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Markets 'want more substance' out of Powell as gold price tumbles $72 in less than an hour – Kitco NEWS

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(Kitco News) Gold’s price action once again kept investors on their toes as the yellow metal rallied to a daily high of $1,987 an ounce and then plunged more than $72 to $1,914 an ounce in just under an hour. 

At the time of writing, December Comex gold futures were trading at $1,927, down 1.31% on the day. 

All eyes were on the Federal Reserve Chair Jerome Powell’s keynote address at the virtual Jackson Hole Symposium Thursday morning. 

Powell did not disappoint in delivering major changes to the central bank’s monetary policy approach, including the highly anticipated flexible form of average inflation targeting. 

Under the new approach, the Fed will seek to achieve inflation averaging 2% over time. This means that following periods of inflation below 2%, monetary policy will focus on getting inflation to run above 2% for some time.

“Our longer-run goal continues to be an inflation rate of 2 percent … Our new statement indicates that we will seek to achieve inflation that averages 2 percent over time. Therefore, following periods when inflation has been running below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time,” Powell explained.

Another major change was regarding the maximum employment goals, which will now be guided by assessment of shortfalls from maximum employment levels rather than deviations. Powell also stressed that robust job market can be sustained without causing an outbreak in inflation. 

“The significance of Powell’s speech was that maybe we are past this initial hurdle of pumping money and now onto the next phase where we are focusing on building job growth,” RJO Futures senior commodities broker Daniel Pavilonis told Kitco News. “Initially gold spiked on the idea of flexible 2% inflation and interest rates being kept at zero for a longer time. But then the market started to come off when it sounded like Powell started looking at COVID as being more and more under control and looking at the pandemic as being in the rear-view mirror.”

Powell seemed to have kicked off the second phase of the recovery with his speech. “Now, it is about repairing the damage done to the economy. We went from unlimited printing to let’s get people back to work. This is kind of like a second phase,” Pavilonis said.

The selloff in gold was likely triggered because the precious metals markets wanted to hear more from Powell and did not get it.

“Metals wanted more substance out of this. When Powell started talking, it was very bullish for the metals initially but then prices began to decline,” Pavilonis pointed out. “What the central bank is saying now is that they are not going to pump trillion of dollars anymore, they will instead focus on the real economy.”

As long as COVID-19 stays under control, people are going to continue to adopt and realize that there might be more of a scare factor than necessary, he added.

Another element that contributed to gold’s selloff was the market’s interpretation of Powell’s speech as not being dovish enough, said Blue Line Futures chief market strategist Phillip Streible.

“When Powell first said the Fed would allow inflation to run above 2% if needed, market rallied on it. But when Powell said the Fed would not hesitate to act if inflation pressures build, the market interpreted it as the Fed could reverse easing policy measures and that’s why the metals sold off,” Streible told Kitco News. 

Thursday’s close is something to keep an eye on, said Walsh Trading co-director John Weyer, pointing to a lot of new Fed speak confusing the markets. 

“The Fed is looking to treat the labor market a little different. It is now about assessing shortfalls rather than deviations. For the Fed, these changes mean a lot,” Weyer said. “Close will be interesting here. Might be a down a bit on the day.”

Weyer added that this pullback might slow down gold’s rally in the near-term.

Despite Thursday’s decline, the overall picture remains very bullish for gold, Pavilonis pointed out. 

“The market is overall still bullish because of zero percent interest rates for a long time and the flexible 2% inflation target. This means that even if we hit 2%, it doesn’t mean the Fed will start raising rates. That is still really solid conditions for the metals market,” he said. “We are in a fragile state right now. It would not take much to push rates below zero and push into negative yields. And that will ultimately push the metals higher.”

Pavilonis added that he sees these price drops as buying opportunities before gold heads back to $2,000 an ounce again. 

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Stocks rise as technology rally tempers virus woes – BNN

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Stocks rose as dip buyers emerged after the market selloff, tempering concern over remarks from Federal Reserve officials that pointed to a slow economic recovery. The dollar climbed.

Most groups in the S&P 500 advanced, with retailers and real-estate companies leading gains. Tech giants drove the Nasdaq 100 to a back-to-back rally, while the Dow Jones Industrial Average underperformed. The benchmark gauge dropped earlier Tuesday as Fed Chairman Jerome Powell said the economy has a long way to go before fully recovering and will need further support. Meanwhile, Chicago Fed President Charles Evans noted that rates could rise before the inflation target is reached.

Equities are still heading toward their first monthly slide since March on concern Congress hasn’t agreed on another fiscal stimulus package, while an increase in global virus cases has raised the specter of more lockdowns. British Prime Minister Boris Johnson announced new restrictions that are likely to last six months and told people to work from home if possible, saying the country is at a “perilous turning point” for the virus.

Congressional Democrats and Republicans and the White House have opened negotiations to resolve a dispute over farm aid that had raised the risk of a U.S. government shutdown on Oct. 1. To facilitate the talks, the House may scrap plans to vote later Tuesday on a stopgap spending bill that lacked Republican and White House support.

“We think equities will move higher over the medium term, thanks to the likely development of a successful vaccine, an end to election uncertainty, the passage of new U.S. fiscal stimulus, and continued extraordinary global monetary support,” wrote Mark Haefele, chief investment officer of global wealth management at UBS Group AG. “However, the path to ‘more normal’ is likely to be bumpy,” he said, adding that “we therefore expect volatility to persist over the balance of the year.”

Financial and energy stocks, once dominant within the S&P 500, are taking even more of a back seat to technology shares than they did as a bull market ended 20 years ago.

The two industry groups together have trailed the weight of the S&P 500 Technology Index by as much as 17 percentage points this month, according to data compiled by Bloomberg. That’s less than a point away from a low in March 2000 — a figure that isn’t adjusted for a September 2018 index shift, which lifted the ratio by 5.1 points in just one day. Bespoke Investment Group LLC highlighted the comparison in a blog post Monday.

These are some of the main moves in markets:

Stocks

The S&P 500 climbed 0.7 per cent as of 2:55 p.m. New York time.
The Stoxx Europe 600 Index advanced 0.2 per cent.
The MSCI Asia Pacific Index dipped 0.9 per cent.

Currencies

The Bloomberg Dollar Spot Index climbed 0.5 per cent.
The euro dipped 0.5 per cent to US$1.1716.
The Japanese yen weakened 0.3 per cent to 104.93 per dollar.

Bonds

The yield on 10-year Treasuries decreased less than one basis point to 0.66 per cent.
Germany’s 10-year yield advanced three basis points to -0.51 per cent.
Britain’s 10-year yield gained five basis points to 0.203 per cent.

Commodities

West Texas Intermediate crude advanced 0.1 per cent to US$39.33 a barrel.
Gold depreciated 0.4 per cent to US$1,904.41 an ounce.
Silver depreciated 1.1 per cent to US$24.45 per ounce.

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Canada 'at a crossroads': COVID-19 will keep spreading if behaviours don't change, Tam says – CTV News

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OTTAWA —
The latest federal modelling on the COVID-19 pandemic shows that in the short-term, Canada’s epidemic is set to keep growing, predicting up to 155,795 total cases and 9,300 deaths by Oct. 2, unless Canadians re-adopt the same degree of health precautions they took in the early months of the pandemic.

Federal health officials released updated national COVID-19 modelling on Tuesday, as there continues to be a surge in new cases of the virus across several provinces, prompting renewed anxieties about Canada’s ability to stave off a full blown second wave.

There are currently nearly 11,000 active COVID-19 cases in Canada, while another 126,230 patients have recovered. To date, more than 9,200 Canadians have died from the novel coronavirus.

“Canada is at a crossroads and individual action to reduce contact rates will decide our path,” said the federal presentation document provided to reporters.

The new modelling shows how the course of the pandemic Canada charts in the weeks ahead will vary greatly depending on the precautions in place, projecting big spikes this fall if Canadians don’t redouble efforts to limit the number of close contacts they have, maintain physical distance from people not in their immediate social bubbles, wear masks when distancing can’t be maintained, and stay home if experiencing any COVID-19 symptoms.

“All of us have the future in our hands in terms of the decisions we’re making today,” said Health Minister Patty Hajdu at Tuesday’s briefing. “Those decisions that we make today, to say ‘no’, to connect in different ways, to keep our gathering sizes small, to ensure that we’re not socializing more than absolutely necessary, are going to actually help drive the cases down. It’s a sacrifice that we all have to make.”

Cases reported now reflect increasing transmission one to two weeks ago, and the projections indicate that if Canada maintains its current rate of contacts, the epidemic will come back “faster and stronger,” warned Dr. Theresa Tam, Canada’s chief public health officer.

It’s time to re-adopt the personal protection and separation measures that were taken in March and April to have a change at reversing the epidemic growth, she said.

Tam said that with minimal controls—which is not Canada’s current reality— the epidemic in Canada is capable of surging into a “very sharp and intense peak” because most Canadians don’t have immunity to the virus.

“This surge could overwhelm our health system capacity and significantly impact social and economic systems as well,” she said.

As of the latest round of pandemic projections released last month, Canada’s top public health officials said they are were preparing for a fall peak of COVID-19 cases, and that there would likely be localized outbreaks until at least January 2022.

Tuesday’s data shows that the spread of the virus is accelerating nationally, but unevenly across Canada, with the Atlantic bubble not seeing the same surge in cases as other provinces are.

Hospitalizations lag behind increases in reported cases but show early signs of increase, while COVID-19-related deaths remain low. The latest data also show that there are outbreaks now being reported in a greater number of settings, including as a result of private gatherings, as well as in long-term care homes and schools.

The August modelling showed the rate of infections has hit young adults between the ages of 20 and 39 the hardest since June. This continues to be the case, as shown in Tuesday’s figures, prompting a specific plea from Canada’s top public health officer to young people to act responsibly.

Tam said then that her team was preparing for a scenario “several times worse” than the first wave, but was confident that Canada is more prepared than in March to handle another surge.

It was during April’s briefing on modeling that showed that Canadians had initially flattened the curve in many regions of Canada, which set off a cascade of easing of measures in many parts of the country that allowed for many businesses and workplaces to reopen and for social gathering sizes to increase.

Now, some regions are pulling back on what’s allowed and increasing their alert levels, in an effort to slow the spread, a move Tam said is necessary.

She stopped short of classifying the current uptick in cases as a second wave, saying that Canada is “riding this pandemic” like ski mogul hills, and it’s too early to say whether the rates of cases being reported now are the start of a huge increase or just one bump along the road.

Though, the new figures indicate that as has been the experience in other countries, a second COVID-19 resurgence can exceed the initial wave.

“The challenge we face now is to stay the course, no matter how weary we may feel. We have done this before, we know what works, and we know we can work together to get this done,” Tam said.

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Union representing Canadian auto workers announces new deal with Ford – Global News

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TORONTO – Unifor says Ford Motor Company of Canada Ltd. has agreed to spend nearly $2 billion on its Canadian plants as part of collective bargaining negotiations.

Under the tentative deal, Unifor National President Jerry Dias says $1.95 billion will be invested in Ford’s Canadian plants, including $1.8 billion toward the production of five electric vehicles in Oakville, Ont., and an engine contract that could yield new jobs in Windsor, Ont.

Dias says the 6,300 union workers at Ford will vote on the deal this weekend.

Read more:
Union presidents says Ford will fight for workers affected by GM plant closure

Talks between the union and the automaker came to a head on Monday ahead of a bargaining deadline of 11:59 p.m eastern time.

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Workers had previously voted to support a strike if a deal could not be reached by that deadline, with the future of the Oakville, Ont. plant potentially on the line.

Once agreed to by union members, Ford’s deal on new products lines, shifts, wages, pensions and benefits will set the tone for upcoming talks with Fiat Chrysler Automobiles and General Motors.

© 2020 The Canadian Press

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