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BBH: gold benefiting from risk aversion

Kitco News

Gold has been a beneficiary of risk aversion since China’s coronavirusbegan making international headlines around week ago, said Brown Brothers Harriman. “There is a lot going on at the start of this week,” BBH said of market-moving factors. As of an early-morning BBH research note, the virus death death count had hit 80, plus there were some 2,700 confirmed cases of the virus across 15 countries. Meanwhile, BBH said, Italy’s local elections “brought back some stability to the governing coalition.” In other news, the U.S. embassy in Baghdad was hit by missiles fired by Iran-linked militia Sunday, with reports of several U.S. injuries. The virus news is center stage, and BBH pointed out that oil prices have taken a “hard hit” due to expected lower travel demand, with Brent crude oil trading below $60 per barrel for the first time since October. Global stocks are weaker, with news reports blaming this on worries about the virus impacting the economy. “Gold, in contrast, has benefited from the risk aversion move, rising about 1.5% since the virus scare began,” BBH said. As of 8:50 a.m. EST, spot gold was $10.40 higher at $1,582 an ounce.

By Allen Sykora of Kitco News; asykora@kitco.com

 

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Gold remains range-bound between roughly $1,540 and $1,580 an ounce, awaiting further U.S. impeachment and political headlines, as well as geopolitical news, said George Gero, managing director with RBC Wealth Management. As of 8:47 a.m. EST, Comex February gold was right in the middle of that trading band, down $5.20 to $1,560.20 an ounce. “The average  price of gold is a barometer of  political and economic well-being,” Gero said. “Traders, however, view technicals and day-to-day headlines, so we see fluctuations and many upswings and downdrafts.” Gero noted that buying ahead of the Chinese New Year, one of the important seasonal time periods for gold, has now passed, as the holiday begins this weekend.

By Allen Sykora of Kitco News; asykora@kitco.com

 

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Monday January 27, 2020 08:52

The major negative factors for the U.S. economy have receded, said Brown Brothers Harriman. The U.S. economy is in its longest expansion ever. Much of the focus of financial markets this week has been a coronavirus outbreak in China and its potential impact on the global economy. “this week's spell of virus-driven nervousness led to some re-pricing of the implied probability of a Fed cut, which still seems exaggerated to us,” BBH said. “According to the Bloomberg model, there is a 60% chance of a cut by the September meeting. We understand that the virus poses a new tail risk, which should be taken into account. But on balance, we still think that the U.S. economy is holding up well and that most of the big negative factors have receded.” 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.