Gold hits 2-week high as investors eye fresh U.S. fiscal support
· Gold rose to a two-week peak on Tuesday, buoyed by growing expectations of more U.S. fiscal stimulus to combat the economic impact of rising coronavirus cases, while a muted dollar added further support.
· Spot gold gained 0.4% to $1,871.65 per ounce. Earlier, it touched $1,875.07, its highest since Nov. 23. U.S. gold futures settled up 0.5% at $1,874.90.
· “We are not too far away from the highs, and once we start getting stimulus or a clearer picture of how this is all going to play out, gold and silver will continue to move higher,” said Daniel Pavilonis, senior market strategist at RJO Futures.
· Raising gold’s appeal for other currency holders, the dollar index stalled its slide, but was still close to multi-year lows.
· Amid mounting coronavirus cases, the U.S. Congress will vote this week on a one-week stopgap funding bill to provide lawmakers more time to reach a deal on COVID-19 relief.
· “Further fiscal spending is positive for gold, and the market appears to be anticipating some type of fiscal package passage, even if only temporary,” James Steel, chief precious metals analyst at HSBC, said in a note.
But while a broadly defensive dollar, negative real rates and a “merciless rise in COVID-19 cases” are positive for gold and silver, “more good news on the vaccine front would be a powerful negative.”
· Gold, considered a hedge against inflation and currency debasement, has risen more than 23% this year, benefiting from near-zero interest rates and the risk of higher inflation likely to result from massive stimulus globally.
· Meanwhile, Britain began its vaccination against COVID-19 on Tuesday.
· Silver rose 0.6% to $24.64 per ounce, while palladium fell 0.7% to $2,315.79 and platinum was up 0.4% at $1,025.56.
· McConnell backs off demand for liability protection in Covid stimulus negotiations
Senate Majority Leader Mitch McConnell said he wants to pass a relief bill with neither legal immunity for businesses nor aid for state and local governments, two key and contentious issues along with direct stimulus checks to individuals.
“What I recommend is we set aside liability and set aside state and local, and pass those things that we can agree on knowing full well we’ll be back at this after the 1st of the year” during the transition to President-elect Joe Biden’s administration, McConnell told reporters on Tuesday.
· U.S. companies sitting on record cash pile - S&P Global
U.S. corporations are sitting on record amounts of cash to reduce shock caused by the coronavirus pandemic, S&P Global Ratings said on Tuesday.
Cash and investments owned by non-financial and non-utilities corporate issuers jumped 30% to an all-time high of $2.5 trillion in the first half of 2020, the ratings agency said a statement.
Those companies have increased their debt levels by 9% to nearly $8 trillion, S&P Global Ratings said, adding that the U.S. Federal Reserve’s plan to maintain interest rates near zero for at least another three years will help companies that may need to take on more debt if the health crisis worsens.
“S&P Global Ratings believes near-term economic uncertainty likely will keep balance sheets relatively conservative,” the ratings agency said. “However, if the outlook brightens in 2021 as coronavirus vaccines become widely available, we believe some issuers will revert to more aggressive financial policies.”
· CORONAVIRUS UPDATES:
· Johnson & Johnson: The Dark Horse Of The Covid Vaccine Race?
Johnson & Johnson (NYSE: JNJ) is seen as a key player in the Covid-19 vaccine race.
The company started phase 3 trials in September and expects to file for emergency approval by early 2021 if the vaccine is safe and effective.
While rivals Pfizer and Moderna’s vaccines will have a head start, given that they have completed phase 3 trials with exceptionally strong results and are likely to start shipping their vaccines in the coming weeks.
· Biden, introducing public health team, focuses on masks, schools and vaccines
President-elect Joe Biden introduced the team that will lead his administration’s response to the coronavirus pandemic on Tuesday, emphasizing the coordination needed to achieve his goal of 100 million vaccinations in his first 100 days in office.
· Supreme Court rejects Trump ally’s push to overturn Biden win in Pennsylvania
· Fitch says upgrades of major economies unlikely in 2021 despite COVID-19 vaccine
Fitch Ratings told Reuters on Tuesday that upgrades of any major economy are unlikely in 2021 despite recent developments related to COVID-19 vaccination, and that countries in Latin America, the Middle East and Africa show the highest level of vulnerability to further negative action in the coming year.
“The two regions that have already seen the most rating downgrades (Latin America and Middle East & Africa) display the highest level of vulnerability to further negative action, with 9 and 12 Negative Outlooks respectively”, Stringer said.
Countries hit hard by the coronavirus will see the maximum economic boost from an effective vaccine which is rolled out swiftly in the first half of next year, Brian Coulton, Fitch’s chief economist told Reuters.
“All developed countries will clearly benefit (from a vaccine) but the UK, Spain, France and Italy were among the hardest hit in H1 2020 and the UK and the EU (European Union) have placed very large pre-orders of the Pfizer, Moderna and Oxford-AstraZeneca vaccines”, he said.
Coulton also said that the start of 2021 will be weak in Europe and the United States as a result of recently tightened restrictions and that the clearest benefits in annual growth numbers will be seen in 2022.
Fitch’s chief economist said that the rating agency expects a slower vaccine roll out in emerging markets as the logistics of rolling out mass immunization programmes could be more challenging, while vaccine pre-orders have been more modest.
Global gross domestic product recovery will strengthen from mid-2021 with vaccine rollouts now looking imminent, the agency noted.
Moody’s told Reuters last week that most sovereigns face a “significant negative shock” from the pandemic while S&P Global said in October that some of the world’s top economies could see their credit ratings cut or put on downgrade warnings in the coming months.
· China’s growing naval activity in Japanese waters is a big concern, Japan lawmaker says
Japan’s state minister of defense says China’s growing maritime activities in the waters surrounding Japan is a threat.
“We feel fear from the Chinese expanding naval power throughout the Pacific Ocean,” Yasuhide Nakayama told CNBC’s “Street Signs Asia” on Tuesday as part of Milken Institute’s Asia Summit.
China and Japan have had a longstanding dispute over a series of uninhabited islands in the East China Sea. Known as the Diaoyu islands to China and the Senkaku islands to Japan, the two sides have often clashed over the disputed territory, but agreed last month to continue discussions.
Nakayama’s comments come days after Japanese media reported that Japan, France and the United States will hold joint military drills for the first time next May, according to Reuters.
· Political impetus needed for Brexit talks to make progress - UK source
Political impetus is required for Brexit trade talks to make progress but a deal may still not be possible, a British government source said on the eve of a meeting between Prime Minister Boris Johnson and the EU’s Ursula von der Leyen.
“It’s clear that some political impetus will be required for the talks to make any more progress,” the source said.
· Australia consumer sentiment hits 10-year high
A measure of Australian consumer sentiment climbed for the fourth straight month in December to a 10-year high as the country further relaxed virus restrictions and states opened their borders to each other.
The Westpac-Melbourne Institute index of consumer sentiment released on Wednesday climbed 4.1% in December from November, when it had risen 2.5%.
The index is now 48% above a nadir hit in April and has reached its highest level since October 2010 at 112, implying optimists far outnumber pessimists
Reference: CNBC, Reuters, Wordometers
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