Dow rose 306, advancers over decliners about 4-1 & NAZ climbed 129. The MLP index rebounded 3+ to the 228s & the REIT index gained 3+ to the 398s. Junk bond funds crawled higher & Treasuries were slightly lower. Oil went up to the high 54s & gold fell 6 to 1524 after a very good week for the yellow metal.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
OPEC sees bearish oil outlook for the rest of 2019, points to 2020 surplus
Gold ended lower, distancing itself from the more-than 6-year high it settled at a day earlier, but the metal's investment haven appeal contributed to a 3rd weekly climb in a row. Gold for Dec fell $7.60 (0.5%) to settle at $1523 an ounce after settling at $1531 yesterday, the highest most-active contract settlement since Apr 2013. Gold settled 1% higher for the week & have rallied 6% so far in Aug. An intensifying US-China trade war & growing worries over the global economy saw investors pile into haven assets. The related rally in Treasuries, sending down yields, further reinforced gains for gold by reducing the opportunity cost of holding the metal. US consumer sentiment data, which revealed a decline to 92.1 in Aug from 98.4, failed to provide support for haven gold. Jul housing starts fell 4% to an seasonally adjusted annual rate of 1.19M, but building permits rose 8.4% to 1.34M.
This was a very rough week for investors feint of heart & the Dow was down 400. China is having a host of problems, major global economies appear to stumbling & the inverted yield curve is flashing an important recession signal. Today's rally is suspicious. While bargain hunting was to be expected, the rally was not all that impressive. Most worrisome is that gold & Treasuries held their own pretty well. Demand remains strong for safe haven investments.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
OPEC on provided a downbeat oil-market
outlook for the rest of 2019 as economic growth slows & highlighted
challenges in 2020 as rivals pump more, building a case to keep up an
OPEC-led pact to restrain supplies. In a monthly report, OPEC cut its forecast for
oil demand growth in 2019 by 40K barrels per day (bpd) & indicated
the market will be in slight surplus in 2020. The
bearish outlook due to slowing economies amid the US-China trade
dispute & Brexit could press the case for OPEC & allies including
Russia to maintain a policy of cutting output to boost prices. Already, a
Saudi official has hinted at further steps to support the market. “While the outlook for market fundamentals seems somewhat bearish for
the rest of the year, given softening economic growth, ongoing global
trade issues and slowing oil demand growth, it remains critical to
closely monitor the supply/demand balance and assist market stability in
the months ahead,” OPEC said in the report. OPEC's policy to
support prices thru supply cuts has been giving a sustained boost to
US shale & other rival supply, & the report suggests the world
will need less OPEC crude next year. The demand for OPEC crude
will average 29.4M bpd next year, OPEC said, down 1.3M
bpd from this year. Still, the 2020 forecast was raised 140K bpd from
last month's forecast. In Jul, OPEC & its allies renewed a
supply-cutting pact until Mar 2020, citing the need to avoid a
build-up of inventories that could hit prices. OPEC
said its oil output in Jul fell by 246K bpd to 29.6M bpd as
Saudi Arabia cut supply more than the pact requires. Even so, OPEC
output is still above the 2020 demand forecast. The report
suggests there will be a 2020 supply surplus of 200K bpd if OPEC
keeps pumping at the Jul rate & other things remain equal.
OPEC sees bearish oil outlook for the rest of 2019, points to 2020 surplus
Gold ended lower, distancing itself from the more-than 6-year high it settled at a day earlier, but the metal's investment haven appeal contributed to a 3rd weekly climb in a row. Gold for Dec fell $7.60 (0.5%) to settle at $1523 an ounce after settling at $1531 yesterday, the highest most-active contract settlement since Apr 2013. Gold settled 1% higher for the week & have rallied 6% so far in Aug. An intensifying US-China trade war & growing worries over the global economy saw investors pile into haven assets. The related rally in Treasuries, sending down yields, further reinforced gains for gold by reducing the opportunity cost of holding the metal. US consumer sentiment data, which revealed a decline to 92.1 in Aug from 98.4, failed to provide support for haven gold. Jul housing starts fell 4% to an seasonally adjusted annual rate of 1.19M, but building permits rose 8.4% to 1.34M.
Gold settles lower, but notches third straight weekly gain
Federal Reserve officials tried to temper growing fears of a near-term recession this week, after a reliable economic indicator in the US pointed to an impending economic downturn, spooking investors. On
Wed, the spread between the 2-year & 10-year Treasury yield,
which has historically preceded a recession when it turns negative, inverted,
pushing markets down across the world & reigniting worries about the
possibility of recession. Yet economists cautioned that because other data in the US showed a relatively healthy economy chugging along at a
steady pace, it's unclear whether a recession is truly imminent or not. “I
think the answer is most likely no,” former Fed Chair Janet Yellen, who
headed the central bank under Pres Obama, siad.
“I think the U.S. economy has enough strength to avoid that, but the
odds have clearly risen, and they’re higher than I’m frankly comfortable
with.” She called the inverted yield curve a “less good signal” of a recession
on this occasion, suggesting that are a “number of factors” other than
market expectations about the Fed’s future path of interest rates that
are pushing down long-term yields. She called the inverted yield curve a “less good signal” of a recession
on this occasion, suggesting that are a “number of factors” other than
market expectations about the Fed's future path of interest rates that
are pushing down long-term yields. It's rare for short-term interest rates to go
higher than long-term rates, because lenders generally require a higher
interest rate to lend for longer periods of time, due to a bigger
inflation risk or the increased possibility of defaulting. Generally,
the yield curve inverts when markets believe there’s a recession coming & inflation will be lower, or the Fed will be forced to cut rates. St
Louis Federal Reserve Pres James Bullard, a voting member of the
FOMC, also sought to downplay the chances of a
recession in the near-term, instead saying policymakers will have to
wait & watch markets and incoming data. “I
think we’re in the middle of a global slowdown, and we’re just going to
have to assess how this is going to affect the U.S. economy,” he said. Bullard pointed to fundamentals like the strong
labor market, low unemployment, solid consumption growth as evidence the
record-long economic expansion hasn't ended yet, but warned that
uncertainty from the US-China trade war & what seems to be a global
slowdown could weigh on the economy.“ This is a
case where, if you're looking backward at the data it looks pretty
good, but boy, you want to be taking into account what might happen
going forward,” he said. Right
now, most traders are pricing in the chance of a modest 25 basis point
interest rate cut at the Fed's Sep meeting. Bullard declined to
say whether he believed a deeper cut was necessary. Rates are currently
set between 2-2.25%. Stocks clawed back some of their
losses today, although the yield curve remained inverted.
RECESSION HYSTERIA? FED OFFICIALS TEMPER MOUNTING SLOWDOWN FEARS
This was a very rough week for investors feint of heart & the Dow was down 400. China is having a host of problems, major global economies appear to stumbling & the inverted yield curve is flashing an important recession signal. Today's rally is suspicious. While bargain hunting was to be expected, the rally was not all that impressive. Most worrisome is that gold & Treasuries held their own pretty well. Demand remains strong for safe haven investments.
Dow Jones Industrials
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