Gold Jumps as Bipartisan Stimulus Talks Resume

Mish

In a lame duck session, stalled negotiations over coronavirus relief showed signs of new life Tuesday.

Centrists Unveil Bipartisan Plan

Trump would need to sign the legislation but Coronavirus Stimulus Talks Restart. 

House Speaker Nancy Pelosi (D., Calif.) and Treasury Secretary Steven Mnuchin planned to speak Tuesday afternoon. Meanwhile, after a month of discussions, a group of lawmakers from both the House and Senate unveiled Tuesday morning a $908 billion aid proposal, seeking a middle ground between Democratic and Republican leaders’ stances.  

“We simply can’t leave town and leave anyone in the cold, without getting something done immediately,” said Rep. Josh Gottheimer (D., N.J.), co-chair of the bipartisan Problem Solvers Caucus, which has endorsed the proposal.

Mr. Mnuchin told a Senate hearing Tuesday that the White House and GOP leaders were interested in further relief, but didn’t provide a target. “We all believe there should be targeted fiscal response,” he said.

The proposal unveiled Tuesday, which would run through March 2021, includes some measures sought by both parties. Lawmakers included $160 billion in state and local funding—long one of the biggest sticking points in talks among congressional leaders.

The bipartisan proposal also nods at one of Republicans’ top priorities: legal protections for businesses and other entities operating during the pandemic. Lawmakers said they would provide a short-term suspension of liability lawsuits related to Covid-19 at the state or federal level, giving states time to put in place their own protections.

The proposal also includes $288 billion for the popular Paycheck Protection Program, $16 billion for the distribution of a coronavirus vaccine, $82 billion for schools, $25 billion for rental assistance and $180 billion for additional unemployment insurance, including $300 a week through March, aides said. In addition, the plan would give $17 billion to airlines.

$908 Billion Aid Proposal

$908 billion is a lot of money, but recall that Democrats sought $2 to $3 Trillion a couple months ago. 

Reaction From Gold?

It's difficult to say precisely what a market is reacting to, but gold appears to be a beneficiary. 

As I type gold is up about $37 today, but it's still down over $200 from recent highs.

Change in Stimulus Expectations

As noted a few days ago, Biden's Progressive Agenda is Dead on Arrival. 

And recently, Gold had been acting as if Congress would do nothing. Previously, the expectation was Democrats would pick up seats in the House and flip the Senate. 

Had that happened, who knows how high the spigots would have gotten? 

I don't, nor does anyone else, but it is certain that Elizabeth Warren, AOC, and other progressives would apply pressure for all kinds of projects including Medicare for All, energy, and state bailouts.

Gold had been pricing in that possibility when it made new highs over $2000.

Everyone understands that deficits would soar no matter who won the election, so it's these ongoing changes in fiscal expectations that matter as well as the actions of the Fed vs other central banks.

Mish

Comments (45)
No. 1-12
goldguy
goldguy

Markets are always discounting...looks like the gold market found a bottom of some sort here. Going forward I expect much higher prices. Since there are no conservatives anymore in DC, I expect printing will be the norm going forward, that would also include yearly giveaways by congress.

njbr
njbr

Attorney General William Barr on Tuesday said the Department of Justice has not uncovered any evidence of widespread voter fraud that would change the outcome of the presidential election—despite unfounded claims from President Donald Trump that the results were rigged. In an interview with the Associated Press, Barr said federal prosecutors and the FBI have been investigating several complaints of mass voter fraud, but have not yet found any evidence to back up those claims. “To date, we have not seen fraud on a scale that could have affected a different outcome in the election,” Barr said. Trump has refused to concede his loss to President-elect Joe Biden, filing several failed lawsuits in multiple battleground states and sending baseless tweets that the election was riddled with fraud.

Last month, Barr issued a directive allowing federal prosecutors to pursue any “substantial allegations” of voting irregularities. “There’s been one assertion that would be systemic fraud and that would be the claim that machines were programmed essentially to skew the election results. And the DHS and DOJ have looked into that, and so far, we haven’t seen anything to substantiate that,” Barr said. The attorney general also noted that the DOJ cannot investigate without cause. “Most claims of fraud are very particularized to a particular set of circumstances or actors or conduct. They are not systemic allegations. And those have been run down; they are being run down,” Barr said. “Some have been broad and potentially cover a few thousand votes. They have been followed up on.”

RunnrDan
RunnrDan

Hopefully Barr can now resume his investigation into the Russian Collusion smear campaign. Also, the Hunter Biden laptop. He has a lot on his plate! I imagine many at the DOJ are looking forward to when Biden takes office and they can go back to working half days and looking into enemies of the People's Republic of America.

truthseeker
truthseeker

I don’t check it that often but yesterday I checked out the RSI-relative strength indicator on gold was at 22 the lowest I’ve ever seen it. Any number at 30 or below is way oversold, at 70 or above is way overbought. Today’s big rally has jumped the RSI all the way up to 39! Silver wasn’t quite as oversold as gold, but as usual, it’s move up today has been much more dramatic.

JonSellers
JonSellers

Once vaccines become widely available, gold will collapse. The economy will recover, taxes will start flowing in, the deficit will fall and stocks will soar.

Scooot
Scooot

“It's difficult to say precisely what a market is reacting to.....”

I don’t think anyone does, and that’s one of the reasons volatility is so high in most markets.

Lance Manly
Lance Manly

So how is the gold price related to bitcoin? Not my thing since I am not into FX

Rocky Raccoon
Rocky Raccoon

Imagine that...

QTPie
QTPie

The Turtle Man already shot down that bipartisan deal.

AussiePete
AussiePete

E.B.Tucker made an interesting point in a recent interview - "The value of all the gold in the world at current prices is about $7 trillion. The Fed has printed up about half that much this year alone - so far....

Eddie_T
Eddie_T

Thursday, Dec. 3, 2020

So....if one did believe in a “managed” gold market, it might not be wrong to expect gold to take a big hit by the algos sometime in the next couple of days....especially if the dollar keeps falling hard.

The DXY broke 90 yesterday...sort of a line in the sand. That has to put upward pressure on gold...and the Fed won’t like the optics of a crashing USD happening in tandem with a gold breakout.

If the dollar falls more....or if gold breaks out....either one....I would expect one of those strange events....either at the open of one of the exchanges, London, NY, or aftermarket....or, possibly during the overnight.

Pop the popcorn.

Eddie_T
Eddie_T

Mish being out of the office today, I was wondering if we could have a discussion about the inflation vs. deflation argument.

Anybody want to play?

My research leads me to believe that the most important thing to understand...... is how Eurodollar lending outside the US affects the strength (or weakness) of the dollar.

A dollar shortage in foreign countries tends to make the dollar stronger than it perhaps should be.....but it isn’t clear to me that this condition is irreversible. Here are two articles that talk about this.....I’d really like to hear from some of you about your take on this.

I think some very informed people read this blog....thanks in advance for any comments.


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