia University. If it ‘lasts through the summer, then all the effects will be amplified.’ Beyond that, there is an array of questions for economists to grapple with — and those doubts increasingly undermine projections for what’s known as a ‘V-shaped recovery,’ in which lost output is quickly restored. Rather than sounding a decisive ‘all clear,’ health authorities seem likely to advocate a gradual return to normal working life, so the behavior known as ‘social distancing’ may stick around. Along with financial blows sustained during the downturn, that is likely to damp spending on travel or spending at shops or restaurants — assuming those businesses can stay afloat in the first place. ‘It takes more time to get ‘back to play’ than to get back to work,’ said Catherine Mann, chief economist at Citigroup Inc. This ‘underpins concerns for the trajectory for services-dependent advanced economies in the second half of 2020,’ she said.”

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BARRON’S/Pierre Briançon

Why The ‘Coronabond’ Dispute Is Tearing Europe Apart

March 31, 2020

“Revisiting their old quarrels in the heat of a new crisis, European leaders are at loggerheads on the best way to beef up their economic response to the coronavirus. Successive meetings of either finance ministers or EU leaders in the past month have failed to come up with any decision on how to proceed. The dispute has crystallized around the proposal that the eurozone should consider launching so-called coronabonds, a form of joint debt vehicle, to help finance the major fiscal effort needed to fight the virus.

The divide in Europe, between governments arguing for more risk-sharing and governments for whom charity begins at home with strict fiscal discipline, may sound eerily like the one that threatened the eurozone’s very existence in the heat of the euro crisis ten years ago … The terms of the debate are simple. European governments have reacted on time, and with significant packages, to the predictable economic shock. A simple, back-of-the-envelope calculation shows that they have already announced, and begun to implement, a fiscal boost equivalent to about 2.5% of their combined gross domestic product. But that may not be nearly enough even on a temporary basis But whether they can agree or not, and however much time it takes them to do so, European leaders, by rehashing their old differences, illustrate that they have begun to ponder a question that they will have to tackle sooner or later: how to manage their economies with increased debt once the pandemic is over?”

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