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Gold eyes $1620 in 2020 on global de-dollarization theme, geopolitical risks – ANZ – Kitco NEWS

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Editor’s Note: 2020 is expected to be another year of significant uncertainty and turmoil. But the question is what asset will emerge the victor when the dust settles from the global trade war, Brexit, recession threats, negative bond yields. It’s a showdown of global proportions, so don’t miss all our exclusive coverage on how these factors could impact your 2020 investment decisions.

(Kitco News) The precious metals sector is likely to outperform other commodities for the second year in a row in 2020, according to the Australia and New Zealand Banking Group (ANZ), which is projecting for gold to rise above $1,600 next year.

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“Precious metals look well positioned to outperform other sectors for the second consecutive year in 2020,” ANZ senior commodity strategist Daniel Hynes and commodity strategist Soni Kumari said in the bank’s 2020 outlook.

ANZ sees gold rising steadily throughout next year and peaking at $1,620 in December.

“Our gold model points to USD1,600/oz in 2020. Our model – based on real interest rates, USD and inflation expectations – shows gold’s value at USD1,470/oz. With a slightly weaker USD and only a tepid increase in bond yields, it forecasts gold will hit USD1,600/oz in 2020,” the strategists wrote.

Global themes of de-dollarization and geopolitical uncertainty are a few of the main drivers that will keep gold prices supported, ANZ’s outlook stated.

“Although the uncertainties related to US-China trade and Brexit peaked in 2019, we believe geopolitical and macroeconomic risks will remain elevated next year,” Hynes and Kumari said. “The ongoing theme of de-dollarization should see investor appetite for gold remain strong.”

The U.S. presidential election will be one of the risks to keep a close eye on as it directly impacts the financial markets. “With several possible outcomes, we see room for market volatility. This should set the stage for safe-haven assets to perform through 2020,” the strategists explained.

Also, the rise of populism around the world increases the case for holding gold in your portfolio, the outlook added. “The geopolitical trend toward division and populism will keep generating uncertainty, enhancing the safe-haven appeal of the sector.”

Lower interest rates environmental on a global scale also works in favor of the yellow metal next year. “A pause in Fed interest rate hikes should not diminish investor appetite … [as] steady-to-higher inflation keep[s] interest rate lower in 2020,” the strategists said.

Another part of the equation that leads to gold breaching the $1,600 an ounce level in 2020 is the weaker U.S. dollar, added ANZ.

“USD appreciation is likely to abate, with downside risks rising through 2020 … With a more stable policy setting, the USD is likely to stabilize and trade in a tight range. We expect the EUR to outperform the USD,” Hynes and Kumari wrote.

Asian gold demand will need to be closely watched as well after Indian gold imports fell 53% between July and October of this year amid record-high local prices.

“In 2020, higher investment demand will be required to clear the supply overhang left by weaker gold jewelry demand and leveling-off central bank purchases,” the strategists said.

One of the major risks to higher gold prices remains crowded investor positions, which could trigger a sell-off in 2020. “Elevated speculative positions leave risk of a price set-back,” the outlook highlighted.

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Canada's economic growth misses forecasts, backing interest rate pause – Financial Post

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Strikes at 2 more U.S. auto factories to start Friday as UAW ratchets up pressure

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A picketer holds a "UAW On Strike" sign while attempting to block a truck from entering the Ford Motor Co. Michigan Assembly plant in Wayne, Michigan
A picketer holds a ‘UAW On Strike’ sign while attempting to block a truck from entering the Ford Motor Co. Michigan Assembly plant in Wayne, Mich., earlier this month. The autoworkers’ union says 7,000 more workers at two GM and Ford plants are going to walk off the job on Friday at noon ET. (Emily Elconin/Bloomberg)

The United Auto Workers union is expanding its strike against U.S. automakers to two new plants, as 7,000 workers at a Ford plant in Chicago and a General Motors assembly factory near Lansing, Mich., will walk off the job at midday on Friday.

Union president Shawn Fain told workers on a video appearance Friday that negotiations haven’t broken down but Ford and GM have refused to make meaningful progress.

“Despite our willingness to bargain, Ford and GM have refused to make meaningful progress,” Fain said. “That’s why at noon eastern we will expand our strike to these two companies.”

“Not a single wheel will turn without us,” Fain said, adding that the 7,000 soon-to-be picketers are the “next wave of reinforcements.”

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Stellantis, the third major automaker targeted by the union, and the maker of brands like Chrysler, Jeep and Dodge, was spared further action, as Fain said the company’s management has made significant concessions on things like a cost-of-living allowance and a freeze on outsourcing.

The Ford plant in Chicago makes the Explorer and Police Interceptor, as well as the Lincoln Aviator SUV.

The GM plant in Michigan’s Delta Township near Lansing manufactures large crossover SUVs such as the Chevrolet Traverse.

The two new plants join 41 other factories and distribution centres already seeing job action.

So far, the impact on Canada’s auto industry has been muted, as none of the idled factories are major users of Canadian-made components.

Biden says striking autoworkers deserve a ‘significant’ raise

U.S. President Joe Biden visited the United Auto Workers picket line in Detroit on Tuesday, saying the workers deserve a significant raise after sacrifices made during the 2008 financial crisis. Auto companies are doing ‘incredibly well,’ Biden said, ‘and you should be doing incredibly well, too.’

Edward Moya, a strategist with foreign exchange firm Oanda, says that despite the expanded job action, the strike seems to be nearing an “endgame” as the two sides are clearly making slow but steady progress.

“Yesterday, the UAW said they are targeting a 30 per cent pay raise, which is down from the 46 per cent they were asking for in early September,” he said. “Automakers have raised their offer to 20 per cent but were not offering much on retirement benefits. The longer this drags, the more both sides lose, so a deal should be reached in the next week or two.”

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Airlines claim passenger safety at risk under new passenger rights rules

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Aviation companies are making the pitch to Ottawa that stricter rules designed to boost customer compensation and improve service could put passenger safety at risk — an argument consumer advocates reject as “ridiculous.”

The push, made in regulatory submissions and meetings on Parliament Hill, comes on the heels of sweeping reforms to the passenger rights charter announced in April and currently being hashed out by Canada’s transport regulator before going into effect next year.

The changes appear to scrap a loophole through which airlines have denied customers compensation for flight delays or cancellations when they were required for safety purposes. The sector wants that exemption restored, and says it doesn’t want pilots to feel pressured to choose between flying defective planes and costing their employer money.

“We want our pilots to be entirely free from any financial consideration when they take a safety-related decision,” WestJet CEO Alexis von Hoensbroech said in a video chat from Ottawa this week, where he was meeting with federal ministers on the reforms. The Air Line Pilots Association raised similar concerns in a submission to the Canadian Transportation Agency.

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“Regulation should never be punitive for safety decisions,” he said.

In the European Union, however, where rules and precedents comparable to the impending passenger rights charter are in place, flight safety remains uncompromised, advocates say.

“Did it make it less safe to fly in Europe? I don’t think so,” said Sylvie De Bellefeuille, a lawyer with the advocacy group Option consommateurs.

Interior of large passenger aircraft with passengers and flight attendants.
In the EU, compensation rules have not compromised safety, passenger advocates say. (Matej Kastelic/Shutterstock)

The EU code came into force nearly two decades ago, shored up by court rulings that require compensation even for trip disruptions caused by safety concerns, such as mechanical issues. No major accidents involving EU-registered planes have occurred in commercial aviation since 2015.

“It lays pretty ill in the mouth of the industry to say that if you … take away that excuse then we will therefore fly unsafe planes,” said John Lawford, executive director of the Public Interest Advocacy Centre.

“I’m surprised that they would have the chutzpah to say that.”

Air Passenger Rights advocacy group president Gabor Lukacs called the claim “ridiculous,” and NDP transport critic Taylor Bachrach also slammed the argument.

“It’s quite alarming that the airlines would suggest that if the government holds them to a higher standard of customer care, there’s going to be a risk to passenger safety,” Bachrach said in a phone interview from northwestern B.C.

Loopholes and exemptions

Organizations from Nav Canada to the International Air Transport Association — as well as Canada’s main pilots union — maintain that safety will be jeopardized unless delays due to malfunctions or mechanical issues are exempted from what the Atlantic Canada Airports Association called “punitive measures.”

Proposed changes under the Air Passenger Protection Regulations would not exempt flight disruptions that are caused by “normal … technical problems” from cash penalties given to customers.

However, “airport operational issues” or “hidden manufacturing defects” would be considered beyond the airline’s responsibility under the would-be reforms, most of which are still months away from being finalized.

The first phase of the overhaul comes into effect on Saturday, kicking off a more streamlined complaints process that currently creaks under the weight of more than 57,000 complaints.

That backlog has continued to mount despite a slowdown in filings, which can take up to two years for the regulator to process. The new system will be managed by “complaint resolution officers” — 40 have been hired, with 60 more expected to be trained over the next year, according to the agency.

Among the provisions slated to kick in next year are fees imposed on airlines by the regulator to recover some or all of the cost of handling those complaints. If a passenger files one due to a flight disruption or denial of boarding, the reformed rules put the onus on the airline to prove the move was for reasons outside its control, such as bad weather.

Airlines make the case that regional routes would be pricier for customers — or simply cancelled outright — as slim profit margins would tip into red ink amid higher costs from complaints and fees.

“That could potentially have an impact on regional connectivity and accessibility for routes that might not be as profitable,” said Jeff Morrison, who heads the National Airlines Council, which represents airlines including Air Canada and WestJet. “There’s always a trade-off.”

Planes on the tarmac at an airport.
The National Airlines Council, which represents Air Canada and Westjet among other airlines, says airline profit margins are already slim and cutting into them by imposing stricter compensation rules could affect services offered. (Nathan Denette/The Canadian Press)

The average profit for large carriers amounts to less than $10 per passenger, said WestJet’s CEO.

“If we have to compensate the passengers, it’s thousands,” von Hoensbroech said, noting that WestJet’s average one-way ticket price hovers around $200. “You need many, many flights to recover.”

Advocates Lawford and Gabor Lukacs said the airlines’ warnings around routes to smaller or far-flung communities are tantamount to “blackmail,” while Bachrach framed the notion of pitting sturdier customer rights against regional flights as a “false choice.”

“If you’re cutting regional routes, we’re going to open the whole country for more competition,” Lukacs said, framing the potential scale-back as an opportunity for other airlines.

He suggested subsidies to support regional trips, whose fares have shot up over the past four years, even as ticket prices on busier routes fell.

Von Hoensbroech also said accountability for flight disruptions, including the cost burden, must be shared across the industry, not borne by airlines alone — an argument some advocates are receptive to, given the highly integrated nature global air travel that hinges on players ranging from baggage handlers to security and border agents to air traffic controllers.

The Canadian Transportation Agency is currently working on a draft of the new Air Passenger Protection Regulations, expected to be published this year before the new charter is implemented in 2024.

“The ultimate goal of air passenger protection shouldn’t be to get compensation to passengers; it should be to incentivize airlines to treat passengers better,” Bachrach said.

Frustrated passengers take airlines to court for compensation

Complaints against Canadian airlines are piled so high the backlog dates back more than a year. Now, some passengers are taking airlines to small claims courts to get compensation.

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