Gold prices are within touching distance of all-time highs–a telltale sign of economic uncertainty.
The traditional haven asset sits less than 2% off its record high of $2,069.40 set in August 2020–just months into the pandemic. That was an uncertain time, if ever there was one.
But so is the present day.
Friday’s March jobs report could even send the world’s oldest store of value to new records and beyond, if it comes in weaker-than-expected.
Gold’s recent rise has coincided with a number of major developments. The asset has climbed close to 12% since March 8–just before the collapse of Silicon Valley Bank and subsequent banking stress. Weaker data in recent days, most notably declining job openings, helped it scale the key $2,000 an ounce level earlier this week. Lower bond yields and dollar declines are also factors.
It may not yet be a sign of a full-blown shift to risk-off sentiment but gold’s function as a potential haven is coming to the fore.
Bitcoin’s rise–up 25% over the past month–has also reinvigorated the old-school thesis of the cryptocurrency as “digital gold,” though the asset’s risk-on tendencies and volatile track record mean gold has the edge as a hedge.
The bad news keeps coming, which may further support Bitcoin and gold. The International Monetary Fund said U.S.-China tensions over chip production could spiral and end up reducing global economic output by about 2% in the long term.
It’s easy to see why investors are flocking to gold. It’s also not hard to imagine that trend continuing.
—Callum Keown
*** Join Barron’s deputy editor Alex Eule and associate editor for technology Eric J. Savitz today at noon when they discuss the outlook for tech companies and individual stocks. Sign up here.
Try your hand at this morning’s Barron’s crossword puzzle and sudoku games. For all games, including a digital jigsaw based on the week’s cover story, click here.
***
U.S.-China Tensions Will Cost Economic Output, Says IMF
The recent tensions between China and the U.S. over semiconductor production are part of a broader trend that could “substantially” lower world prosperity, the International Monetary Fund says in a Wednesday report.
- The U.S. has passed laws to bring semiconductor production back inside the country and prevent companies from manufacturing or developing cutting-edge chips in China. It’s encouraging allies to do the same.
- It amounts to barriers to foreign direct investment. It’s happening in several areas as “friend-shoring” supply chains–keeping production at home or only in trusted countries–becomes more popular. That fragmentation will ultimately crimp economic output, the IMF said.
- Barriers to investing in foreign countries “could substantially reduce global output, by about 2% in the long term,” the IMF said in its latest World Economic Outlook. Emerging markets will probably be hit harder than more developed economies, the report said.
What’s Next: The uneasiness between China and the West probably won’t ease soon, as China has yet to condemn Russia’s invasion of Ukraine. French President Emmanuel Macron and European Commission President Ursula von der Leyen are in Beijing this week and are meeting China’s leader Xi Jinping.
—Brian Swint
***
Tesla Opens Proxy Access as EV Tax Credit Rules Loom
Tesla
is giving proxy access to shareholders, meaning individuals can now nominate directors to the board and have those requests included in the electric vehicle maker’s proxy materials. The idea is to give regular investors a say in a company’s decision process and hold boards accountable.
- Tesla said Wednesday that it changed its bylaws to give a shareholder, or a group of up to 20 of them, the right to nominate up to two directors, assuming they meet the requirements. The shareholder has to own 3% or more of Tesla stock continuously for at least three years to qualify.
-
American car buyers can get a $7,500 purchase tax credit from the federal government if they buy a qualifying electric vehicle, but it’s still unclear how to qualify. For example,
Ford Motor
is losing half the purchase tax credit for two of its popular EVs: The Mustang Mach-E and E-Transit van. - Qualifying is determined by a number of factors, including the buyer’s income, whether the vehicle’s price is below certain limits, and where the vehicles were assembled. U.S. assembly requirements disqualify a lot of foreign-made EVs.
- The Internal Revenue Service has based eligibility only on where the EV was assembled from the start of the year through April 17, but an updated qualification list that includes the battery rules is coming.
What’s Next: Car buyers have a loophole to the purchase rules: Leased vehicles qualify for the credit, even if they aren’t assembled in the U.S. EV makers simply discount their vehicle leases in the amount of the credit, and pass that savings along to the customer.
—Al Root and Liz Moyer
***
Walmart Is Adding Robots to Boost Sales, Lower Costs
Walmart
wants to increase sales by more than $130 billion over the next five years, and is banking on robots and other automation to help get it there. Its new growth strategy aims to boost sales by 4% over the next three to five years, while strengthening its operating margin.
- Robots in its warehouses are unloading pallets and fulfilling orders, reducing the number of workers needed but doubling the pace of orders. Walmart projects that by fiscal 2026, about 65% of its stores will be serviced by automation and 55% of fulfillment center volume will move through automated facilities.
- Walmart said one of the outcomes for workers is that jobs will have less physical labor but higher pay rates. Despite the robots, it expects to maintain or increase the number of associates as new roles are created.
- Members of its online Walmart+ spend more and order more frequently than nonmembers. Younger members have boosted Sam’s Club membership nearly 30% in the past three years.
-
Separately,
Costco
said the average transaction size at its stores shrank 5.8% in March from a month earlier, and same-store sales fell 1.1% after rising in February. Lower gasoline prices are partly to blame. Excluding that effect, same-store sales rose 2.6% in March versus February’s 5% gain.
What’s Next: Walmart forecasts adjusted earnings per share in a range of $5.90 to $6.05 for the fiscal year 2024. It is also projecting sales, excluding fuel, to rise 2% to 2.5% at its flagship stores and 5% at its Sam’s Club stores.
—Sabrina Escobar and Janet H. Cho
***
Alphabet Says Its Chips Can Outpower, Outrun Nvidia’s
Google-parent
Alphabet
said its custom tensor processing units, or TPUs, for training artificial intelligence systems can be faster and more power-efficient than the
Nvidia
chip that currently powers the AI industry. Alphabet is aiming to benefit from the growth of the sector as Google competes for dominance in AI hardware.
- In a scientific paper, Google researchers highlighted how a supercomputer powered by more than 4,000 of the latest generation of its chips performed up to 1.7 times faster and was 1.9 times more power-efficient than a comparably-sized system based on Nvidia’s A100 chip.
-
The A100 has emerged as a key piece of hardware for training AI models, with major customers including
Microsoft.
Alphabet sells access to its TPU-powered systems to its Google Cloud customers, although it also works with Nvidia for some services. - Nvidia didn’t respond to Barron’s request for comment, but recently said its flagship H100 chip has entered full production. It started a cloud service letting companies rent AI computing capacity powered by those chips. Google didn’t compare its supercomputer to H100-powered systems.
- MLperf, an industrywide AI chip test, released results and rankings on Wednesday. Nvidia CEO Jensen Juang said on his blog that results for the H100 showed significant performance increases from the earlier generation chips.
What’s Next: J.P. Morgan analysts said AI is likely to be a defining technological development of our generation, calling Microsoft a clear early leader because of its edge in bringing AI products to market and its broad portfolio of products that could benefit from AI integration.
—Adam Clark and Janet H. Cho
***
Quick Serve Restaurants Chase Diners with Spicy Menu Items
Quick serve restaurants have been pushing out new menu items to attract diners, especially capitalizing on Americans’ love for hot sauces and spicy food. The description of “spicy” on restaurant menus is up 8.5% over the past five years, The Wall Street Journal reported, citing research firm Technomic.
-
This week
Dine Brand’s
IHOP rolled out a $16 Spicy Poblano Eggs Benedict, featuring fire-roasted poblano peppers, among several new menu items. Rival
Denny’s
rolled out a $13 sandwich called Spicy Moons Over My Hammy featuring ham, chorizo sausage and scrambled eggs. -
Chipotle Mexican Grill
added a spicy protein it calls Chicken al Pastor to its menu for burritos, bowls, tacos and salads after testing it in Denver and Indianapolis. The burrito chain has also recently drawn notice on TikTok for its spiciest salsa offering. -
Burger King, owned by
Restaurant Brands International,
introduced a Ghost Pepper Whopper last Halloween; and
Yum! Brands
’ KFC offers its Kentucky Scorcher Chicken Sandwich with milk. Customers have to sign a waiver when they order Dave’s Hot Chicken’s Carolina reaper-pepper items. - Spice isn’t the only attraction. Arby’s, the Inspire Brands-owned chain known for its roast beef sandwiches, just rolled out a line of sandwiches with a sweet and spicy profile alongside loaded fries with the same sweet and spicy sauce.
What’s Next:
Nissin,
the maker of the instant ramen noodle kits popular on college campuses, now offers a breakfast ramen version. Add hot water to create a meal designed to taste like a combination of pancakes and syrup, sausage and eggs. It’s gotten mixed reviews online.
—Liz Moyer and Janet H. Cho
Uncredited
***
I just bought a used electric vehicle, so now I’d like to install a solar array to offset the additional electricity use.
My tax liability for 2023 will be enough to get full benefit of the used EV tax credit or the (guesstimated) solar tax credit. But not enough for both.
If I claim both for 2023, will the IRS apply the EV credit first and let me roll over the solar credit to 2024? Or will it apply the solar credit first, which means I get nothing for the EV credit since it doesn’t roll over?
Read more here.
—Andrew Keshner
***
—Newsletter edited by Liz Moyer, Brian Swint, Rupert Steiner and Steve Goldstein
Read the full article here