Gold gains as stimulus uncertainty ease
· Gold rose on Wednesday after concerns over further U.S. stimulus to support the virus-hit economy waned, with focus now on minutes from the U.S. Federal Reserve’s last meeting for clues on the outlook of monetary policy.
· Spot gold rose 0.4% to $1,884.46 per ounce. U.S. gold futures fell 1.3% to $1,884.60 per ounce.
· “President Trump’s retracement from “no stimulus negotiation” to “unilateral relief measures” has helped support gold prices despite the U.S. dollar only weakening slightly,” said Jeff Klearman, portfolio manager at GraniteShares.
“Coronavirus-related demand destruction concerns are still abound, meaning sooner or later, a fiscal stimulus package will likely be passed and the Fed will continue its unprecedented accommodative monetary policy,” Klearman said.
· Gold prices had declined nearly 2% on Tuesday after U.S. President Donald Trump announced a halt in additional stimulus negotiations until after the Nov. 3 presidential election. However, he later suggested new payroll assistance to U.S. passenger airlines.
· Investors now await minutes from Fed’s Sept. 15-16 policy meeting at 1800 GMT. Fed Chair Jerome Powell on Tuesday called for more help for businesses and households to keep a nascent economic recovery from faltering.
· “There is an anticipation about the level of inflation as a result of stimulus ... and that could be hedged by gold,” said Jeffrey Sica, president and chief investment officer of Sica Wealth Management.
He added “there will be a great potential of not having an election result in November, which will help gold prices as a flight to safety.” Gold is seen as a safe-haven investment due to its ability to retain value even at times of financial or political uncertainty. It is also used as a hedge against inflation.
· Elsewhere, silver climbed 2.7% to $23.70 per ounce, platinum was up 0.9% to $856.15, while palladium rose 0.9% to $2,362.41.
· Split on applying new framework, Fed struggles over economic outlook as well
U.S. Federal Reserve policymakers split over how to apply a new strategy for monetary policy at their September meeting, and, amid growing doubts about the path of the economy, offered no clear sense of their next steps to offset the coronavirus recession.
· Fed officials worried that lack of help from Congress will threaten recovery, minutes show
Federal Reserve officials worried that a lack of further fiscal stimulus would jeopardize and economy recovery that was moving faster than expected, according to minutes released Wednesday from the central bank’s September meeting.
The Federal Open Market Committee on Wednesday released minutes from its Sept. 15-16 meeting. The Fed’s policymaking arm held interest rates steady at the meeting and approved language outlining its new approach to inflation.
The minutes described the recovery in GDP at that point as being “rapid.”
The meeting featured extensive discussion about the economic outlook, as members said the economy was doing better than expected in good part because of the fiscal help provided by Washington.
That support is in jeopardy as talks have broken down between the White House and congressional Democrats and may not resume before the November election.
“Many participants noted that their economic outlook assumed additional fiscal support and that if future fiscal support was significantly smaller or arrived significantly later than they expected, the pace of the recovery could be slower than anticipated,” the meeting summary stated.
Small businesses and farmers were being bolstered by the support, officials said, amid an economy that had regained more jobs than expected through August.
· Fed’s Kashkari sees ‘enormous consequences’ from stimulus impasse
Minneapolis Fed President Neel Kashkari became the latest central banker to warn about the stimulus impasse in Washington.
The central bank official told CNBC’s “Squawk Box” in a Wednesday interview that failing to provide more aid to businesses, workers and local and state governments could have “enormous consequences.”
“If we don’t support people who have lost their jobs, then they can’t pay their bills and then it ripples through the economy and the downturn is much worse than it needs to be,” Kashkari said. His comments echo sentiment expressed Tuesday from Chairman Jerome Powell and Cleveland Fed President Loretta Mester.
· Fed's Evans says Fed won't follow strict formula for timing liftoff
The U.S. central bank will likely need to keep monetary policy easy for some time after 2023 in order to meet its inflation goal, even once it begins raising interest rates, a top Federal Reserve policymaker suggested on Wednesday.
Inflation, he forecast, will return to 2% only by 2023, and the Fed will need to moderately overshoot that level for some time thereafter to achieve its goal of 2% on average, he said.
· Trump returns to Oval Office after doctor says he’s been free of coronavirus symptoms
· Trump says ‘no president’s ever pushed’ the FDA like him, vaccine coming ‘very shortly’
· As stimulus talks falter, the U.S. economy faces growth coming to a halt
A recovery that has lived by stimulus could die by stimulus, or the lack thereof, as the impasse among Washington leaders hits a new phase.
With the increasing chance that no broad-based help will happen before the November election, the reality now exists that a record-breaking rebound in the third-quarter will be followed by little or no growth to end 2020 and begin 2021.
“A lack of another round of fiscal aid will result in a much slower path of growth heading into the end of the year,” said Joseph Brusuelas, chief economist at RSM. “You’re just going to see everything slow to a grind if we don’t see anything put forward.”
· Unemployed workers unlikely to get a boost in benefits
Millions of workers collecting unemployment are unlikely to get a boost in benefits before the November election, after President Donald Trump directed White House officials on Tuesday to stand down from negotiations with Democrats on another round of coronavirus relief.
· Unemployment benefits may pay just $5 a week without stimulus deal
It appears unemployed workers won’t get another boost in their weekly benefits anytime soon, after President Donald Trump pulled officials out of negotiations on a fifth round of coronavirus relief Tuesday.
Absent more aid, jobless Americans will be living off their current allotment of benefits from the state or federal government. In some cases, that amounts to just $5 a week.
· Trump wants Congress to approve more $1,200 stimulus checks. That may not be easy
President Donald Trump is calling for Congress to move on approving a second round $1,200 stimulus checks to millions of Americans.
But don’t count the money just yet.
The president tweeted on Tuesday night he supports stand-alone legislation to authorize those payments. That was a reversal from his position earlier in the day, when he said he wanted Washington lawmakers to hold off on stimulus negotiations until after the election.
Trump has also called for other stand-alone legislation to provide $25 billion to help the airline industry and $135 billion for additional Paycheck Protection Program loans to small businesses.
· Pelosi and Mnuchin discussed standalone airline bill, to talk again
U.S. House of Representatives Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin had a 20-minute phone call to discuss a standalone bill to provide assistance to the struggling airline sector and agreed to talk again on Thursday, Pelosi’s spokesman said in a post on Twitter on Wednesday.
· Unemployment is world's biggest risk, business leaders say
Unemployment is seen as the biggest worry over the next 10 years for business executives around the world, closely followed by concern about the spread of infectious diseases, according to a survey by the World Economic Forum.
Unemployment rates have rocketed due to lockdowns and other restrictions to combat the coronavirus pandemic, with fears of worse to come in countries which have furloughed workers.
· Stimulus doubts stoke uncertainty for shoppers, retailers just as holiday season begins
· Major European economies forecast dire declines
Major European economies have been downgrading already dire economic forecasts as a second wave of coronavirus infections continues to rage through the continent, prompting governments across the region to impose more restrictions on businesses and the public.
The Bank of Spain warned Tuesday that strict measures to contain the spike in virus cases could push the country into a worse-than-expected economic crisis. In its worst-case scenario, the bank said gross domestic product could contract 12.6% in 2020. In a less pessimistic forecast, GDP is forecast to contract 10.5%.
France, the euro zone’s second largest economy, is also warning that an economic rebound post-lockdown is likely to plateau in the fourth quarter, as a spike in cases stifles business activity.
· French president Macron announces new COVID-19 restrictions
· Rising COVID cases will stall UK recovery, budget watchdog warns
British economic output fell an unprecedented 25% year-on-year in April, when the lockdown was tightest, and output in the first half of 2020 slumped more than in any other G7 economy.
Much of the economy has since rebounded. August gross domestic product (GDP) data, due on Friday, is likely to show output 7% below year-ago levels, say economists polled by Reuters.
Reference: CNBC, Reuters
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