Gold Prices Set Record as U.S. Dollar Sinks to Lowest Level in Almost Two Years

Posted on 07/27/2020 6:08 AM

Will U.S./China trade negotiators hold talks on Phase 1 progress in August?

 


In Today’s Updates


 

Top Topics:
* U.S./China trade negotiators set to hold talks on progress of Phase 1 deal, but...
* FBI accused China of harboring an ex-military officer
* Beijing takes over U.S. Chengdu Consulate after forced closure
* NYT: Officials push U.S.-China relations toward point of no return
* Huawei lawyers claim Trump created "ominous" climate for extradition of Meng to U.S.
* Kudlow: 'I still think the V-shaped recovery is in place'
* Oxbury goes against grain in bid to become U.K.’s first ag lender in a century
* Russia’s central bank cut its key interest rate to a record low
* Powerful storms threaten parts of the U.S.
* Dollar index ticked down to touch lowest level in almost two years
* Gold prices hit new record
* Fed isn’t likely to roll out new stimulus measures this week: WSJ

* Speculative accounts have boosted their bets on U.S. soybean futures
* U.S. rig count rose last week for the first time since March
* Senate GOP leaders aiming to release Covid-aid package this afternoon
* Perdue announces extension of food box distribution program through October


U.S. food & beverage industry update:
* L.A. Times: Officials knew coronavirus could ravage San Joaquin County farmworkers
* Vertical farms fill a tall order


Update on reopening America... and around the world:
* Long wait for major professional sports is over


Coronavirus update:
* Florida became third state to record more than 400,000 cases of Covid-19
* New outbreaks emerge from Spain to China
* Top HHS official 'not happy' with coronavirus testing turnaround time
* Covid-19 patients face significant likelihood of lingering symptoms

* White House 'hopeful' of new coronavirus therapies 'in the coming days'

 

Politics & Elections:
* 100 Days: Democrats see clear path to Senate majority: The Hill
* Meatpackers donated to campaigns of Republicans backing liability protection
* Poll finds just 13% of voters still up for grabs for Trump, Biden
* 'A lot could change': Pollster Nate Silver says Trump reelection fate not 'sealed'
* The Economist analyzing polls and other data to predict U.S. elections


Other Items of Note:
* FY 2021 Ag spending approved as part of package; veto threat
* Kansas Dept. of Ag: unsolicited packages of seeds apparently from China
* Third round of talks on a proposed U.S./U.K free trade agreement begins today
* Global import restrictions hit $1.7 trillion

 


MARKET FOCUS


 

Equities today: U.S. futures tied to the S&P 500 edged up, suggesting a higher U.S. open. Overseas, stocks were mixed. China’s main stocks benchmark, the Shanghai Composite Index, closed up 0.3%. The equity gauge in Hong Kong ticked down 0.4%, while Japan’s Nikkei 225 eased 0.2% lower.

 

     U.S. equities Friday: The Dow lost 182.44 points, 0.68%, at 26,469.89. The Nasdaq fell 98.24 points, 0.94%, at 10,363.18. The S&P 500 declined 20.03 points, 0.62%, at 3,215.63.

 

     The S&P 500 closed down 0.28% for the week to mark its first negative week in four, while the Nasdaq closed down 1.33% to record two weeks in a row of a loss. The Dow was down 0.8%.

 

     About 80% of the companies already reporting have beaten Wall Street estimates. That is well above the average beat rate of about 65%, since 1994.

 

On tap today:

 

     • USDA Export Inspections at 11 a.m. ET
     • USDA Crop Progress at 4 p.m. ET
     • U.S. durable goods orders for June, due at 8:30 a.m. ET, are expected to rise 5.4% from a month earlier.
     • Dallas Fed's manufacturing survey for July is out at 10:30 a.m.

 

I still think the V-shaped recovery is in place,” White House economic adviser Larry Kudlow said Sunday. “I don’t deny that some of these hot-spot states are going to moderate that recovery, but on the whole the picture is very positive.” Kudlow noted data last week showing that sales of existing homes jumped 20.7% in June after dropping 9.7% the month before, and another report showing that manufacturing in July expanded for the first time since February. “I do think the odds favor a big increase in jobs creation and a big reduction in unemployment” for July, Kudlow said on CNN’s State of the Union.

 

Oxbury goes against grain in bid to become U.K.’s first agricultural lender in a century In the U.S., farm debt has grown to 1980s levels on an inflation adjusted basis. The Financial Times reports there is “little surprise” that “lenders servicing the $5 trillion sector have either thrown in the towel or evolved into more universal banks like France’s Crédit Agricole and the Netherlands’ Rabobank. Newcomer Oxbury is going against the grain in its bid to become the U.K.’s first dedicated agricultural bank in a century.” Agriculture is on the wane across much of the developed world, not least the U.K. where there are now just 280,000-odd farms, the article details. Link to article (paywall).

 

Russia’s central bank cut its key interest rate to a record low as the coronavirus pandemic has pushed the economy into a deep recession. The bank on Friday lowered its benchmark rate by 0.25 percentage point to 4.25%, following a one-percentage-point cut in June to a post-Soviet low. The bank’s move makes lending to businesses and consumers cheaper in an economy hit hard by a twin strike of lockdowns and lower oil prices.

 

     Russia plunge

 

Market perspectives:

 

     • U.S. dollar dropped to its lowest level in almost two years against a basket of major currencies as momentum picked up after the currency wiped out a key technical level Friday, while Japan’s currency climbed against all its major peers. The ICE Dollar Index, which measures the U.S. dollar against a basket of currencies, fell 0.5% to its lowest level since September 2018. The dollar is likely to weaken further following this week’s FOMC meeting even if the Federal Reserve holds current policy, benefiting the euro and “dollar bloc” currencies the most, according to Wells Fargo. Any new, major policy changes in the form of yield curve control or additional forward guidance are more likely to be announced at September or November meetings, Wells Fargo added. Meanwhile, billionaire investor Ray Dalio warned that the U.S./China conflict could expand into a “capital war” and harm the U.S. currency. "There's a trade war, there's a technology war, there is a geopolitical war and there could be a capital war," according to Dalio. "If you say by law 'Don’t invest in China,' or even possibly withholding the payment of bonds that the U.S. owes payment on in China - these things have big implications for the dollar," he added. "The things I worry about the most are the soundness of our money. You can't continue to run deficits, sell debt or print money rather than be productive and sustain that over a period of time."

     Dollar troubles


     • Gold prices climbed 2.1% to $1,937.50 this morning after having risen on Friday to a record close, topping the previous high of $1,923.70 in September 2011. Spot gold has increased 27% since the start of 2020.

 

     Gold rallies

 

     • The Fed isn’t likely to roll out new stimulus measures this week but is debating how to provide more support to the economy once the economic outlook becomes clearer, the Wall Street Journal reports. “They could do this by adjusting their purchases of Treasury and mortgage securities and by providing more detail about what conditions would lead them to consider withdrawing stimulus.” Link for details. Meanwhile, the Joint Economic Committee meets tomorrow for a hearing on reducing uncertainty during the Covid-19- induced economic recession.

     Covid and the Fed

 

     • Speculative accounts have boosted their bets on U.S. soybean futures and cut back their short positions in corn.

 

     • Russian oil grab in Libya fuels U.S./Kremlin tensions in Mideast. Military contractors linked to the Kremlin have seized control of two of Libya’s largest oil facilities in recent weeks, heightening tensions between Russia and the U.S. over Moscow’s growing footprint in the turbulent North African nation, the Wall Street Journal reports (link).

 

     • U.S. rig count rose last week for the first time since March. Meanwhile, President Donald Trump will visit Midland, Texas Wednesday, according to a White House scheduling statement. He will tour the Double Eagle Energy rig and deliver remarks.

 

     • Crude oil: After trading in negative territory or not far from unchanged most of the overnight trade ahead of the U.S. trading start, crude oil futures have moved into positive territory. U.S. crude was recently up 0.4% around $41.45 per barrel while Brent crude rose more than 1.3% to trade around $43.95 per barrel.

 

        Crude

 

Powerful storms threaten parts of the U.S. Heavy rain and flash floods have caused widespread power outages in parts of Texas as Tropical Storm Hanna made landfall. In Hawaii, Hurricane Douglas, which had sustained winds of 85 miles an hour on Sunday, is expected to maintain hurricane strength as it passes through the islands.

 


POLICY FOCUS


 

Update on China:

  • U.S./China trade negotiators are set to hold talks on progress of Phase 1 deal, but... The head of China’s trade negotiating team, Vice-Premier Liu He, and joint leader of the U.S. side, Trade Representative Bob Lighthizer, are expected to hold talks in August, the South China Morning Post (SCMP) reported, echoing prior reports from other media and including remarks by Lighthizer earlier this month. The meeting will be “an important inflection point” to allow both sides to assess the progress of the deal, a source told the SCMP. However, if because of the prevailing tensions between Washington and Beijing, “there was less of an appetite for engagement at the moment,”, the two sides might agree that a telephone conversation between Lighthizer and Liu on May 8 had satisfied the “meeting” clause of the deal, the source said. An unnamed Chinese government adviser said he too thought a new round of trade talks was unlikely given the poor state of the relations. “The trade topic has lost weight in the overall China/U.S. relationship,” he said. Chinese authorities responsible for economic and trade issues met on Thursday to discuss several related issues, including how to increase imports, the SCMP item noted. “We have already bought what we could [from the U.S.], so any additional purchases would create difficulties,” the person quoted said. Link to SCMP article.
     
  • The FBI accused China of harboring an ex-military officer who was wanted for visa offenses at its consulate in San Francisco. Soon after, they announced her arrest.
     
  • The flag at the U.S. Consulate in Chengdu was lowered in the early hours of this morning, signaling the end of U.S. diplomatic operations in the capital of Sichuan province for the foreseeable future. A statement from the U.S. State Department confirmed the suspension of activities. “We are disappointed by the Chinese Communist Party’s decision and will strive to continue our outreach to the people in this important region through our other posts in China,” the statement read.
     
  • Madmen” in America. The pro-government Chinese newspaper Global Times lamented the fraying of ties, while being in no doubt of where to lay the blame. “Right now, it is no longer a matter of whether China/U.S. ties are in freefall, but whether the line of defense on world peace is being broken through by Washington,” a Sunday editorial said. “The world must not be hijacked by a group of political madmen.”
     
  • Officials push U.S./China relations toward point of no return, says an article in the New York Times. “Top aides to President Trump want to leave a lasting legacy of ruptured ties between the two powers. China’s aggression has been helping their cause.” The item adds that, “From the start, Trump has vowed to change the relationship with China, but mainly when it comes to trade. Early this year, the negotiated truce in the countries’ trade war was hailed by some aides as a signature accomplishment. That deal is still in effect, though hanging by a thread, overshadowed by the broader fight.” Link
     
  • Huawei lawyers claim Trump created "ominous" climate for extradition of CFO Meng to U.S. Lawyers for Meng Wanzhou, the chief financial officer of Huawei Technologies, have applied to a Canadian court seeking stays in the proceedings for her extradition to the United States, documents released late last week showed. Meanwhile, HSBC denied “setting traps to ensnare” Huawei after the bank was dragged into the clash. In the British-headquartered bank’s first public comments on the controversy, it rejected allegations in Chinese media on Saturday that it tried to entrap Huawei in the act of breaking U.S. sanctions, and that it had presented U.S. authorities with misleading information. The U.S. has labelled Huawei a national security threat with close links to the Chinese military and has sought to stop the company from building 5G networks around the world. At the request of the US Department of Justice, Meng Wanzhou, Huawei’s chief financial officer and the daughter of the company’s founder, was arrested in December 2018 in Vancouver, Canada. She faces extradition to the U.S. on charges of bank and wire fraud.
     
  • U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.

Update on next aid package:

  • Senate GOP leaders are aiming to release their Covid-aid package this afternoon. Some details were provided in weekend comments by Trump administration officials on Sunday TV news shows — see The Week Ahead for details (link). Meanwhle, Treasury Secretary Steven Mnuchin and White House chief of staff Mark Meadows said on Sunday that Congress may need to pass a stopgap bill to maintain enhanced unemployment insurance to Americans.

    Assistance

     
  • House Speaker Nancy Pelosi (D-Calif.) said she stayed in Washington over the weekend “hoping they had something to give us. They promised it this week. It didn’t come.” When asked on CBS' Face the Nation if the House will stay in session until there’s a deal, Pelosi said “we can’t go home without it.”

    Meanwhile, Pelosi provided a new nickname for President Trump: “Mr. Make Matters Worse. He has made matters worse from the start. Delay, denial, ‘it’s a hoax,’ ‘it’s a miracle’ and the rest.”

Update on implementation of CARES 1, including CFAP:

  • USDA Secretary Sonny Perdue announced extending the food box distribution program through September and October. There’s between $500 million and $700 million remaining for a third round of the program, which has faced growing scrutiny from House Democrats for its reliance on private contractors with little experience in food distribution.

Food and beverage industry update:

  • Officials knew coronavirus could ravage San Joaquin County farmworkers. Why didn't they do more to stop it? San Joaquin County is at the center of alarming coronavirus outbreaks among farmworkers. But officials balked at imposing mask rules, and critics say they missed key opportunities to slow the spread. Link to Los Angeles Times article.
     
  • Mondelēz International CEO Dirk Van de Put says market share of his big brands is growing as consumers turn to snacks, they know and love. Link to article in Bloomberg Businessweek.
     
  • Vertical farms fill a tall order. Indoor crops grown by high-tech methods are on the rise as the Covid-19 pandemic spurs interest in food security for cities. “On multiple floors of a single building, layers of vertical fields can be harvested in phases to provide year-round crops. Since the farms are close to their target consumers, spoilage and damage from shipping are greatly reduced. Eventually, such farms could provide healthier produce options in under-served neighborhoods that have been described as 'food deserts'.” Link to WSJ article.
     
  • Trump administration has determined that a proposed mine in Alaska would not impact salmon harvests in the area, reversing an Obama-era determination that it would. “There would be no measurable change in the number of returning salmon,” said the new assessment of the environmental impacts of the controversial Pebble Mine. It also said the project "would not be expected to have a measurable effect on fish numbers and result in long-term changes to the health of the commercial fisheries in Bristol Bay."

Update on reopening America... and around the world:

  • The long wait for major professional sports is over for broadcasters with the new MLB season starting up and both the NHL and NBA finishing off their 2019-2020 seasons — the basketball season resumes Thursday at the Florida Disney campus where teams have been sequestered since July 7. ESPN says demand for ad time on baseball telecasts has been high and Fox's regular season was 90% sold out before the first pitch. The NBA is set to pick up its season in the Disney World bubble on Thursday, with coverage primarily on ESPN, ABC and TNT. Meanwhile, looming is a potential comeback of the NFL in the fall, for Disney, Fox, and ViacomCBS.

    Meanwhile, a Cincinnati Reds player tested positive for Covid-19 a day after playing on Opening Day.

Coronavirus update:

  • Summary:

    — 16,095,722: Confirmed cases world-wide, and 584,556 deaths
    — 65,490: New U.S. cases recorded yesterday
    — 4,193,103: Total confirmed cases in the U.S.
    — 900: Deaths in the U.S. recorded yesterday
    — 146,574: Total U.S. deaths
    — 50,635,683: Tests conducted in the U.S.

    Princeton Energy Advisors said, “The U.S. reported 78,000 new cases of coronavirus on July 25th, bringing the cumulative total to 4.1 million. On the plus side, the daily growth rate has stabilized around 2% in the last two weeks, and this suggests that the maximum number of new cases may not exceed 80,000. At the same time, new cases are projected to continue around 70,000/day the next few weeks, with the Aug. 31st forecast at 60,000 and the Sept. 30th forecast around 40,000. This again assumes we see some sort of peak and decline in the next few weeks.”

    Link to Covid Case Tracker

    Link to Our World in Data

     
  • Florida became the third American state to record more than 400,000 cases of Covid-19. Nationally, the tally has passed 4 million — a doubling in six weeks as cases spike in many states in the South and West. On Friday more than 1,000 deaths were recorded for the fourth day in a row, the first time that has happened since May. Yet deaths remain well below levels in April, when an average of 2,000 people died a day. Florida reported more than 9,000 new coronavirus cases on Sunday, a day after overtaking New York as the state with the second-highest number of confirmed infections, behind only California. This weekend, Florida overtook New York in terms of total infections since the pandemic began, with more than 12,000 new cases on Saturday and 9,338 on Sunday, for a total of nearly 424,000. It is second to only California, which on Saturday reported a further 10,066 people tested positive over the past day, taking its total to 445,400.
     
  • Several countries, including Britain and Norway, re-imposed quarantine on travelers from Spain after a surge of new infections in Catalonia. TUI, Europe’s largest tour operator, cancelled all holidays on the Spanish mainland for the next fortnight. Meanwhile, El País, a newspaper, calculated that Spain’s death toll from Covid-19 is probably 60% higher than the official figure of 28,432.

    China reported the most domestic coronavirus infections in more than four months.

     
  • Top HHS official says he is 'not happy' with coronavirus testing turnaround time. The Trump administration's coronavirus testing coordinator said he's not content with the coronavirus test turnaround time. During a Sunday interview with CNN anchor Jake Tapper, Adm. Brett Giroir told the network host he's unhappy with the time it takes for test results to come back after hearing that former chief of staff Mick Mulvaney's son waited five to seven days for results. "We are not going to stop our efforts until testing is exactly where we want it to be with rapid turnaround times," Giroir began, stating that the Trump administration has conducted over 54 million tests.
     
  • Covid-19 patients face a significant likelihood of lingering symptoms, even if they weren't sick enough to go to the hospital, according to a new report from the Centers for Disease Control and Prevention. Link for details from USA Today.
     
  • Vaccine update. The partnership between Oxford University and AstraZeneca will see another Phase 3 test involving 30,000 participants in the U.S. beginning next week, along with a parallel test of the Moderna vaccine. Gilead’s antiviral drug remdesivir showed positive results in data published this month, and last Wednesday the Trump Administration announced an advance order for 100 million doses of a promising vaccine.
     
  • White House 'hopeful' it can announce new coronavirus therapies 'in the coming days'. 'White House chief of staff Mark Meadows said Sunday that the administration is “hopeful” it can announce new therapies to treat the coronavirus “in the coming days.” Meadows told ABC’s This Week that the White House has been “working around the clock,” with a focus on Covid-19 therapeutics, vaccines and mitigation therapies. “The president has been very clear — whatever amount of money and whatever amount of time needs to be invested, we’re doing that,” the White House chief of staff said. "We're hopeful that with some of the breakthrough technology on therapeutics that we'll be able to announce some new therapies in the coming days,” he added.
     

POLITICS & ELECTIONS


 

  • Links
    2020 Presidential Election Interactive Map
    The Green Papers

     
  • 100 Days: Democrats see clear path to Senate majority. The Hill article says, “Democrats have a clear path to winning back the Senate majority with just 100 days to go before Election Day, a result that could give the party total control of Congress and the White House if presumptive Democratic presidential nominee Joe Biden also wins.” Link to article.
     
  • Meatpackers donated large amounts to the campaigns of Republican officials backing an effort to shield companies from lawsuits levied by workers who contracted Covid-19 on the job, according to The Intercept. Slaughterhouses were among the most prominent hotspots for coronavirus outbreaks. Link for details.
     
  • Poll finds just 13% of voters still up for grabs for Trump, Biden. A recent Wall Street Journal/NBC News poll revealed that just 13% of voters say their vote is up for grabs in the presidential election. That is compared with 50% who say there is no chance they will support President Trump and 37% who say there is no chance they will support presumptive Democratic nominee Joe Biden. Link for details.
     
  • 'A lot could change': Pollster Nate Silver says Trump reelection fate not 'sealed'. FiveThirtyEight founder Nate Silver believes the 2020 election outcome is not written in stone. During a Sunday appearance on This Week, the polling expert said the president's reelection ambitions are "clearly in trouble" amid the coronavirus pandemic but that he does not believe his fate is sealed. "There are a lot of unknowns. It's probably too optimistic to expect major progress on a vaccine by November, but you never know. And people's behavior around issues like masks can change. So how do you account for this in an election model? Basically, you add more uncertainty," Silver said. "We've found, historically, that when there are lots of major news events and economic disruptions, an election becomes harder to predict. So while he's clearly in trouble, I do not buy that Trump's fate is sealed. A lot could change in the next 100 days, things could get worse still for the president. But a turnaround in the Covid situation by the fall could make the election more competitive," he continued. Silver noted last month (link) that "a Biden landslide is possible."
     
  • The Economist is analyzing polls together with economic and demographic data to predict America’s elections in 2020. Right now, its model thinks Joe Biden has a 9 in 10 chance of beating Donald Trump in the electoral college. Link for details.

    Economist poll
    Economist electoral

OTHER ITEMS OF NOTE


 

  • FY 2021 Ag spending approved as part of package; veto threat. The House on Friday voted 224-189 to approve a $259.5 billion four-bill measure consisting of the Agriculture, Interior-Environment, Military Construction-VA and State-Foreign Operations bills. The package includes $37.5 billion in emergency spending that Republicans and the White House contend busts the budget caps deal reached last summer and contains numerous policy riders they labeled "poison pills” which were factors behind a White House veto threat, including blocking food stamp restrictions for able-bodied adults without children. The four House bills will now go to the Senate where they are likely to sit until after the Nov. 3 election, at the earliest.
     
  • Kansas Department of Agriculture said state residents have reported receiving unsolicited packages of seeds that appear to be from China, which “could be invasive species, could introduce diseases to local plants, or could be harmful to livestock,” the department wrote. It’s happening in other states, too. Link for details.
     
  • Third round of talks on a proposed U.S./U.K free trade agreement begins today. U.S. Trade Representative Bob Lighthizer and Vice President Mike Pence have downplayed the idea of striking a deal with the U.K. before the end of the year.
     
  • Countries have imposed trade restrictions on roughly $1.7 trillion worth of imported goods since the 2009 financial crisis, representing 8.7% of world imports, the World Trade Organization said on Friday in its semi-annual trade monitoring report. “This figure has grown steadily since 2009, both in value terms and as a percentage of world imports,” the WTO said. Link to report.

 

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