Bipartisan stimulus package framework could be completed this weekend

In the words of the famous author Mark Twain, “If you don’t read the newspaper, you’re uninformed. If you read the newspaper, you’re misinformed.”

These words seem to resonate in regards to the current news about the ongoing negotiations to come up with a fiscal stimulus proposal that will be palatable to both sides of the political fence. If you have been following the current news, although you might be not be misinformed, you are certainly uninformed, or unaware out the outcome.

There are three proposals currently being considered. One a bipartisan $908 billion coronavirus relief package, this proposal is being considered in conjunction with two partisan proposals. One of which is being put forward by McConnell as the White House’s bid, and lastly a Democratic proposal supported by House Speaker Nancy Pelosi and Senate Democratic Leader Chuck Schumer.

Currently, both Treasury Secretary Steven Mnuchin and Fed Chairman Jerome Powell are supportive of the bipartisan proposal. Chairman Powell speaking at a Senate banking committee hearing said, “I look forward to reviewing with you the overall package. I do think that more fiscal response is needed.”

However, even though Treasury Secretary Mnuchin supports the bipartisan bill his caveat was whether or not President Trump would be on board, saying that President Trump would sign a narrower relief plan proposed by McConnell.

As reported by CBS News, “The president will sign the McConnell proposal he put forward yesterday, and we look forward to making progress on that, Mnuchin said at the Capitol before a hearing before a House committee.

Given that House Speaker Pelosi and Treasury Secretary Mnuchin have been deadlocked and at a stalemate unable to put a proposal together that both sides will agree upon. The upside is that they have resumed talks this week, this began with a telephone call between the two yesterday.

Even though it is unclear if a fiscal stimulus package can be agreed upon and enacted soon, it has created extreme optimism that the possibility of additional and greatly needed stimulus will be forthcoming this month. This optimism has led to extremely strong gains in gold yesterday, followed by moderate gains today.

As of 4:51 PM EST, the most active February gold futures contract is up to $15.70 and is currently fixed at $1834.60. Considering that on Monday gold traded to an intraday low of $1757, the last three trading days have resulted in gold gaining approximately $80. The primary question being asked by investors and market participants is whether or not we have seen the lows in gold, and if higher pricing is forthcoming. On a technical basis, a strong case can be made that the lows achieved on Monday, followed by the sharp rises yesterday, and moderate rise today suggest that we should see gold move higher. However, we must acknowledge recent gains have been headline-driven.

Lastly, the government will run out of money on October 11 if no stopgap budget proposal is enacted. This suggests that if a fiscal stimulus proposal can be agreed upon it will be somehow tied into the pending legislation needed to keep the government open.

We continue to be cautiously optimistic and truly hope both sides can agree and implement a round of fiscal stimulus that is so greatly needed in a timely manner.

For those who would like more information on our service simply use this link.

 

By Gary Wagner

Contributing to kitco.com

 

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Peter Hug – Gold, silver prices bounce off support, can rally last?

Gold rose 2% on Monday, with silver up 5.5% on the trading session. Peter Hug, global trading director of Kitco News, said that fundamentals line up with this rally.

Equities also saw a bounce. Hug said that talks of a new round of fiscal stimulus is adding fuel to the risk-on sentiment while driving money to precious metals at the same time.

The U.S. dollar weakened on the trading session.

 

By David Lin

For Kitco News

 

 

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This is only the start for gold prices as bitcoin hits an all-time high – currency debasement will drive prices higher – Charlie Morris

The gold market is struggling to find near-term bullish momentum as the price trades below $1,800 an ounce; however, one fund manager said that if investors want to know where the precious metal is heading, they need to look to bitcoin.

Monday, the digital currency pushed to a new all-time higher within striking distance of $20,000. Charlie Morris, chief investment officer at ByteTree Asset Management, said that he sees a lot more room for bitcoin to go as it has started a new bull run.

As bitcoin continues its surge higher, Morris noted that according to his research, seasonal factors support the digital asset during the second and fourth quarters. On average, the bitcoin has seen rallies of more than 60% and 50% in even quarters.

Meanwhile, gold sees its best performance during odd quarters. Looking at gold, he added that the market is currently trading at fair value; however, he also said that strong fundamentals continue to support higher gold prices, and it's only a matter of time before gold resumes its uptrend.

"The gold market was pretty hot this summer, so it's not surprising to see the price slip back a bit heading into year-end," he said. "Some money has pulled out of gold, maybe it has gone into platinum because of the green movement and obviously some of it has gone into bitcoin, cause all this excitement."

Morris' firm investment invests in both digital assets like bitcoin and gold. While a lot of investors see bitcoin and gold as competing assets, Morris said that he views them as complimenting assets. He added that both markets are currently reacting to the same market factors: unprecedented stimulus measures and the wave of inflation that is expected as a result.

"Bitcoin and gold are both on the right side of the inflation trade," he said. "They are both assets that will protect investors from the massive fiat currency debasement trade that is coming."

For those investors who are questioning whether inflation will actually pick up in the next few years, Morris said that they just have to take a look at other commodities. Copper prices are currently trading at an eight-year high, and oil prices are starting to creep higher. Oil prices are benefiting from ongoing news of potential vaccines for the COVID-19 as investors start to price a faster-than-expected recovery in the global economy.

"For gold, the bond market hasn't noticed the rally in oil and copper, but when they do, you will start to see real yields drop further into negative territory," Morris said. "That is when gold starts to rally again. Inflation expectations have to go higher unless the central banks around the world just halt everything they are doing, and that is very unlikely to happen."

In a world that is expected to see weaker fiat currencies because of rising inflation and massive government debt levels, Morris said that bitcoin and gold will play more important roles in an investor's portfolio. He added that bitcoin is the risk-on trade in the current environment as its volatility will lead to higher prices in a bull market; however, at the same time, gold remains an important risk-off asset.

"Gold is the reference point of what an anti-debasement stable asset is supposed to be," he said.

Although gold prices are struggling to find renewed buying interest, Morris reiterated his 10-year target for gold to reach $7,000 an ounce by 2030.

At the same time, because of its volatility, bitcoin prices over the next 10 years could be worth around $4 million.

 

By Neils Christensen

For Kitco News

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Can gold price fall below $1,700 before selloff is over? Markets eye COVID restrictions, stimulus

Gold is down for the third week in a row but does this mean the bull market is over? Some analysts are beginning to reverse their expectations of $2,000 gold by the end of the year.

Thin holiday trading and stop losses have contributed to gold's move below $1,800 an ounce on Friday.

And even though analysts remain certain that the macro environment is still very supportive of higher gold, some are starting to postpone expectations of new record high prices until next year.

"I disagree with the premise that gold was rallying because of the pandemic. I think gold was rallying because of the response to the pandemic. The stimulus package, the devaluation of the U.S. dollar, low interest rates — those are the reasons why gold rallied to new record highs. I don't think any of those reasons have dissipated," Phoenix Futures and Options LLC president Kevin Grady told Kitco News.

However, Grady no longer expects $2,000 gold by the end of this year, estimating the precious metal to wrap up 2020 below $1,900 an ounce.

The drivers that pushed gold to new highs back in August are still very much there, said TD Securities commodity strategist Daniel Ghali.

"One way to look at this is to see what drives people to buy or sell gold. When we break that down, it comes down to factors that we can actually see in real-time. Things like the U.S. dollar, real rates, nominal rates, etc.," Ghali said. "The price action in gold right now is entirely inconsistent with what's going on in those other markets. And what that tells us is that it is overwhelmingly driven by positioning changes. Most likely, what has happened is that gold prices have breached some threshold that was essentially maximum pain that some market participants could withstand."

Analysts did warn investors last week to expect higher volatility due to thin holiday trading, and this is what the gold market saw. At the time of writing, December gold futures were trading at $1,782.70, down 1.26% on the day.

"This week saw a rollover period. Wednesday was the last day of index roll, meaning that it was the last day for anyone who was long December contract to either liquidate those positions or roll those positions. This is what happened with the selloff at the beginning of the week. It gave people a chance to get out of the trade and revaluate," Grady said.

Traders who got in late and were chasing the market higher are the ones getting out now, said Walsh Trading co-director Sean Lusk.

"What we are seeing here is those who got long last going out first, which means the public who probably chased this thing from $1,920. The formation was pretty steep, so the break was to be severe," Lusk said.

Also, a lot of the attention is being taken up by the crypto space, and it has been hurting gold as well, Grady added. "Some money came out of precious and went into crypto," he said.

Lusk also noted that a lot of people are starting to favor crypto versus gold. "But at the end of the day, what would you rather have an ounce of gold in your hand or something on the screen?" he asked.

 

Eyes on COVID restrictions, stimulus, Fed

In the next few weeks leading up to the Christmas holidays, the market's attention will shift to how severe the COVID-19 restrictions will be, whether there will be any more stimulus this year, and what more can the Federal Reserve do to help, according to analysts.

"Market sentiment will be more likely influenced by news on the timing of a vaccine and concerns about a near-term intensification of Covid containment measures in the wake of Thanksgiving gatherings," said ING chief international economist James Knightley. "The number of cases was rising sharply before last week, but holiday travel and socializing could see an acceleration that necessitates aggressive action to prevent healthcare systems buckling under the pressure of hospitalizations."

These new restrictions could harm the economic recovery, which is far from stable, Knightley said. "Already we can see the jobs market is suffering as curfews and restrictions kick in across more parts of the United States."

Markets are still likely to see problems with getting the COVID-19 vaccines out while the second wave persists, added Lusk. "There is some real potential that this could still hamper this recovery in equities outside of the political situation," he noted.

With no stimulus yet in sight, the big question for gold is whether or not the market can count on the Fed to do more in December, said Ghali.

"More specifically, the change in weighted average maturity that some part of the market expects. That was the focus of the Fed minutes and will likely be the focus of the mid-December FOMC meeting. That's ultimately what will determine whether or now gold prices will resume their upward trajectory in the near future," he noted.

 

What's next?

In terms of how to trade gold from here, Grady said to keep an eye on $1,851 as the upside level and then sell that level the first time gold reaches it. "This was our old low that we broke down," he said.

Lusk, on the other hand, is not ruling out more losses next week before gold begins to recover. "If this market can push down another $60-$70 dollars lower, we could see a move below $1,700 before this is over with," he said.

After that, Lusk projects for gold to begin to climb into 2021, noting that the end of December and beginning of January are seasonally good times for gold.

"We'll go from Mnuchin to Yellen, which is right out of Bernanke school of quantitative easing and money printing. You can look for continued dips to get bought," he said. "Seasonally, as we get into November through mid-December, we see a seasonal weakness. The market was overdue here. I am looking for support levels to hold and then buy into 2021.

 

Data to watch

Next week's data slate is a full one, including the key U.S. nonfarm employment figures from November, scheduled for Friday.

There is also the PCE price index and pending home sales on Monday, ISM manufacturing PMI on Tuesday, ADP nonfarm employment and factory orders on Wednesday, and ISM non-manufacturing PMI and jobless claims Thursday.

 

By Anna Golubova

For Kitco News

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Global stocks hover near record high, oil skids on demand outlook

Stock Markets41 minutes ago (Nov 27, 2020 01:06AM ET)

TOKYO (Reuters) – Asian shares stalled near record highs on Friday as investors weighed renewed doubts about a highly-anticipated coronavirus vaccine against hopes that some of the region's economies will recovery quicker than their Western peers.

MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.04% but remained with striking distance of a life-time peak touched this week.

Australian shares ended down 0.53%. Treasury Wine Estates (OTC:TSRYF) Ltd tumbled by 11.25% after China slapped tariffs on Australian wine, which is likely to worsen a diplomatic row between Beijing and Canberra.

Japan's Nikkei rose 0.33% in choppy trade.

Shares in China rose 0.13% after data showed Chinese industrial profits surged at the fastest pace since early 2017. South Korean stocks also rose 0.27%.

U.S. S&P 500 e-mini stock futures fell 0.09%. U.S. financial markets were closed on Thursday for the Thanksgiving holiday and will trade on a partial schedule later on Friday.

Euro Stoxx 50 futures were down 0.26%, German DAX futures fell 0.24%, and FTSE futures were down 0.22%, suggesting a soft start to the European session.

U.S. oil prices extended their declines from a seven-month high due to signs of oversupply.

British drugmaker AstraZeneca (NASDAQ:AZN)'s coronavirus drug was touted as a "vaccine for the world" due to its inexpensive cost, but the efficacy of the vaccine is now facing more intense scrutiny, which experts say could delay its approval.

Several scientists have raised doubts about the robustness of results showing the shot was 90% effective in a sub-group of trial participants who, by error initially, received a half dose followed by a full dose.

"With global case numbers having now topped 60 million… there is certainly some rough terrain ahead for the global recovery, and that can create economic scarring," analysts at ANZ Bank wrote in a memo.

MSCI's broadest gauge of world stocks was up 0.08% on Friday, sitting just below a record high reached in the previous session.

Concerns about the distribution of a coronavirus vaccine have placed renewed focus on the current state of the pandemic, which looks grim for many places.

U.S. hospitalizations for COVID-19 are at a record and experts warn that Thanksgiving gatherings could lead to further infections and deaths.

More than 20 million people across England will be forced to live under the toughest restrictions even after a national lockdown ends on Dec. 2. Partial lockdowns in some European countries have also raised concern about economic growth.

The European Central Bank's chief economist highlighted these concerns in dovish comments on Thursday, which pushed European bond yields lower.

The euro, which last bought $1.1924, showed little reaction because currency traders have largely priced in expectations for additional ECB easing next month.

The dollar index fell toward its lowest in more than two months.

The yield on benchmark 10-year Treasury notes fell to 0.8586% as some investors sought the safety of holding government debt.

U.S. crude dipped 1.82% to $44.88 a barrel. Brent crude fell 0.17% to $47.72 per barrel.

Fuel demand is falling due to renewed coronavirus lockdowns, but some oil producers are not complying with agreed production cuts, which raises concerns about oversupply.

Bitcoin, the world's biggest cryptocurrency, edged up to $17,256 on Thursday, but it tumbled by 8.4% in the previous session after failing to take out its record high of $19,666.

The cryptocurrency showed little reaction to a report in the Financial Times that Facebook (NASDAQ:FB) will launch its own Libra digital currency in limited format next year.

Bitcoin has rallied around 140% this year, fuelled by demand for riskier assets.

Global stocks hover near record high, oil skids on demand outlook

 

By Stanley White

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Peter Hug: Should gold and silver still be in your portfolio?

Gold’s medium-term outlook is still constructive, and long-term investors should be using lower prices to re-weight their gold holdings, said Peter Hug, global trading director of Kitco Metals.

“There’s a bridge that needs to be gapped here until this vaccine gives everybody the confidence to go back and have this economy at full bore. That is, to me going to require additional stimulus,” Hug said. “The politicians might not do it, I think that’s going to really hurt the stock market, but if they do do it, I think that’s constructive for gold.”

In six months, it’s more than likely to get more stimulus which would drive gold to new highs. Monetary tightening would not happen before 2022, Hug added.

Hug said that investors should be allocating only a portion of their portfolio into metals and actively re-balance when needed.

“A balanced portfolio is the smartest way to go. Part of that balanced portfolio should hold hard assets, whether that’s gold, whether that’s real estate, whether that’s oil, you need a component of your portfolio in precious metals,” he said.

By David Lin

Kinesis Money

David

Bank of American neutral on gold price – no longer holding $3,000 target

The possibility of three highly effective vaccines in 2021 has changed the landscape for the gold market, according to analysts at Bank of America Securities.

In BoA's 2021 outlook presentation, Francisco Blanch, head of global commodities & derivatives research, and Michael Widmer, metals strategist at the bank, announced a significant shift in their gold forecast for 2021. The bank no longer expects prices to hit the $3,000 an ounce target.

"We are now neutral on gold," said Blanch. "We see a risk of rising long-term interest rates."

Inits updated forecasts, the bank sees gold prices averaging the year around $2,063 an ounce.

"As the global economy opens up, gold faces more challenges, making it tricky to hit $3,000/oz; that said, the ongoing fiscal and monetary stimulus should push the yellow metal above $2,000/oz again," the bank's analysts said in its 2021 outlook report.

The comments come as gold prices continue to struggle to attract some buying momentum as the market test another critical support level. December gold futures last traded at $1,801 an ounce, down 2% on the day.

Bank of American made headlines in April as they expected significantly higher gold prices due to strong momentum and significant monetary policy action from central banks.

In Tuesday's presentation, BoA expects that energy commodities, which suffered significantly in 2020, will outperform next year as the economy recovers from the devastation caused bythe COVID-19 pandemic. At the same time, the analysts are also bullish on industrial metals, particularly copper and nickel.

As energy prices outperform commodities next year, the analysts expect Brent Crude oil to rise to $60 a barrel by the summer.

"We see a world in a cyclical recovery, and that means we could see higher interest rates," Blach said. "We are not outright bearish on gold. Fiscal stimulus programs will keep investors in the market, but eventually, there is a big rotation underway, and in a cyclical commodities rally, there is some likelihood of precious metals becoming lighter."

Widmer noted that rising inflation could be met with higher nominal interest rates. He said the question is whether inflation increases faster than nominal interest rates to keep real interest rates lower.

Blach said that the big shift in their gold outlook is because of the recent vaccine news. He explained that markets were expecting vaccines to be about 60% effective, which would have meant a slower recovery.

He added that the 90% effectiveness of all three potential vaccines could mean that life gets back to normal quicker in 2021.

"I think that's what the markets are starting to pricing and why we've had such a big rotation in such a short period of time," he said.

The bank has lowered its outlook for silver, but they see the metal outperforming gold as its industrial demand picks increases in a global economic recovery.

Widmer added that silver's outlook remains bright as a new focus on green energy could increase demand for solar panels.

"Silver is our preferred play on rising investment in solar panels," the analysts said in their report.

Bank of America expects silver prices to average next year around $29.13 an ounce.
 

By Neils Christensen

For Kitco News

 

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Peak in gold price? Precious metal to drop below $1,650 in next two years, says Westpac

Gold's record high of $2,070 an ounce was likely the peak, at least for now, according to Westpac, which sees gold dropping below $1,650 in the next two years.

Risk aversion has peaked, and so has the gold price, Westpac senior economist Justin Smirk said in his November update. "2020 has seen a peak in risk aversion, central bank liquidity, and global uncertainty hence our forecast for gold prices to ease in 2021," Smirk said.

Westpac projects for gold to average below $1,760 an ounce by the end of next year and then drop all the way to $1,633 at the end of 2022.

The situation will turn around only by mid-2023, when the precious metal will begin to climb and rise to $1,848 by September 2024, according to the long-term forecast.

This outlook comes as gold has been on a losing streak amid better economic data and more risk-on sentiment in the marketplace in light of positive COVID-19 vaccine news.

At the time of writing, December Comex gold futures were trading at 1,834.00, down 2.05% on the day after shedding nearly $40 on Monday.

"U.S. equity markets recorded gains, helped by positive vaccine news. Currencies were notably buffeted by stronger U.S. PMI data, which helped the USD bounce off a three-month low. U.S. bond yields rose slightly," Westpac strategists summarized on Monday.

Vaccine developments are "game changers" for the U.S. economy, said Westpac chief economist Bill Evans.

"Our forecasts have been for a fairly 'steady' profile for U.S. Treasuries through 2021 as markets were uncertain about the recovery outlook in the face of competing 'forces' – prospects of a vaccine and the sharp lift in case loads," said Evans on Monday.

The risk-on sentiment seems to be winning the tag of war between positive vaccine news and a sharp rise in coronavirus cases.

"These earlier and more convincing than expected results on the vaccines … point to markets favoring the improving vaccine outlook over the immediate threat from rising case-loads. And as we move through 2021, that dynamic will become more apparent," Evans said.

A more optimistic economic outlook could also pressure the Federal Reserve to begin to curtail its loose monetary policy next year, the chief economist added.

"We accept that the Federal Reserve may remain active in the Q.E. space through 2021 but feel that the optimism associated with the successful distribution of vaccines through 2021 will be the dominant market force while providing the Fed with some scope to ease back on support," he noted.

Westpac also raised its forecast for U.S. 10 year Treasuries through 2021. "We have now brought that rate profile in 2022 forward to 2021 with the 10-year bond rate rising from 0.80% in December through to 1.2% by end 2021," Evans added.

One concern to watch with the introduction of a vaccine is the percentage of the population choosing to get it, Westpac senior economist Elliot Clarke wrote.

"One of the main challenges after approval will be the extent of take–up of the vaccine. For the spread of the virus to be effectively curtailed, at least 60–70% of the population will need to achieve immunity. Even for a highly effective vaccine that 'works' say 90% of the time, that will require a high take up rate in the order of 65–80%. Studies across the U.S. and Europe have seen just over 50% of adults indicating they would accept a COVID–19 vaccine," Clarke noted.

Also, important to keep in mind that the U.S. economy is not out of the woods yet, and it will need more fiscal stimulus.

"Without a meaningful, medium-term focused stimulus package after January's inauguration, the U.S. economy still risks getting caught in a sub-trend growth, high–unemployment environment in 2021 – with considerable downside risks," Clarke said.
 

By Anna Golubova

For Kitco News

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Gold’s big question: Can the bull market outlive a pandemic?

Gold’s record-breaking bull market is facing an existential question after this month’s pharmaceutical breakthroughs: what happens to the rally once Covid-19 vaccines start rolling out?

 

 

 

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