Golden State Mint Blog: Recent Episodes
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SilverSilver is trading around $64.60 per ounce this week, having climbed steadily since the start of the week. That makes for a big move higher in the metal, which has generally been on a roll ever since the surprise weakness in the labor market put the brakes on expectations of rapid interest rate hikes. Silver touched its highest price in roughly seven weeks on Friday, and it has shown no signs of slowing this week.
The reason? A mix of factors, but it starts with the belief that the Federal Reserve will be less aggressive in its tightening stance, and lower interest rates are generally bullish for silver prices. But it is also important to note that demand for the metal in industrial uses has also contributed to the rise. Solar panels, electronics, and grids all use silver, which has helped lift prices across the board.
GoldMeanwhile, gold is steadying near $4,350 an ounce, essentially flat to slightly lower than where it was at the same time last week. Gold has been on a roll in recent months, but it has cooled off this week, and the consolidation after a rapid rise is generally healthier than not.
Some of it is because a lot of the good news for gold has already been priced in. Gold tends to be a metal that reacts most strongly to surprises, and there hasn’t been much of those this week. Investors are waiting for this week’s inflation data before taking any meaningful action on gold positioning.
Other News Affecting These SpotsThe biggest catalyst for the metals markets this week comes not from the metals themselves, but from the labor market.
The much weaker-than-expected labor market data from Friday has sent shockwaves through markets and dramatically lowered the chances of the Federal Reserve raising interest rates this year. The change in the outlook for monetary policy has had a major impact on the prices of gold and silver, as both compete with bonds and other yield-bearing assets for allocation in the portfolios of investors and central banks. Lower-for-longer interest rates tend to benefit the price of these metals.
The Wait for an Iran Deal ContinuesWhile oil prices remain high this morning as Trump seeks to increase economic pressure on Iran to reach a deal, it is worth noting that geopolitical tensions between the United States and Iran have cooled this week. Some reports suggest that an agreement to de-escalate and reopen the Strait of Hormuz could be reached imminently. The strait is a major shipping route for oil, and any resolution to the crisis would see oil prices ease, and by extension, inflation expectations ease as well. That would also support gold and silver prices, providing another reason for central banks to keep rates on hold or cut them.
Equities have generally been remarkably resilient to the dovish turn in monetary policy and labor market weakness, with stocks selling off only slightly despite the weak data. This suggests that investors are interpreting weakness in the labor market as a reason to cut rates rather than slow down the economy. That has helped support gold prices, which would have sold off sharply in the latter scenario.
Precious Metal Demand in China is RisingOn the industrial demand front, China has seen a rise in demand for silver, particularly in the production of solar panels and electrical grids, which has led to a large jump in imports of silver-containing ore. This has also helped support prices beyond what would be otherwise seen in a speculative buying spree.
The two inflation reports due this week will be crucial in determining whether the Federal Reserve will cut or hold rates in September, and markets are sure to be on edge until then.
PlatinumPlatinum is trading near $1,745 to $1,755 an ounce, near a seven-week high, after jumping on the back of lower rate expectations and the de-escalation of geopolitical risk between the US and Iran, but it has fallen slightly today amid broader profit-taking across the metals complex.
PalladiumPalladium is trading between $1,337 and $1,397 an ounce, up sharply over the last month and near multi-week highs, but it has cooled slightly amid continued pressure from the rise in electric vehicles, which are eating into demand for the metal, despite hybrid cars being supportive of prices.
Bottom LineSilver is the metal to watch this week, with gold taking a breather after its rapid rise in the last few weeks, but platinum and palladium have also joined the fray. Across the board, the metals market has been positively surprised by the weakness in the labor market, lowering rate-hike expectations and benefiting all four metals.
The catalyst that has positively surprised the most has been the change in the outlook for monetary policy, with investors pricing in a pause in rate hikes. The metals are all likely to continue benefiting from this trend, and if the weakness in the labor market persists, the rally in silver will be even more impressive than it has already been, as it has an added tailwind from industrial demand that is not present for gold. But if this week’s inflation data surprises on the upside, it could resume the sell-off in metals with equal fervor.
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Summary* Earnings drive market corrections, but the direction of earnings barely moves the odds of a down year. The size of the earnings decline moves the damage. * Across 151 years, every single annual decline worse than 20% arrived alongside a double-digit drop in reported earnings, in the same year or an adjacent one. There are no exceptions. * When earnings fell by less than 10%, the worst calendar year in the entire record was down 9.4%. Mild profit dips produce noise, not bear markets. * Capital spending, deficits, and oil prices don’t reprice the market on their own. They matter only when they show up in profit expectations. * Credit spreads and estimate revisions deteriorate before reported earnings do, which makes them the signals worth monitoring.
Earnings drive market outcomes. In 151 years, every single 20% market decline was accompanied by a double-digit earnings decline, with zero exceptions.
Every few months, a new reason to sell arrives. Capital spending is too high. The deficit is unsustainable. Oil just broke out. The conclusion attached to each is always the same: investors are about to lose half their money. I’ve watched that warning recycle for three decades, and it’s a smoke detector that goes off every time somebody makes toast. What actually matters is far less exciting. Earnings drive market corrections, and the historical record on that is close to airtight.
A probability tree from BCA Research has been circulating that makes the point simply. It shows the S&P 500 rising 84% of the time overall and only 64% of the time in years when earnings fall. The framing is right. The specific numbers, when I rebuilt them from scratch, turned out to be a good deal more interesting than the chart suggested.
The Bear Case That Keeps Not WorkingStart with why the popular scare stories fail as timing tools. Capital spending, government deficits, and energy prices are all real economic variables. None of them repriced the market on their own. If earnings drive market corrections, then every one of these stories has to travel through profits before it can do any damage, and most of them never complete the trip.
The reason is mechanical. A stock is a claim on future cash flows, and its price is that claim divided by a discount rate. So there are exactly two ways to knock the market down hard. Either the expected cash flows fall or the discount rate rises. That’s the whole list. Capex, deficits, and oil only matter to the extent they eventually show up inside one of those two variables, and most of the time they don’t show up in either with enough force to matter.
Consider what that means in practice. Hyperscaler capital spending can run at what looks like a reckless pace for years without producing a bear market because the spending itself is a transfer from cash flow to depreciation schedules rather than a destruction of earning power, and the market will happily fund that trade for as long as revenue keeps validating it. The spending isn’t the risk. The risk is that the moment revenue stops validating it, it becomes an earnings problem wearing a capex costume. I made a version of this argument in AI Capex Depreciation Risk Is The Catch To Record Earnings, where the concern isn’t the capex line but the impact deferred costs have on reported profits later.
Deficits work the same way, of course. They can widen for a decade, and the only reliable transmission into equity prices runs through interest rates, which is the discount-rate channel rather than the earnings channel. Oil, in contrast, is the most direct of the three because energy is an input cost that compresses margins. Even there, the market doesn’t fall when oil rises. It falls when the margin compression shows up in guidance.
How Earnings Drive Market Corrections Over 151 YearsRather than take anyone’s chart on faith, I rebuilt the analysis from Robert Shiller’s monthly S&P 500 dataset, which carries index price, dividends, and trailing reported earnings per share back to the nineteenth century. That yields 151 complete calendar years, from 1872 through 2022, where both an annual total return and a year-over-year change in reported earnings can be computed. Reported earnings, not operating earnings, and certainly not forward estimates. Actual bottom-line profits.
Here’s what the conditional probabilities look like.
Two things stand out. The unconditional hit rate is 74%, not 84%. That figure cross-checks cleanly against Aswath Damodaran’s independent dataset at NYU Stern, which records 71 positive years out of 97 from 1928 through 2024, or roughly 73%.1 The 84% figure only appears if you start the sample in the mid-1980s, which conveniently excludes the Depression, the 1970s, and both world wars.
The second finding is the one that should give a strategist pause. In years when earnings fell, the market still rose 66% of the time, which is close to BCA’s 64%. But in years when earnings rose, the market rose only 79% of the time, not 92%. Widen the sample, and the gap between the two branches collapses from 28 percentage points to 13. Over the 1928 to 2022 subsample, it shrinks to roughly three points.
So does that kill the thesis? No. It relocates it.
Earnings Drive Market Corrections By Severity, Not DirectionUp or down is the wrong question. A tree that sorts years into two buckets throws away the only variable an investor actually cares about, because a year finishing 2% lower lands in the same box as a year finishing 38% lower, which is how you end up holding a chart that looks decisive while telling you nothing whatsoever about risk. Sort the same 151 years by the magnitude of the earnings change instead. The relationship of the binary version buried comes into focus immediately.
Read the middle column first. When reported earnings fell by less than 10%, not a single one of those 25 years saw a decline worse than 10%. Zero. The worst outcome in that entire bucket was a year that finished down 9.4%. A mild earnings dip is a nothing-burger for the index, which is exactly why the market shrugs off the soft patches that dominate financial television.
Now read the left edge. When earnings fell by more than 25%, half of those years saw declines of more than 10%, and a quarter saw declines of more than 20%. The average outcome in that bucket is negative. That’s the only bucket in the entire 151-year record where the average annual return is below zero.
Ultimately, that is the sentence to carry out of this article. Earnings drive market corrections through severity, not through direction. Whether the market finishes a given year up or down is close to a coin weighted by sentiment, liquidity, and valuation. Whether the market takes a 20% beating is an earnings question, and the historical record answers it without a single exception.
Every Major Decline, And The Earnings Behind ItIn fact, only eight calendar years in the entire sample have a total return worse than 20%. That’s a small enough list to examine one at a time, which is the appropriate level of humility when you’re drawing conclusions from tail events.
Look at the last column. Every one of the eight is accompanied by a double-digit earnings decline. Three of them, 1937, 1974, and 2002, had earnings still growing in the year the market fell apart, which is why a naive year-by-year test would file them as counterexamples and move straight on. They aren’t. The 1937 crash preceded a 43.4% earnings collapse in 1938. Same pattern in 1974, which preceded a 10.5% drop the year after. And 2002 had the sequence reversed, arriving after the 50.6% collapse of 2001 and the valuation reset that followed.
“In each apparent exception, the market didn’t ignore earnings. It got there first.”
That is the mechanism, stated properly. As a result, the market prices expected earnings, so it turns before reported earnings turn. Which means anyone waiting for the profit decline to appear in the data before reducing risk is reading a rear-view mirror and calling it a windshield.
The Strongest Objection, And What It Costs The ThesisThere is a real argument on the other side that we should examine.
“But Lance, 2022 was a 25% bear market, and earnings never fell. That was rates, full stop.”
It’s the best objection available, and it’s half right. On forward operating estimates, 2022 is a clean multiple-compression event. Estimates actually rose through much of the decline, and the forward multiple did nearly all of the work as it compressed from the low twenties into the mid-teens. No earnings recession required.
Here’s the wrinkle. On trailing reported earnings, the measure this entire study is built on, 2022 shows a 12.7% decline. Both statements are true at once, and the gap between them is the point. Operating earnings exclude what companies would rather you ignore. GAAP earnings don’t. When those two series diverge sharply, you’re looking at a quality-of-earnings problem, and I’ve written about that divergence in Shiller’s CAPE: Is It Really Just B.S. more than once.
Still, the objection lands a genuine hit, and I’d rather concede it than dress it up. Rates are an independent channel. A discount-rate shock can produce a serious decline on its own, and 1937, 1974, and 2002 all carried heavy multiple-compression components alongside their earnings problems. So the honest formulation isn’t that earnings are the only thing that matters. It’s that earnings are the variable that separates a routine 10% air pocket from a portfolio-altering event, while rates determine how much valuation cushion you have when the earnings news arrives. Watch both. Weight earnings more heavily.
What about the other direction?There’s a mirror-image error that costs investors more money than the one this article is mostly about. Earnings collapsed by more than 25% in 12 separate years, and in half of those years the market went UP. For example:
- 1921: earnings fell 63.8%, yet the market still returned 14.1%.
- 1938: down 43.4% on earnings, up 19.8% on price. In In
- 2020, earnings were off 32.5%, and the index was up 18.2%.
Why? Because by the time the earnings collapse is measurable, the market has moved on to pricing the recovery. Markets bottom before earnings bottom, without exception in the record above. Selling into a confirmed earnings recession is frequently the worst available trade.
Watch The Estimates, Not The ReportsIf earnings drive market corrections and the market front-runs reported earnings, then the practical question becomes which earnings number carries information. The answer isn’t the one company’s report. It’s the one analysts are revising.
That would be more comforting if analysts were good at it. They aren’t. A McKinsey study spanning 25 years found Wall Street pegging earnings growth at 10% to 12% annually, while actual growth came in at around 6%, roughly the economy’s nominal growth rate, which is why forecasts drift so reliably above outcomes.2
Every year, since 1994, when operating earnings became the convention, initial quarterly forecasts have been skewed optimistically by something close to 30%. I’ve covered the machinery behind that bias in Earnings Season and The Truth About Wall Street Analysis, and the arithmetic of overpaying for those estimates in Estimates By Analysts Have Gone Parabolic.
Of course, the bias doesn’t make estimates useless. It makes the level useless and the direction valuable. Nobody should care that the consensus is too high, because the consensus is always too high. What matters is the second derivative, meaning the rate and breadth at which estimates are being cut. As Bob Farrell’s Rule #9 puts it, when all the experts and forecasts agree, something else is going to happen. The tell isn’t the agreement. It’s the moment the agreement starts quietly dissolving, which typically shows up first in the number of companies being revised down rather than in the index-level figure.
In addition, the breadth of revisions matters more than the magnitude, and index-level estimates hide it. When a handful of very large companies carry the aggregate, the index number can climb while the median company deteriorates. That’s the setup I flagged in Earnings Estimate Revisions Are Very Optimistic, and it’s the single most common way a deteriorating profit cycle stays invisible for a couple of quarters longer than it should.
Investor Tactics When Earnings Drive Market CorrectionsNone of this matters without a process. Howard Marks has made the point for years that you can’t predict, but you can prepare, and preparation here means deciding well in advance which signals change your positioning and by exactly how much so that the decision isn’t being made while you’re staring at red numbers and feeling something about them.
Warning Signals Worth MonitoringCredit markets whisper what equities later shout. Bondholders get paid to worry about whether a company survives at all, so they reprice deteriorating fundamentals well ahead of equity holders, who spend their days pricing growth and tend to read the balance sheet last. Gilchrist and Zakrajšek demonstrated this formally in their NBER work, building a credit spread measure that predicted declines in economic activity and equity prices considerably better than standard default-risk indicators.3 I’ve walked through the practical version in Credit Spreads: The Market’s Early Warning Indicators.
A caution on all of it. Earnings drive market corrections, but these are monitoring tools, not triggers. Spreads spent long stretches at complacent levels while equities compounded, and investors who de-risked the moment spreads looked tight gave up substantial returns for the privilege of being early. The rate of change matters more than the level; confirmation across several signals matters more than any single one; and the correct response to a deteriorating dashboard is usually a smaller position rather than no position.
Frequently Asked QuestionsDo earnings declines always cause market corrections?No, and that’s the most misunderstood part. Across 151 years, the market rose in 66% of the years when reported earnings fell. Small earnings declines are routine, and the index absorbs them easily. The data show that large earnings declines are a precondition for large market declines.
If earnings drive bear markets, how large does an earnings decline have to be to matter?From the data, an earnings decline of roughly 10% appears to be the threshold. When reported earnings fell less than 10%, no year in the sample produced a decline worse than 10%. Once earnings fell more than 25%, half of those years produced a double-digit decline, and a quarter exceeded 20%.
Why did the market fall in 2022 if earnings didn’t decline?It depends on which earnings series you use. For example, forward operating estimates rose, making 2022 look like a pure valuation reset driven by rates. Trailing reported GAAP earnings fell 12.7%. The divergence between operating and reported earnings is itself the story.
Should I sell when earnings start falling?Usually, the opposite is true if the decline is already visible in reported data. Indeed, markets bottom before earnings bottom. In 1921, 1938, and 2020, earnings fell more than 25% while the market delivered double-digit gains. The useful signal is estimated revisions and credit spreads, both of which move earlier.
Are capital spending and deficits irrelevant to market risk?Not irrelevant, but indirect. However, they affect equity prices only by working through expected cash flows or through the discount rate. Watching them without considering earnings and rates means watching the symptom rather than the disease.
What This Means Going ForwardEarnings drive market corrections. That’s the finding, and the next serious decline won’t arrive with a headline about capital spending or the deficit but will begin exactly where all eight of the others began, in the profit cycle, surfacing in credit spreads and revision breadth well before it reaches any earnings report you can actually read. The investors who get hurt won’t be the ones who missed the story. They’ll be the ones watching a different story entirely, waiting on confirmation that always arrives late.
Notes and Sources1. Aswath Damodaran, Historical Returns on Stocks, Bonds, and Bills, NYU Stern. Reports 71 positive years of 97 from 1928 through 2024, best year 1954 at +52.56%, worst 1931 at -43.84%. 2. McKinsey & Company research on analyst forecast accuracy, covering approximately 25 years of consensus estimates versus realized S&P 500 earnings growth. 3. Simon Gilchrist and Egon Zakrajšek, Credit Spreads and Business Cycle Fluctuations, NBER Working Paper 17021. 4. ICE BofA US High Yield Index Option-Adjusted Spread, FRED series BAMLH0A0HYM2, Federal Reserve Bank of St. Louis. Note that FRED restricts the ICE BofA series to a rolling window, so longer histories require the index provider directly. 5. Primary dataset: Robert J. Shiller, monthly S&P 500 price, dividend, and trailing reported earnings series. 151 complete calendar years, 1872 through 2022. All conditional probabilities, severity buckets, and adjacent-year earnings figures were calculated by RIA Advisors. 6. Probability tree framing adapted from a chart published by BCA Research, sourced from FactSet and BCA calculations. Figures in this article are independently recalculated and differ from those in the chart. After having been in the investing world for more than 25 years from private banking and investment management to private and venture capital; I have pretty much “been there and done that” at one point or another. I am currently a partner at RIA Advisors in Houston, Texas. The majority of my time is spent analyzing, researching and writing commentary about investing, investor psychology and macro-views of the markets and the economy. My thoughts are not generally mainstream and are often contrarian in nature but I try an use a common sense approach, clear explanations and my “real world” experience in the process. I am a managing partner of RIA Pro, a weekly subscriber based-newsletter that is distributed to individual and professional investors nationwide. The newsletter covers economic, political and market topics as they relate to your money and life. I also write a daily blog which is read by thousands nationwide from individuals to professionals at www.realinvestmentadvice.com.
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China added 20 tonnes of gold in July and shifted reserves toward Hong Kong, strengthening Bitcoin’s digital gold and scarcity narrative. | Credit: CCN.com
Key Takeaways* China added nearly 20 tonnes of gold in July, its largest monthly purchase since October 2023. * The purchase extended China’s gold-buying streak to 21 months and lifted its holdings to a record 2,366 tonnes. * The purchases do not indicate direct Chinese demand for Bitcoin, as mainland authorities maintain strict crypto restrictions.
China’s central bank added nearly 20 tonnes of gold to its reserves in July, marking its largest monthly purchase since October 2023 and extending an accumulation streak that now spans 21 consecutive months.
The People’s Bank of China increased its holdings by 640,000 troy ounces, lifting total reserves to approximately 76.08 million ounces, or a record 2,366 tonnes. China has added about 60 tonnes since the beginning of 2026, including 10 tonnes in May and 15 tonnes in June.
The accelerating purchases underline Beijing’s appetite for scarce reserve assets as governments seek greater protection from currency, geopolitical and counterparty risks.
The strategy also reinforces the macroeconomic argument behind Bitcoin’s “digital gold” narrative, although China continues to favor physical bullion over decentralized cryptocurrencies.
China Accelerates Gold AccumulationThe July purchase represents the fifth consecutive month in which the PBOC increased the pace of its gold acquisitions. The central bank added roughly 5 tonnes in March before expanding its monthly purchases through the second quarter.
China’s sustained buying reflects a wider effort to diversify its foreign exchange reserves and reduce its reliance on dollar-denominated assets. Gold provides governments with a liquid reserve instrument that no foreign issuer controls and that carries no direct counterparty risk.
Geopolitical tensions and uncertainty surrounding the international monetary system have strengthened that appeal. Other central banks have also increased their exposure to bullion, supporting gold demand even as prices remain historically elevated.
China’s official figures may not capture the full scale of its activity because the country can purchase gold through state-owned institutions or other channels.
However, the published data alone show that Beijing continues to treat the metal as a core strategic asset rather than a short-term trade.
Hong Kong Challenges Western Gold InfrastructureChina has also reportedly transferred more of its gold reserves from London to Hong Kong, supporting the city’s effort to become a major bullion trading and pricing center.
Hong Kong launched a trial of its central gold clearing and settlement system in July. The infrastructure aims to connect trading, storage, clearing and settlement while reducing Asia’s dependence on established Western gold centers.
Moving physical reserves closer to China gives Beijing greater control over custody and improves access during periods of market or geopolitical stress.
It could also increase Hong Kong’s influence over Asian gold pricing and create an alternative to London’s long-established bullion infrastructure.
The initiative reflects a broader trend toward regional financial systems that allow countries to settle and store strategic assets outside Western-controlled networks.
Gold Strategy Supports Bitcoin’s Scarcity CaseChina’s purchases do not represent direct demand for Bitcoin. Mainland authorities maintain strict restrictions on cryptocurrency trading, while the central bank continues to prioritize assets it can hold and control directly.
Nevertheless, the motivation behind China’s gold strategy overlaps with several arguments Bitcoin advocates make for the cryptocurrency. Both assets offer limited supply, global liquidity, and reduced dependence on a single sovereign issuer.
Central-bank demand for gold shows that scarcity and monetary neutrality remain valuable during periods of geopolitical fragmentation. Bitcoin supporters argue that the cryptocurrency extends those properties into a digital, portable, and independently verifiable asset.
Bitcoin still lacks gold’s history, central-bank adoption, and lower volatility. Those differences explain why governments continue to choose bullion for official reserves.
However, as China accumulates gold and builds alternative market infrastructure, the move could strengthen investor interest in scarce assets more broadly.
That environment may support Bitcoin’s digital-gold narrative even if Beijing keeps the cryptocurrency outside its reserves.
China Adds 20 Tonnes of Gold as Reserve Shift Strengthens Bitcoin’s ‘Digital Gold’ Narrative appeared first on CCN.com.
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The data, released in a report from the National Retail Federation (NRF) and Hackett Associates, indicates that major US ports handled 2.23 million twenty-foot equivalent units (TEU) in June, reflecting a 13.2% year-on-year increase as importers moved cargo ahead of newly imposed tariffs and in response to international supply chain uncertainties.
However, this figure represents a modest decline of 0.7% from May, which appears to have marked the year’s busiest month with 2.24 million TEU processed.
According to the forecast, July import volumes are projected at 2.21 million TEU, a 7.6% decrease from the same month last year.
For August, the report anticipates a further dip to 2.22 million TEU, down 4.2% year-on-year.
Despite these projected decreases, Global Port Tracker expects US ports to maintain higher import levels than in 2025 for the remainder of the year, although volumes are projected to steadily taper off.
The NRF cited changes to US tariff policy as a major factor behind the altered import timing. Temporary global tariffs under Section 122 ended in late July, but these were swiftly replaced by Section 301 tariffs ranging from 10% to 12.5%, impacting a broad array of imports from 60 countries, the organisation noted.
Retailers sought to bring in goods earlier to avoid the latest round of tariffs and to contend with continued supply disruptions related to Middle East conflict, Jonathan Gold, NRF’s vice president for Supply Chain and Customs Policy, stated.
“We had an early peak season this year as retailers brought in merchandise ahead of tariff changes in late July and responded to other uncertainties in the supply chain like the ongoing disruption brought by the conflict in Iran. One round of tariffs has been replaced with another, but retailers will be well stocked for the coming holiday season. Retailers know how to adapt to shifting situations and are well prepared to meet consumers’ demand for affordability and choice.”
Looking ahead, the Global Port Tracker predicts import levels will gradually recede after August, with September volumes forecast at 2.16 million TEU, a 2.8% year-on-year rise, followed by 2.13 million TEU in October, up 2.7%.
Monthly volumes are then expected to remain above their 2025 levels through to December, with the year likely to close at 25.5 million TEU, marginally surpassing last year’s total.
The report also noted that the peak shipping season, traditionally occurring later in the summer or early autumn, has arrived earlier and become less pronounced in recent years due to supply chain volatility and anticipation of tariff changes.
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GoldGold is on the ropes at $4,350 an ounce today, off its intraday high near $4,410, but that’s still a level not seen since mid-June, and a price that marks gold’s best weekly showing since early January. The metal has climbed more than 8% since the start of this week and has broken out above the $4,000-$4,200 region, which has been a ceiling for some time. Gold’s weekly gains compared to the same day last week are among the largest in recent months. This week’s move was precipitated by the Bureau of Labor Statistics’ announcement of a stunning loss of 23,000 jobs in the latest employment report.
July was supposed to be a strong month for jobs, but it turned out to be a disaster, with the 23,000 figure coming a large distance below the 80,000 economist consensus. With each subsequent report, the BLS appears to have made the numbers worse, lowering its estimates of 57,000 to 20,000 in June and of 72,000 to 71,000 in May. Not only did traders and investors factor in the weakness in July, but they also worried about the technical deterioration over the prior two months. As a result, the probability of a rate hike in September has been slashed to between 42% and 55%, compared to over 60% a week earlier.
Uncertainty from the FOMCThere’s another reason why the markets are less certain as to the direction of monetary policy now. The latest statement from the Federal Open Market Committee chairman was almost identical to his statement from a month ago. With the exception of one word, the statements were nearly identical, and both followed a period of sharply mixed economic data. In addition, the newer statement included an additional paragraph regarding three dissenters. Gold investors know that when the Fed speaks with a united voice, it’s usually because the institution itself is confused about the state of the economy.
SilverSilver is right at $63.50 an ounce today, having pulled back from an intraday spike that briefly touched $65. Despite this quick pullback, the metal is having a strong week, climbing to a seven-week high and posting one of its largest gains in recent months. Silver’s percentage gains today were higher than gold’s, and the metal appears to be following a similar pattern to its higher-priced cousin.
However, an analyst noted that some of the strength in silver is due to technical positioning, as macro funds and system traders who had been heavily short the metal found themselves scrambling to cover their positions. Short covering, especially on a broad scale, can often lead to exaggerated movements in financial assets, especially commodities. Meanwhile, the fundamental outlook for silver is also bullish, with demand from electric vehicles, solar panels and utility-scale energy storage helping prop the metal higher.
Other Developments Affecting Metals MarketsThe Iran Story Isn’t OverIn addition to news about Iran’s nuclear program, conflicting reports about the Strait of Hormuz have also contributed to volatility in the metals market on Thursday. In addition to the reports of the closure of the waterway, the Iranian parliament’s security committee is reportedly considering a bill forbidding the passage of American, Israeli, and other “enemy” ships and imposing huge fines upon any that attempt to do so anyway. This comes in addition to previous reports that both countries are attempting to reach a diplomatic understanding regarding the dispute, with the situation as a whole changing daily. President Trump himself noted that he believes that the war with Iran is likely to end imminently, but he appears to be discounting the possibility that the Islamic Republic may have a far larger arsenal of weapons than previously estimated, despite his repeated assertions to the contrary.
Wall Street WeaknessThe Dow Jones Industrial Average finished down 0.85% on Thursday, snapping a five-day winning streak after memory chip makers found themselves under heavy selling pressure. Western Digital and SanDisk both dropped more than 13% and 6%, respectively, after reporting disappointing results, and the weakness across technology stocks may well have spilled over into metals. Especially in the wake of such a sharp decline, a poor jobs report can prompt traders and investors alike to jump at the opportunity to buy more commodities, particularly precious ones.
PlatinumPlatinum is at $1,760 an ounce, near a seven-week high, as automakers continue to buy platinum for use in catalytic converters for gasoline-burning vehicles rather than the more expensive palladium.
PalladiumPalladium is at $1,360 an ounce and is lower for the week, although not by much, as automakers continue to switch to platinum and as forecasters estimate a supply glut over the course of 2026.
Bottom LineAll four metals are up on the week, although today’s gains have been sharply limited given the spectacular rise that metals experienced on the back of the employment report. Gold and silver both had a strong week, with prices jumping after months of stagnation in a tight range, although neither was able to hold onto its intraday high.
Platinum is set to benefit from a structural shift in demand from automakers, while palladium finds itself in a slow grind downwards amid several competing factors. In the short term, metals buyers should continue to watch developments in both labor markets and Middle East politics, as their combined impact will dictate whether the long-awaited break higher for gold and its cousins will continue. Expect the Fed meeting next month to be particularly important for both.
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An eagle is seen framed through construction fence on the Marriner S. Eccles Federal Reserve Board Building, the main offices of the Board of Governors of the Federal Reserve System on September 16, 2025 in Washington, DC, U.S. – Kevin Dietsch | Getty Images News | Getty Images
Key Points* The weaker-than-expected July jobs report is altering the outlook for the rate path by the Federal Reserve. * Traders on prediction market platform Kalshi now see a 65% chance that the central bank holds rates steady in September. On CME’s FedWatch tool, those odds are now at 60%. * Investors will now be looking to the July inflation picture, set to be revealed in the Consumer Price Index report for the month on Aug. 12.
The U.S. economy surprisingly shed jobs in July, and it’s leading investors to think that an interest rate hike by the Federal Reserve in September is increasingly unlikely.
After the jobs report was revealed on Friday morning, odds on prediction market platform Kalshi that the central bank holds rates steady at its meeting next month jumped to 65%. Before the report, odds were about 50-50 for a hike or maintaining the status quo, and just after the Fed’s last meeting at the end of July odds of a hike were at almost 58%.
On CME’s FedWatch tool, odds that the Fed will maintain rates are now at 60%, based on trading in Fed funds futures. On Thursday, those chances were at 45%, and a week ago they were just one-in-three.
The weaker-than-expected jobs report sent Treasury yields lower and stocks higher, as investors priced in the new outlook for the rate path.
If the labor market is weakening, that may change how the central bank thinks about rate hikes, which some members of the Fed have called for amid higher energy prices due to the U.S.-Iran war. At the bank’s July meeting, three members of the Federal Open Market Committee dissented, arguing the bank should have raised interest rates rather than held them steady.
However, those calls have come after the labor market showed resiliency in 2026 with consistent job growth, after a more mixed picture in 2025. If the job market is showcasing weakness, raising interest rates to slow down the economy may be viewed as more risky.
Investors’ eyes will now be on what the inflation picture in July looked like, and the Consumer Price Index for the month is set to be released next week on Aug. 12. In June, prices posted their biggest month-over-month fall in six years as energy prices fell, though oil rose in July amid renewed tensions in the Middle East.
“Today’s weak payrolls print may ease the pressure on the Fed to raise rates at its September meeting, but next week’s inflation data will still likely be the deciding factor,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “If those numbers come in hotter than expected, a cooler labor market may not be enough to quiet the calls for hikes inside the Fed.”
And rate hikes this year still aren’t out of the question. Even after the report, CME’s FedWatch tool still sees a 55% chance of a hike in October, and an almost 75% chance in December.
— CNBC’s Sean Conlon contributed reporting
Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.
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(Kitco News) – The gold market is surging higher as the U.S. economy lost jobs in July, significantly missing expectations. The Bureau of Labor Statistics said the economy lost 23,000 jobs in July, versus expectations for a gain of 85,000.
The spot gold price last traded at $4,367.80 an ounce, up 3% on the day. Gold prices are once again surging higher, climbing to $4,350 an ounce as the U.S. economy lost jobs last month, significantly missing expectations. The Bureau of Labor Statistics reported on Friday that U.S. nonfarm payrolls fell by 23,000 in July. The jobs number missed consensus forecasts, as economists had anticipated job gains of around 85,000.
This is the second contraction in the labor market this year. Although the labor market contracted last month, the unemployment rate fell to 4.1%, down from June’s reading of 4.2%. Economists were expecting to see an unchanged reading. However, some analysts note that the unemployment rate is dropping as Americans start to leave the workforce. The gold market is seeing significant buying momentum in its initial reaction to the disappointing labor market data.
Analysts said gold investors are now anticipating that the Federal Reserve will be limited in raising rates this year, even in the face of persistent inflation fears, capping real yields. Spot gold last traded at $4,363.70 an ounce, up nearly 3% on the day. The disappointing economic data has pushed gold prices into positive territory for the year. Not only were jobs lost last month, but the report also downwardly revised the May and June numbers.
The report said June’s employment data was revised down to 20,000, compared to the initial estimate of 57,000. At the same time, May’s numbers were revised lower to 63,000 jobs from the prior estimate of 129,000. Along with weak headline data, the report also noted muted wage growth. Average hourly earnings increased by 0.1%, or 2 cents, last month to $37.62. Economists were expecting to see a 0.3% increase. Bond markets continue to price in a rate hike in September. The CME FedWatch Tool shows markets see a roughly 50/50 chance of a rate hike in September.
However, economists expect that expectations will start to be pared back as investors continue to digest the data. “The US rate hike odds are simply smashed by the US NFP number, and anyone who has been thinking that rate hikes are coming has had a real reality check. The action and reflection of this are clearly shown in the gold price action, which has moved higher like a rocket,” said Waleed Said, Technical Analyst at GivTrade. “Basically, the data has brought good news for gold and for the markets, but for the Fed, this is another huge problem, especially when inflation is this high. The Fed Chairman now will have to do some serious thinking to keep inflation in check.”
Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management, described the employment report as a game changer for interest rate expectations. “Before today, many were expecting that the Fed had no choice but to raise rates in order to fight stubbornly high inflation, because the job market was so strong, but this report shows that isn’t the case,” he said. “Next week’s CPI release will be important – and if the data continues to come in higher than expected, it could raise the probability of a rate hike at the Fed’s next meeting – but today’s jobs numbers should be enough to keep the Fed on hold for at least another meeting, which all things being equal is a positive for the stock market.”
However, not all economists see the July data as disastrous. Bill Adams, Chief U.S. Economist at Fifth Third Commercial Bank, described the report as “wonkish,” as much of the job loss was in government employment and education. “In the broader context, the July jobs report shows that job growth was slow in the middle of 2026, but the job market is still tightening due to a shrinking labor force.
Ordinarily a drop in payrolls would make the Fed worry about growth momentum, but when they fall at the same time that the unemployment rate declines it’s more likely to be noise,” he said. “The July CPI release will influence the Fed’s September decision more than the month’s jobs report.”
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.
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GoldGold is up to $4,250 an ounce today, down modestly from this morning’s open above $4,300, the highest since June 17th, and the first time it has crossed this price since then. It is only down slightly on Monday, but has jumped substantially over the past week and is now seeing one of its best short daily advances of the year. Much of the weakness on Monday appears to be profit-taking off the table after the rapid advance, a fairly typical move.
Iran Deal Hopes Support the Bigger MoveA big change of fortune today involves Iran. In addition to reports that a deal may be struck soon, it seems one may actually be near. With Oman and Iran agreeing to a deal allowing shipping to pass through the Strait of Hormuz, it appears the deal that has long seemed likely may actually happen. This is a big difference from what was seen earlier in the week, when much of the news focused on possibilities rather than certainties.
This makes it more likely that oil prices will move lower, which also means the Federal Reserve is less likely to raise interest rates over the coming months. Fewer rate hikes by the Fed are usually bullish for gold over time, and despite Monday’s weakness, gold is seeing a slight sell-off after a big move higher. Gold is not alone in seeing a small sell-off after a big week, as the same pattern is showing up in other metals as well.
SilverSilver is at $61.30 an ounce today, down slightly from this morning’s open near $62.20, and is the highest since early June, with a large jump over the past week. It has climbed more than 4% from its Monday open and is well above where it was one week ago. A small down move on Monday appears to be little more than a pause after hitting a multi-week high.
Silver Looks to Hold the $60 LevelThe weakness on Monday appears to be little more than a pause after two straight days of gains, and a move above $62 is likely soon. One thing to watch in silver is whether it can hold above $60, as it has spent much of July trying to do so. If it can hold above this level, it could quickly become the next level of support that would need to be broken before further weakness could be expected. This is the type of setup that often leads to a technical bullish scenario when it unfolds.
Other News Affecting These MetalsMarkets are generally up modestly today, following Wednesday’s correction from Tuesday’s record close. Companies have reported earnings, including Disney, Shopify, and Kimberly-Clark, and now investors are watching the nonfarm payrolls report on Friday. Expectations are for about 80,000 new jobs created in July, and with the lower-than-expected number seen this Monday in the ADP report, this report will have implications for how hawkish the Federal Reserve is likely to be in the near term.
Labor and Market Volatility Stay in FocusAt the same time, layoffs are also down, according to the latest Challenger report. This helps take the edge off concerns about the labor market, even as the ADP report this Monday showed weakness that could raise questions about the economy’s strength. At the same time, SpaceX’s IPO lockup expires today, which could lead to increased supply of shares after its rocky debut as a public company last week. This type of news usually has little direct impact on gold and silver, but has contributed to some market volatility.
Palladium Demand Remains MixedIt may also be worth noting that the demand for palladium appears to be conflicting. While Americans continue to favor hybrids over electric cars, which favors metal, Chinese EV sales rose for the third straight month in July. At the same time, Nornickel, one of the world’s largest producers of palladium, expects a surplus of the metal to develop in 2026. This suggests that the fundamentals of this particular metal may be more mixed than those of others at this time.
PlatinumPlatinum is up to around $1,700 an ounce, and is near a seven-week high after a strong move higher on Thursday.
PalladiumPalladium is near $1,360 an ounce and is close to a two-month high despite concerns about long-term demand for the metal.
SummaryEach of these metals is seeing a slight down move today, but this is little more than a pause following a substantial rise this week. A pause after a big move in either direction is normal, and not unexpected, especially after the rapid rise seen in each of these metals over the past week.
Gold and silver, in particular, appear to be well positioned to move higher over the medium term, with weaker labor market numbers this Monday, a softer outlook from the Federal Reserve, and improved prospects for shipping routes in the Middle East. The Friday nonfarm payroll report will be important, with weakness likely to trigger a move similar to what has been seen this week almost immediately. Stronger-than-expected numbers, meanwhile, would see a similar consolidation as what is being seen today.
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(Kitco News) – Although gold prices have retreated from their overnight high above $4,300 an ounce, the market is holding solid support above $4,200 an ounce even as the U.S. labor market continues to show resilience, with the number of Americans filing first-time unemployment claims remaining below a key level.
Initial claims for state unemployment benefits rose by 1,000 to a seasonally adjusted 199,000 for the week ending Aug. 1, the Labor Department announced Thursday. The figure was broadly in line with expectations, as consensus forecasts called for 203,000 claims. The previous week’s reading was revised up by 1,000 to 198,000.
This marks the third consecutive week that jobless claims have remained below 200,000, the longest such streak since March 2023.
The latest labor market data is having little impact on gold, as investors continue to digest Wednesday’s disappointing job gains reported by private-sector payroll processor ADP. The company said that the private sector added just 44,000 jobs in July.
Spot gold last traded at $4,265.60 an ounce, up 0.45% on the day.
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.
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Summary* Markets anticipate conflict resolution in the Strait of Hormuz, easing inflation fears and supporting a pause in Fed rate hikes. * Tech sector valuations have normalized with the broader market due to strong Q2 earnings, reducing risk and improving sector attractiveness. * Recent economic data, including ADP payrolls and ISM services PMI, suggest steady 2% trend growth and manageable inflation pressures. * Rare S&P 500 V-shaped reversal historically signals high probability of continued bull market and economic expansion into 2027. * This idea was discussed in more depth with members of my private investing community, The Portfolio Architect. denphumi/iStock via Getty Images
Yesterday, stocks took a breather after a record four-day run. Any further progress on lowering oil prices and easing bond yields across the curve is going to require an official reopening of the Strait of Hormuz agreed to by all parties involved. It appears that Iran and Oman have negotiated a path forward, but it remains to be seen whether President Trump will agree and use this as an opportunity to further deescalate and soon end the war.
The dollar has been weakening, which is leading to an upturn in gold and silver prices, all of which tells me that markets sense the conflict is coming to an end. That should ease inflation fears and give the Fed more room to hold off from rate hikes. CME Fed Funds futures show an increasing probability that rates will remain unchanged at the next meeting in September.
Finviz
A welcomed development from the correction in the Nasdaq Composite combined with the tremendous outperformance in second-quarter earnings reports is that the tech sector’s valuation has now fallen in line with the broad market. Valuation was my primary concern at the beginning of the year, and my reason for underweighting the sector. Earnings are growing into the elevated multiples we had seven months ago. This process is likely to continue during the second half of the year, requiring selectivity when picking stocks, but this period of consolidation has reduced risk and made the sector more attractive.
US Technology valuations(Bloomberg)
According to the ADP payroll report, private companies added 44,000 jobs last month, which fell short of expectations for 70,000 and below last month’s 95,000. Most of the new jobs came from education and health services (36k), along with the financial sector (10k) and professional business services (9k). The leisure and hospitality sector shed 11,000 jobs, but I think that has more to do with the end of the World Cup. This report was not too hot or too cold but just right to temper inflation concerns.
Private payrolls (TradingEconomics)
The Institute for Supply Management’s (PMI) service sector index inched higher in July to 54.1, continuing to point to expansion for the broad economy. While new order growth strengthened and business activity rose to a five month high, employment weakened. This suggests Friday’s labor report may come in light of the 83,000 jobs expected. Input prices remain elevated, led by petroleum-related products, but the number of commodities mentioned falling in price from the survey results rose from three to six last month. This report is consistent with trend growth of 2% in the economy.
US service sector expands (Bloomberg)
We had an extraordinary event over the past month. According to the analysts at SentimenTrader, the S&P 500 index swung from a 21-day low to a 21-day high within fewer than ten trading days. In fact, it happened in just four days! Since 1984 this has occurred just ten times when the S&P 500 was within 2% of an all-time high. The index was higher six months later 89% of the time. It was higher 12 months later every time. This is no guarantee it will happen again, but it does align with my fundamental outlook for a continuation of the economic expansion and bull market well into 2027.
SPX V-shaped reversal(SentimenTrader)
Lawrence Fuller has been managing portfolios for individual investors for 30 years, starting his career at Merrill Lynch in 1993 and working in the same capacity with several other Wall Street firms before realizing his long-term goal of complete independence when he founded Fuller Asset Management.
He also manages the Focused Growth portfolio on the new fintech platform called Dub, which is the first copy-trading platform approved by securities regulators in the US, allowing retail investors to copy the portfolio and ongoing trades of the manager they choose automatically. You can also find him on Substack and lawrencefuller.substack.com.
He is the leader of the investing group The Portfolio Architect, which focuses on an overall economic and market outlook that complements an all-weather investment strategy designed to produce consistent risk-adjusted market returns. Features include: Portfolio construction guidance, access to an “All-Weather” model portfolio and a dividend and options income portfolio, a daily brief summarizing current events, a week ahead newsletter, technical and fundamental reports, trade alerts, and 24/7 chat. Learn More.
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(Kitco News) – U.S. markets are closed in recognition of Juneteenth, and the gold market is not finding much direction from global currencies after the Bank of England left interest rates unchanged, while the Swiss National Bank cut rates.
Mixed global monetary policies are helping to keep gold prices locked in their current elevated range. The yellow metal, priced against the British pound, is £2,508.39—roughly unchanged on the day. At the same time, gold priced in Swiss francs last traded at ₣2,755.86 an ounce, also unchanged. Gold’s price action against specific currencies is broadly in line with the global market, with the precious metal trading at $3,370.15 an ounce, up 0.08% on the day.
According to analysts, it’s not surprising that gold is seeing little direction from either the Bank of England or the Swiss National Bank, as both decisions were roughly in line with expectations.
Economists note that the BoE’s monetary policy remains caught in a tug-of-war, with weakening economic growth on one side and persistent inflationary pressures on the other.
However, analysts also point out that three committee members voted for a 25 basis point rate cut—more than expected—while six members voted to keep interest rates unchanged.
Despite the dovish vote, Michael Brown, Senior Market Strategist at Pepperstone, said the central bank’s monetary policy statement remains straightforward, as it aims to implement “gradual and careful” rate cuts while maintaining restrictive policies to keep consumer prices in check.
“On the whole, the June MPC meeting isn’t exactly going to go down as a ‘gamechanger’ for the ‘Old Lady’, with policymakers, for the time being, sticking with their autopilot approach of delivering a cut at every other policy meeting. Hence, my base case remains that the next 25bp reduction, taking Bank Rate to 4.00%, will come at the August confab,” he said.
Fixed income analysts at TD Securities also expect the BoE to continue cutting rates, even as inflationary pressures remain elevated.
“Looking forward, the addition of Ramsden to the doves’ camp, as well as the softer-than-expected data releases since the last meeting, suggests that the quarterly pace the BoE has been on thus far is likely to continue. This places more certainty on the August cut, and we expect an additional one in November, for a total further reduction of 50bps in the Bank Rate by year-end,” the analysts said.
Meanwhile, gold appears to be a potentially stronger bet against the Swiss franc, as the SNB cut its interest rate to zero and signaled a willingness to go further if necessary in order to deter investors from pushing up the franc.
Economists note that the SNB is attempting to keep the franc weaker to support economic activity. Many investors view the franc as an important safe-haven currency due to Switzerland’s stable financial markets. The ongoing global economic uncertainty—initially triggered by President Donald Trump’s global trade war—has significantly increased demand for safe-haven currencies like the franc.
Economists at ING said they expect economic uncertainty to be a stronger factor supporting the Swiss franc than the central bank’s rate cuts.
“Considering the troubled trade and geopolitical environment, it is unlikely that the Swiss franc will weaken significantly in the coming months, although the SNB hopes that the increase in the interest rate differential between Switzerland and other central banks will help to limit this appreciation. Its ‘safe-haven’ characteristic, which attracts capital flows during high-risk periods, should keep it strong,” the analysts said.
Neils Christensen has a diploma in journalism from Lethbridge College and has more than a decade of reporting experience working for news organizations throughout Canada. His experiences include covering territorial and federal politics in Nunavut, Canada. He has worked exclusively within the financial sector since 2007, when he started with the Canadian Economic Press.
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.Trending NewsGoldGold has a path to $4,000 as U.S. credibility crumbles – WisdomTree’s Nitesh ShahMay 12, 2025 – 1:55 PM
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The post It’s not just the US dollar, gold treading water against British pound and Swiss franc following in line central bank moves appeared first on Golden State Mint Blog.
By Naomi Rovnick and Dhara Ranasinghe
LONDON (Reuters) -Investor unease about an increasingly uncertain environment is rising, as Norway’s shock rate cut on Thursday highlights how U.S. tariffs, Middle East conflict and a shaky dollar make global monetary policy and inflation even harder to predict.
Norway’s crown slid roughly 1% against the dollar and the euro in a sign of how unexpected the move was. And Switzerland, which cut borrowing costs to 0% on Thursday, confounded some expectations among traders for a return to negative rates in the deflation-hit nation, as its central bank warned of a cloudy global outlook.
Just a day earlier the U.S. Federal Reserve kept rates on hold and chair Jerome Powell said “no one” had conviction on the rate path ahead.
The conclusion for markets: monetary policy uncertainty is one more headwind to navigate against a backdrop of geopolitical and trade risks.
Global stocks pulled away from recent peaks, a gauge of expected volatility in European equities touched a two-month high as stocks across the region fell and government bonds, usually geopolitical risk havens, sold off.
“We’re at a moment of considerable policy and macro uncertainty,” said BlueBay chief investment officer at RBC Global Asset Management Mark Dowding.
“We can’t see a clear trend on interest rates,” he added, which meant he was holding back from active market bets across the group’s investment portfolios.
Volatility was set to rise, some investors said, because a choppy dollar and oil prices whipped around by geopolitics meant that central banks were far less able to provide markets and investors a clear route map for the future.
“You cannot just take your cues from the central banks anymore as they are facing a harder job of reading the economy themselves,” T.S. Lombard director of European and global macro Davide Oneglia said.
BROKEN MODELS
Rate-cutting European central banks are not just diverging from the Fed, which is grappling with the inflationary risks of President Donald Trump’s tariffs.
They are also struggling to navigate a new era where the dollar, the lynchpin of world trade, commodity prices and asset valuations, has turned weaker and more volatile under trade war stress and government debt anxiety.
“That’s a massive, massive fundamental shift in global markets that everyone is trying to assess,” Monex Europe head of Macro Research Nick Rees said.
“All of those standard economic rules of thumb we use for forecasting are completely broken right now.”
The dollar is down almost 9% against other major currencies this year but has risen following the outbreak of a war between Israel and Iran.
European Central Bank policymaker Francois Villeroy de Galhau said on Thursday the ECB might have to adapt its rate cut plans if oil price volatility was long-lasting.
The new status quo in markets could well be an era of central bank surprises that create rapid shifts in the market narrative, asset pricing and volatility trends, analysts said.
“We’re getting into this next cycle in which variables are much more volatile, because, rather than (monetary policy) being just easily predictable, events just take over and policy and human factors, as we now know with Donald Trump, play an important role,” Oneglia said.
Norway’s surprise cut came because the crown was a “runaway top currency” of the trade-war era, added Societe Generale’s head of FX strategy Kit Juckes.
With investors chasing around the world to identify stores of wealth that are not U.S. dollars, meanwhile, the Swiss franc has soared, cutting the costs of imports and pushing the economy into deflation.
On Thursday, the franc rose against the dollar as traders saw the SNB’s cut as too small to keep deflation at bay.
Ninety One multi-asset head John Stopford said the hazard risk was rising for global stocks and that options products that aim to offer protection from incoming volatility looked fairly cheap.
He was buying bonds issued in nations where inflation and rates could come down materially, such as New Zealand, but was negative on longer-dated U.S. Treasuries and German Bunds where economic uncertainty was higher and government borrowing was likely to rise.
Global stocks remain almost 20% above their April trough, after investors relaxed about tariffs.
Stopford said there was more to worry about in the short term.
“The stock market feels like it’s a thatched house in a hot country with a fire hazard risk, and people aren’t charging much to insure the house,” Stopford added.
(Reporting by Naomi Rovnick and Dhara Ranasinghe; Editing by Toby Chopra)
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Why Silver’s Move Has Investor’s Attention | https://www.themorganreport.com
David Morgan, The Silver Guru speaks on why should I, or you, be excited with silver? Why does silver’s moves have investor’s attention? Most of us have been there before. We’ve had the excitement, we’ve seen the head fakes, we’ve seen the gold to silver ratio run off into the hundreds and back down. However, this time…this time it all looks, smells, sounds, feels, and tastes different. David Morgan from The Morgan Report gives us his expert take on silver and yes, could it be different this time? Either way, I’m buying silver, come see why.
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By Lewis Krauskopf
NEW YORK (Reuters) -U.S. President Donald Trump has said that he would soon nominate Jerome Powell’s successor, with nearly a year left before the Federal Reserve chair’s term ends. Investors said that could present a risky proposition for markets.
Trump has made no secret of his displeasure with Powell and the Fed for not lowering interest rates since the president began his second term in January. While Trump has backed off from comments earlier this year that he could fire Powell, and a recent U.S. Supreme Court ruling eased worries that he could do so, he said earlier this month that a decision on the next Fed chair would be coming soon.
Such an announcement, well before Powell’s term ends on May 2026, could cause significant unease in markets, investors said.
The potential for a “shadow” Fed chair who offers potentially clashing views with the sitting central bank leader on monetary policy could sow confusion. Any choice deemed as being under Trump’s thumb would alarm Wall Street, given the broad sentiment that an independent Fed is critical to its ability to function properly.
“Whomever is appointed, the key thing to monitor is whether they are perceived as being a political appointee,” said Eric Winograd, chief U.S. economist at Alliance Bernstein. “And by that, I mean someone whose views change with the whims of the president.”
The chair of the Fed, which sets U.S. monetary policy and has a mandate to maintain full employment and price stability, is among the most closely followed government officials by Wall Street.
That said, the Fed chair is only one of 18 members on the central bank’s monetary policymaking committee and part of the role is to build consensus on the committee.
Markets will want a Fed chair who is “laser focused” on economic balance and its dual mandate, said Callie Cox, chief market strategist at Ritholtz Wealth Management.
“Any Wall Street manager would tell you that Fed independence is the golden rule of markets,” Cox said. “To move away from that can introduce a whole host of issues.”
An unconventional choice for the Fed would present a potential wildcard for markets if announced in the next few months, said Jason Draho, head of asset allocation Americas at UBS Global Wealth Management.
“It’s a risk that exists if people are too complacent on how this could all play out,” he said.
The Fed has no open spots that Trump could fill temporarily until January when Adriana Kugler’s term on the Board of Governors ends.
According to online prediction market Polymarket, the top candidates are White House economic adviser Kevin Hassett; former Fed Governor Kevin Warsh; Judy Shelton, a former Trump pick for the Fed board whose nomination was withdrawn under President Joe Biden; and Treasury Secretary Scott Bessent.
Another prediction site, Kalshi, lists current Fed Governor Christopher Waller as having among the best odds to be nominated.
The White House declined to comment on Hassett or Bessent as possible contenders. A Fed spokesperson declined to comment. In an emailed response, Shelton pointed to her opinion piece about the Fed earlier this week in the Wall Street Journal. A request for comment from Warsh was not immediately returned.
SHADOW CHAIR
Investors worry that an early Fed chair appointment could lead to confusing messages about monetary policy.
“You’re going to have two people trying to steer the ship: One that’s actually steering it, and one that’s the backseat driver,” said Ryan Sweet, chief U.S. economist at Oxford Economics.
For months, Trump has hammered Powell, whom the president himself appointed in 2018, over the Fed’s decision not to lower interest rates this year.
The central bank cut the fed funds rate by a full percentage point last year, with its most recent cut of 25 basis points in December. But the Fed has pointed to risks of both higher inflation and higher unemployment in keeping the rate at its current level of 4.25-4.5%.
Just last week, Trump slammed Powell over the lack of rate cuts, calling him a numbskull, but said, “I’m not going to fire him.”
A Fed chair would need to be confirmed by the U.S. Senate, a process that could take months from the time of Trump’s announcement, investors said.
While markets would “not love the idea” of a shadow Fed chair, having a track record of reactions to data and policy “increases the level of familiarity that you would have with their communication style,” said Alex Grassino, global chief economist and head of macro strategy at Manulife Investment Management.
“You’re sort of setting up an alternate version of what you think policy should be.”
The optimal market reaction to any Fed chair nomination may be none at all, said Felix Vezina-Poirier, strategist for BCA Research, adding that he will be watching how bonds respond in particular.
“No reaction, or a decrease in long-term yields, would be a good sign that the market is digesting the Fed candidate,” he said.
Some investors doubted that Trump would name a Powell replacement anytime soon, instead waiting until closer to when the Fed chair’s term ends.
The eventual nominee may not be among those most publicly rumored or predicted at the moment, investors said.
“If I were betting, I’d bet other,” Winograd said. “I’d bet the field.”
(Reporting by Lewis Krauskopf; additional reporting by Laura Matthews and Saeed Azhar in New York, Andrea Shalal and Howard Schneider in Washington; Editing by Alden Bentley and Richard Chang)
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As gold hits record highs, central banks keep accumulating, and a viral tweet from Miles Franklin is asking the question on everyone’s mind.
A tweet by precious metals dealer Miles Franklin recently drew attention across financial circles. The tweet noted: “Gold hit $3,500 in April and central banks kept buying like it was cheap. They’ve stacked over 1,000 tons yearly for three years straight (WGC). Now, 95% expect gold reserves to keep rising while dollar reserves fall. What are they bracing for?”
It’s a timely question. Despite hitting a historic high of $3,500.05 per ounce in April 2025, central banks haven’t paused their gold purchases. According to the World Gold Council (WGC), official sector buying has exceeded 1,000 metric tons annually for three consecutive years. That kind of consistent demand hasn’t been seen since the 1960s.
Why Central Banks Aren’t Slowing DownThe WGC’s 2025 Central Bank Gold Reserves Survey confirms the trend: 95% of central banks expect global gold reserves to rise over the next year, while nearly three-quarters anticipate a decrease in their U.S. dollar holdings.
Analysts point to several drivers behind the move: geopolitical tensions, inflation hedging, and efforts to reduce exposure to U.S.-led financial systems. Rhona O’Connell of StoneX said this wave of buying suggests central banks view gold as a “strategic shield” amid growing global uncertainty.
“Gold’s resilience in crisis, its role in diversification, and the shift away from the dollar are all feeding into this,” the WGC noted.
Market Snapshot: Gold and Silver TodayAs of June 17, spot gold is trading around $3,430 per ounce, up more than 45% year-over-year. Silver is currently priced near $36.50 per ounce, still well below its 2011 high of $49.80.
With the U.S. Federal Reserve expected to begin easing interest rates later this year, many central banks appear to be positioning ahead of falling real yields, a scenario in which gold historically performs well.
This article is for informational purposes only. The opinions and analysis herein are those of the author and are not financial advice. The Jerusalem Post (JPost.com) does not endorse or recommend any investments based on this information. Investors should consider their financial situation, investment goals, and risk tolerance before making any decisions. Consulting a qualified financial advisor is recommended. JPost.com is not liable for any investment losses from using this information. The information provided is for educational purposes only and should not be considered as trading or investment advice.The post Central Banks Keep Buying Gold Despite $3,500 Price Tag appeared first on Golden State Mint Blog.
(Kitco News) – The gold market is trading AAAAA after the latest data shows U.S. producers saw cooler price pressures last month.
The headline Producer Price Index (PPI) rose 0.1% in May, following April’s revised -0.2% reading, the U.S. Labor Department announced on Thursday. The latest inflation data was cooler than expectations, as economists looked for a 0.2% increase.
In the last 12 months, headline wholesale inflation increased 2.6%, the report said, in line with the consensus but higher than April’s revised 2.5% reading.
Core PPI, which strips out volatile food and energy costs, rose 0.1% in May, well below economists’ 0.3% consensus forecast and following April’s revised -0.2% reading. Annual core PPI was 3.0%, against the consensus expectation for a 3.1% reading and April’s upwardly revised 3.2% print.
Gold prices continued to climb into the upper end of their daily range after the 8:30 am EDT data release. Spot gold last traded at $3,385.42 for a gain of 0.89% on the day.
PPI is viewed as a leading inflation indicator as producers pass higher input costs on to their customers.
Market analysts have said that falling producer price growth, combined with cooler-than-expected CPI inflation, would enable the Federal Reserve to move up the timeline for further rate cuts, which would represent a tailwind for gold prices.
Bill Adams, Chief Economist for Comerica Bank, told Kitco News that business-to-business inflation was expected to be hotter in May.
“Tariffs were expected to add to the increase of core PPI goods excluding foods and energy, but that component registered an unremarkable moderate increase in May,” he said. “The PPI data don’t report the uptick in input costs visible in the PMI surveys, which showed input cost inflation at the highest since 2022 in May.”
Adams still expects the Fed to hold rates unchanged through year-end, but said the latest inflation and jobless claims data increase the possibility of a cut by then.
“If businesses think demand is too weak for them to pass on the cost of the tariffs, they will have to absorb the costs,” he warned. “That would eat into profits. When profits fall, capital spending and hiring tends to be weaker too, which would slow the overall economy.”
Adams said there are two potential offsets to this dynamic which have yet to show up in the data, and that could keep the Fed sidelined this year.
“The first is that tax cuts in the 2026 tax and spending bill will be stimulative to the economy (and also contribute to higher fiscal deficits, that’s how fiscal stimulus works),” he said. “The second is stricter immigration enforcement, which will reduce growth of the labor force this year. That means less job creation is needed to keep the job market on an even keel. The effect of these is likely to show up in weekly and monthly economic indicators this summer.”
Ernest Hoffman is a Crypto and Market Reporter for Kitco News. He has over 15 years of experience as a writer, editor, broadcaster and producer for media, educational and cultural organizations. Ernest began working in market news in 2007, establishing the broadcast division of CEP News in Montreal, Canada, where he developed the fastest web-based audio news service in the world and produced economic news videos in partnership with MSN and the TMX. He has a Bachelor’s degree Specialization in Journalism from Concordia University. You can reach Ernest at 1-514-670-1339.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.The post Spot gold at $3,387/oz after U.S. housing starts fall -9.8% in May appeared first on Golden State Mint Blog.
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If you go by the official numbers, the inflation spike of 2022 may feel like a thing of the past. But according to legendary investor Rick Rule — former president and CEO of Sprott U.S. Holdings — the U.S. dollar’s erosion in purchasing power is far from over.
The culprit, he says, is America’s massive and growing debt burden.
“The net present value of off-balance-sheet liabilities, which is to say Medicare, Medicaid, Social Security, federal pensions, military pensions — the net present value of unfunded federal promises in the United States exceeds $100 trillion,” Rule said in a recent interview with Kitco.
While the official U.S. national debt currently stands at $36.22 trillion, some experts estimate that unfunded liabilities are upwards of $70 trillion, pushing the total past $100 trillion.
Rule warns that serving that debt will come at a cost to everyday Americans.
“We will have to allow the purchasing power of the U.S. dollar to decline so that we can honor our nominal debts while not honoring our real debts,” he explained in the interview. “I believe because of this $100 trillion in unfunded entitlement liabilities, that the U.S. dollar will lose 75% of its purchasing power over 10 years.”
It’s a stark outlook — but not without precedent. Rule pointed to the dollar’s steep decline in the 1970s as an example of how quickly purchasing power can evaporate.
After all, $100 in 2025 has the same purchasing power as just $12.05 in 1970, according to the Federal Reserve Bank of Minneapolis inflation calculator.
If Rule’s prediction of a 75% drop in the U.S. dollar’s purchasing power over the next decade proves accurate, it could mean serious trouble for anyone holding the greenback. So what does he rely on?
“I maintain liquidity in things like the U.S. dollar and the Canadian dollar — I save in gold,” he told Kitco.
Gold has served as a store of value for thousands of years — and for good reason. Unlike fiat currencies, the precious metal can’t be printed at will by central banks, making it a natural hedge against inflation and currency devaluation.
Over the past 12 months, gold prices have surged by more than 40%. But Rule believes that’s just the beginning, given how much real value the dollar is expected to lose.
“I believe that over the next 10 years, gold’s appreciation, at least in nominal terms, will mirror the devaluation of the purchasing power of the U.S. dollar,” he said. “I don’t own gold because I hope it’ll go to $3,500, I own gold because I’m afraid it’ll go to $12,000.”
Considering where gold is trading today, $12,000 would represent a potential upside of roughly 250%.
Rule isn’t alone in turning to gold as a safeguard. Ray Dalio, founder of Bridgewater Associates — the world’s largest hedge fund — also sees it as a key component of a resilient portfolio.
“People don’t have, typically, an adequate amount of gold in their portfolio,” he told CNBC earlier this year. “When bad times come, gold is a very effective diversifier.”
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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For much of the year, silver was moving sideways, while gold marked one all-time high after another. The script has flipped this month.
Silver has gained 12% in June so far, while gold prices are up 2.7%. The silver market is benefiting from new applications in solar panels, while traders may also be searching for other stores of value after exhaustion from gold’s 25 record highs this year.
On Tuesday, silver prices popped by 1.2% to $36.945, while gold prices were dropping. The question now is whether this is a small detour for silver or a start of a longer-term outperformance. Investors typically prefer gold over silver in times of distress, like a war.
Over the past year, silver’s gain is about half the 46% gain in gold prices.
The post Silver Is Having a Way Better Month Than Gold appeared first on Golden State Mint Blog.
(Kitco News)— The gold market is trading in neutral territory below $3,400 an ounce, even as American consumers significantly cut back on their shopping last month.
U.S. retail sales dropped by 0.9% in May, following April’s revised decline of 0.1%, the U.S. Commerce Department announced Tuesday. The data came in weaker than expected, as economists had projected a 0.5% decline in the headline number.
Over the past 12 months, retail sales increased by 4.5%, the report said.
Core sales, which exclude vehicle purchases, fell by 0.3% in May, also missing expectations. Economists were forecasting a 0.2% increase.
At the same time, the control group—which excludes sales from auto dealers, building materials retailers, gas stations, and office supply stores, and which feeds directly into U.S. GDP—rose by 0.4%, exceeding expectations for a 0.3% increase.
The gold market is largely shrugging off the disappointing economic data, as investors continue to take profits following last week’s sharp rally above $3,400 an ounce. Spot gold last traded at $3,384.79 an ounce, roughly unchanged on the day.
However, some analysts suggest the weak sales data could provide support for the precious metal. Sluggish consumer spending may dampen economic growth, potentially prompting the Federal Reserve to cut interest rates, even if inflation risks remain elevated.
Adam Button, Senior Currency Strategist at Forexlive.com, described the sales data as a mixed bag.
“Overall, this is a tough series to read right now because sales jumped in March on tariff worries and have fallen in two consecutive months since,” he said.
Neils Christensen has a diploma in journalism from Lethbridge College and has more than a decade of reporting experience working for news organizations throughout Canada. His experiences include covering territorial and federal politics in Nunavut, Canada. He has worked exclusively within the financial sector since 2007, when he started with the Canadian Economic Press.
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.The post Gold prices treading water as U.S. retail sales fall 0.9% in May appeared first on Golden State Mint Blog.
Gold slips from near record highs this morning on likely profit taking. The yellow metal jumped over $3400 an ounce in overnight trading amid demand from investors seeking a haven against geopolitical and economic uncertainty.
Prices remain elevated following Israel’s attacks on Iran beginning last week and retaliatory strikes by Iran on Israel. Traders throughout the broader market seemed unwilling to make big bets in either direction as the conflict developed.
August gold futures rose 3.2% last week to settle at $3,452.80 an ounce on Comex after the front-month contract gained 1.5% Friday. Bullion slipped 0.1% last month after increasing 5.4% in April and gaining 11% in March. It’s up 31% this year. The metal rose 27% in 2024, its biggest annual gain since 2010. The August contract is currently down $39.60 (-1.15%) an ounce to $3413.20 and the DG spot price is $3394.60.
Iran launched fresh air strikes against Israel late Sunday and early Monday after Israel reported that it killed key Iranian figures over the weekend—including the chief of Iran’s armed forces intelligence unit. U.S. President Donald Trump reportedly dissuaded Israel from taking out Iran’s supreme leader, and Trump on Sunday called for the two sides to make a deal.
A three-day meeting of the Group of Seven nations in Canada early this week will likely take on the conflict and discuss Trump’s tariff and trade policies.
Investors will also be watching the upcoming Federal Reserve policy meeting this week for any signals on plans for interest rates for the rest of the year. The Fed’s next monetary policy announcement is due out Wednesday, but the central bank is widely expected to leave interest rates unchanged at 4.25% to 4.50%. Most investors tracked by the CME FedWatch Tool expect the Fed to begin interest rate cuts in September, not at this week’s meeting or the next one in July. Lower interest rates are typically bullish for gold, making the yellow metal a more attractive alternate investment.
The Fed held rates at policymakers’ meetings this year after reducing them three times in 2024. The central bank began raising interest rates in March 2022 to fight inflation, ultimately imposing increases of by 5.25 percentage points before beginning rate cuts last year. Previously, the Fed had kept rates at 5.25% to 5.50% for a year.
Front-month silver futures rallied 0.6% last week to settle at $36.36 an ounce on Comex after the July contract rose 0.2% Friday. Silver added 0.6% in May after dropping 5.2% in April and advancing 9.9% in March. It gained 21% in 2024. The July contract is currently down $0.025 (-0.07%) an ounce to $36.330 and the DG spot price is $36.31.
Spot palladium fell 2% last week to $1,041.50 an ounce after losing 2.3% Friday. Palladium advanced 2.8% last month after falling 4.9% in April and rising 7.3% in March. Palladium dropped 17% last year. The current DG spot price is up $10.20 an ounce to $1056.50.
Spot platinum rose 5.2% last week to $1,232.50 an ounce, though it fell 4% Friday. It surged 8.6% in May after retreating 3.1% in April and increasing 6.7% in March. Platinum lost 8.4% in 2024. The DG spot price is currently up $56.90 an ounce to $1280.80.
Disclaimer: This editorial has been prepared by Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or a recommendation regarding any particular security, commodity, or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities, or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand, and accept this disclaimer.
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Precious metals faced a challenging day following Donald Trump’s U.S. presidential election victory. Despite that, gold and silver’s bull market is still very much alive.U.S. presidential elections are always high-stakes events, filled with tremendous uncertainty, and this trend has only intensified over time. Significant volatility and market turbulence are common, especially when results are announced. This recent election was no exception, with winners emerging in the U.S. stock market, dollar, and Bitcoin, while commodities including gold and silver faced setbacks. Nonetheless, gold and silver’s bull market and future prospects remains strong. Let’s examine their current position and likely path forward.
Rising over 50%, gold has been a stellar performer over the past year. But, as you probably know, no bull market in history has ever gone straight up — there will always be pullbacks along the way. And today was one of those days for gold, which dropped $84.73 an ounce or 3.09%. Gold closed below the $2,700 support level in COMEX futures, causing me to shift to a defensive stance in the short-term (this only applies to futures trading and mining shares, not the long-term holding of bullion). I closely watch $100 increments in gold futures because they often form key support and resistance levels. Though gold is experiencing a shorter-term pullback, its uptrend of the past year is still intact as you can see from the uptrend line. Absolutely nothing has changed about gold’s bull market and long-term prospects, as I will explain shortly.
silver also saw a sharp pullback as election results became clear, falling back below the critical $32-$33 zone (credit: PR)Similar to gold, silver also saw a sharp pullback as election results became clear, falling back below the critical $32-$33 zone—a key level I’ve closely monitored since silver’s breakout on October 18th. As I mentioned in all of my reports, a decline below this zone would invalidate that breakout. While I remain confident in the long-term bullish outlook for silver, some more time may need to elapse before silver attempts another breakout. I’m watching to see if silver can reclaim this level, with several potential catalysts on the horizon that might drive a renewed push, as I’ll outline shortly.
Silver priced in euros recently closed below the €30 support level (credit: PR)I closely monitor silver priced in euros, as it strips away the effects of U.S. dollar fluctuations, highlighting silver’s intrinsic strength—especially on days like today, when the dollar experiences significant fluctuations. Silver priced in euros recently closed below the €30 support level I’ve been tracking. However, this support is more accurately viewed as a zone between €29 and €30, rather than a strict horizontal line. I’m now watching to see if silver can hold within this zone and potentially bounce back from here—and this zone may be even more important than the $32-$33 zone discussed earlier.
Silver/EUR support is more accurately viewed as a zone between €29 and €30 (credit: PR)I also want to point out a concerning phenomenon that I’ve been noticing occurring in the trading of silver, especially since its breakout on October 18th. Nearly every morning between 8:30 am and 11 am EST, silver has been violently slammed—a pattern that has repeated in 10 of the last 13 trading sessions. This behavior is highly unusual and has been statistically proven, confirming that it is not a natural market occurrence. I strongly believe this is an attempt to suppress silver prices and prevent a substantial rise.
pattern that has repeated in 10 of the last 13 trading sessions. (credit: PR)A prevailing theory in the precious metals community suggests that silver’s price suppression stems from large futures market short positions held by bullion bank trading desks—positions that are equivalent to nearly 200 million ounces. This means these banks face close to $200 million in losses for each dollar increase in silver’s price. There is good reason to believe these short positions are intentionally used to keep silver (and similarly gold) prices down, aiming to make the U.S. dollar and other fiat currencies appear stronger by comparison. I believe that silver and its proponents will eventually prevail, but not without a fight, as you can see.
silver’s price suppression stems from large futures market short positions held by bullion bank trading (credit: PR)I’ve developed an indicator to help confirm price movements in silver, called the Synthetic Silver Price Index (SSPI). This index combines the average prices of copper and gold, with copper adjusted by a factor of 540 to prevent gold from disproportionately influencing the index. The SSPI closely mirrors silver’s price movement, even though silver itself is not an input. Currently, a major resistance zone lies overhead in the SSPI, and a breakout there would give a bullish confirmation signal for silver. However, today’s declines in copper and gold caused a sharp drop in the SSPI.
major resistance zone lies overhead in the SSPI (credit: PR)I monitor silver mining stock ETFs, particularly the popular Global X Silver Miners ETF (symbol “SIL”), for additional insights into silver’s price trends. Today, like silver itself, SIL declined, returning to its $36-$38 support zone, prompting me to adopt a more defensive stance. Notably, SIL and other silver stocks fell less than silver did, which could signal underlying strength. A rebound in SIL above the $36-$38 range would provide a bullish confirmation I’m watching for.
SIL declined, returning to its $36-$38 support zone (credit: PR)The Amplify Junior Silver Miners ETF (symbol “SILJ”) also fell below its support zone, causing me to take a defensive stance for the time being. A close back above the $13-$14 zone would generate a bullish signal.
Amplify Junior Silver Miners ETF (symbol “SILJ”) also fell below its support zone (credit: PR)Today was a particularly volatile and unusual trading day, driven by the highly anticipated election and its wide-reaching implications, which investors are only beginning to digest. I’d advise against overanalyzing a single day’s trading action. Adding to this week’s turbulence, there’s also a Fed meeting on Thursday where a rate cut is expected, and China is likely to announce another stimulus program—both of which could be bullish for commodities, including precious metals.
The precious metals bull market remains firmly intact, supported by numerous bullish factors that continue to drive it forward. As I discussed recently, the U.S. faces a massive debt burden that no single president can undo, given decades of accumulation. And it’s not just the U.S.—nearly every major economy is similarly indebted, a situation beyond President-elect Donald Trump’s influence. The fiscal and monetary challenges in these countries further strengthen the long-term case for precious metals.
Also, I’d like to clarify my approach to investing in precious metals. I hold a core, long-term position in physical gold and silver bullion, which I accumulated at much lower prices, and I plan to keep it through the global financial reset I anticipate. I expect gold to rise beyond $15,000 per ounce and silver to reach several hundred dollars per ounce. Despite fluctuations that may occur in the precious metals market, I have no intention of selling this core bullion position anytime soon.
Additionally, I engage in shorter-term trades in precious metals futures and mining shares, which are far more volatile and risky, suitable only for experienced investors. So, when I mention taking a defensive stance, I’m referring to reducing my exposure in these high-risk, shorter-term trades—not in my core bullion holdings. While I analyze and share price charts, this shouldn’t be seen as an endorsement or encouragement of short-term trading in precious metals.
I use a trend-following approach to markets and trading, a strategy that has proven successful for numerous market legends. I don’t aim to predict tops or bottoms; instead, I focus on capturing the middle—the “meat”—of the movement. This is why I turn bullish on breakouts and shift to a defensive stance when key supports are broken. I’ve found that many misunderstand this trend-following method, assuming it requires predicting every high, low, zig, and zag. I’m not clairvoyant, nor do I have a crystal ball—I simply respond to what the market is telling me in real time.
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Renowned investor Lobo Tiggre forecasts a surge in gold and silver prices, driven by economic uncertainty, inflation, and geopolitical tensions.In a recent interview with Capital Cosm, Tiggre discussed his bullish outlook on precious metals, citing several factors that could fuel a price surge.
Renowned investor and speculator Lobo Tiggre believes that gold and silver prices are poised for a rebound, driven by growing economic uncertainty and potential inflationary pressures.
He attributes this bullish outlook to several key factors: economic uncertainty, inflationary pressures, and geopolitical tensions. As markets grapple with these challenges, investors are turning to safe-haven assets like gold and silver to protect their wealth.
Tiggre’s comments align with the broader market sentiment, which has seen increased interest in precious metals as a hedge against economic and geopolitical risks. However, he cautions investors to conduct thorough research and consider their individual risk tolerance before investing in these volatile assets.
Natural Gas vs. OilWhile discussing energy markets, Tiggre expressed a preference for oil over natural gas. He highlighted the global fungibility of oil, which makes it less susceptible to regional price fluctuations compared to natural gas.
“Oil is a globally fungible market, while natural gas isn’t. This makes oil a more reliable investment,” Tiggre said.
Bond Market RebellionTiggre also commented on the recent “rebellion” in the bond market, where bond yields have risen despite the Federal Reserve’s efforts to lower interest rates. He suggested that this could be a sign of market skepticism towards official economic narratives.
“When markets don’t react as expected, it often indicates a deeper underlying issue,” Tiggre noted.
Tax Loss SeasonAs tax-loss season approaches, Tiggre advised investors to consider harvesting losses on underperforming investments to offset capital gains. He also highlighted potential buying opportunities that may arise from tax-loss selling.
“Tax-loss season can be a great time to buy quality assets at discounted prices,” he said.
Tiggre’s insights into the precious metals market, energy sector, and broader economic trends provide valuable information for investors navigating these uncertain times. By understanding the factors driving market movements, investors can make informed decisions and potentially capitalize on emerging opportunities.
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In a recent interview on the Money Metals podcast, host Mike Maharrey sat down with Peter Krauth, a seasoned precious metals expert and author of The Great Silver Bull.
During their discussion, Krauth shared valuable insights on the current and future state of the silver market, highlighting its role as an undervalued investment, the dynamics of the gold-silver ratio, supply and demand challenges, and the potential impact of economic policy on precious metals.
(Interview Begins Around 6:34 Mark)
Peter KrauthPeter Krauth is a seasoned metals analyst and expert in the resource market, with over 20 years of experience specializing in precious metals, mining, and energy stocks. He is the editor of the investment newsletter Silver Stock Investor, which focuses exclusively on silver investments.
Silver’s Price Trajectory: Perceptions vs. RealityKrauth acknowledged the perception that silver lags behind gold in performance. While gold reached 38 new record highs this year, with prices rising by 38% since mid-February, silver has outperformed gold with a 46% gain during the same period.
Krauth emphasized that while silver may often appear as a “laggard” early in a bull market, it historically outpaces gold in the long run, driven by industrial demand and investor interest during periods of market stress.
The Gold-Silver Ratio and What It SignalsThe gold-silver ratio, hovering around 83 to 84:1 in recent months, is notably higher than the historical range of 40 to 60:1. This indicates that silver remains relatively undervalued compared to gold, a situation Krauth views as an opportunity for investors.
Despite silver’s gains, the high ratio is partly maintained by gold’s strength and persistent investor interest. Krauth advised keeping a close eye on the gold-silver ratio, as it reinforces silver’s undervaluation and offers a potential entry point for long-term investors.
Supply Deficits: A Key Factor in Silver’s Potential UpswingOne of the more pressing issues Krauth discussed is the silver supply deficit. Over the past three years, silver demand has exceeded supply, driven by an expanding industrial demand—particularly in electronics, solar panels, and electric vehicles. The silver market operates with an annual supply of around 1 billion ounces, 85% from mining and 15% from recycling.
Yet, annual demand has surged to 1.2 billion ounces, creating a 200-million-ounce shortfall, currently covered by existing stockpiles. Krauth predicts that these reserves will deplete within the next 12 to 18 months, which could result in supply constraints and significant price increases if demand remains high.
Industrial Demand: The Steady Floor Under Silver PricesIndustrial demand for silver is strong and growing, with uses across various fields. According to Sprott Investment Management, silver ranks second only to oil in terms of its global applications, spanning electronics, medical applications, and renewable energy.
Notably, in 2024, industrial demand is expected to represent 70% of the total silver supply, up from 50% just a few years ago. With renewable energy mandates in many countries, demand from solar panel manufacturing alone accounts for over 20% of global silver consumption.
Parallels with Uranium: Potential for a Strong Price RallyKrauth drew an intriguing comparison between silver and uranium markets. Like silver, uranium faced a period of high demand and limited supply, with secondary sources filling the gap until they dwindled, leading to a price surge from $23 to $83 per pound over three years.
Krauth sees similar dynamics in silver, where above-ground stockpiles are shrinking, and new supply is limited. He anticipates a price rally in silver, propelled by industrial demand and the eventual depletion of available stockpiles.
Global Factors Influencing Silver: India and RussiaIndia’s surging silver demand also plays a critical role. The country recently cut import duties on silver, resulting in a fivefold increase in silver imports in Q3 2023 compared to the same period in 2022. India’s expanding solar panel production and cultural affinity for silver jewelry are driving this demand.
Krauth also highlighted Russia’s decision to include silver in its national wealth fund, potentially to support domestic industries and accumulate silver as a strategic asset. Krauth views these developments as additional positive drivers for silver prices.
Policy and Precious Metals: Harris vs. TrumpLooking at the broader economic landscape, Krauth discussed how a potential presidency by either Harris or Trump might influence precious metals. He believes silver and gold are poised to rise regardless of who holds office, as government spending and debt continue to escalate.
While a Harris administration may prioritize renewable energy initiatives that could bolster silver demand, a Trump presidency may favor deregulation and support for mining industries. Both scenarios, Krauth argues, would contribute to a bullish environment for precious metals.
Final Thoughts and The Great Silver BullIn closing, Krauth recommended his book, The Great Silver Bull, which explores the factors driving the silver market and offers a generational investment perspective. Through short, digestible chapters, Krauth provides insights into silver’s economic fundamentals, its role in portfolio diversification, and strategic approaches for investing in both physical silver and mining stocks.
For those interested in precious metals, Krauth’s comprehensive analysis of silver’s unique market dynamics, historical context, and future potential offers a roadmap for understanding this often-overlooked asset. As the world faces rising demand for renewable energy and geopolitical shifts, silver stands as a compelling investment with substantial growth potential.
Key Questions & Answers
Here are the key questions and answers from the podcast interview between Mike Maharrey and Peter Krauth:
Is silver a laggard compared to gold?Yes, silver is often perceived as a laggard in bull markets, but it ultimately outperforms gold, especially in the later stages of a bull market. Despite gold reaching record highs this year, silver has actually outpaced gold in percentage terms, with a 46% increase since February compared to gold’s 38% gain. Silver tends to be back-end loaded in bull markets, where its performance accelerates toward the end.
How does the gold-silver ratio affect the silver market?The high gold-silver ratio, recently around 83 to 84:1, indicates that silver remains undervalued compared to gold. This is an opportunity for investors, as silver is historically undervalued when the ratio is high. The high ratio reinforces silver’s appeal as a long-term investment and reflects its relative affordability against gold.
What impact does the silver supply deficit have on future prices?With silver demand outstripping supply by 200 million ounces annually, covered by existing stockpiles, there are significant price increases likely once above-ground reserves are depleted. These reserves may run out within the next 12 to 18 months, creating the potential for a price rally, especially if demand from industrial uses remains high.
How does industrial demand influence silver prices?Industrial demand for silver is strong and rising, accounting for around 70% of supply in 2024, compared to 50% in previous years. Silver is essential in electronics, solar panels, electric vehicles, and medical applications, creating a steady demand base. This robust industrial demand will provide a stable floor under silver prices.
Are there similarities between the silver and uranium markets?There are similarities between silver and uranium markets, where high demand and limited supply eventually led to a price surge in uranium. Similar dynamics are seen in silver, with above-ground stockpiles being drawn down and limited new supply, which could lead to a significant price rally for silver in the future.
How is India influencing the silver market?India has become a major silver buyer, recently reducing import duties, which led to a fivefold increase in Q3 2023 silver imports compared to 2022. India’s demand for silver is driven by industrial uses like solar panels, cultural jewelry demand, and its bargain-hunting culture as gold prices rise.
What does Russia’s inclusion of silver in its wealth fund mean for the market?Russia’s decision to include silver in its wealth fund is strategic, possibly to support its domestic industries and accumulate a valuable asset. This move may restrict silver supply on the global market and reflects the geopolitical importance some countries place on silver.
How would a Harris or Trump presidency affect silver and gold markets?Both candidates would likely drive precious metals prices higher due to continued government spending. A Harris administration may increase renewable energy demand, benefiting silver, while a Trump presidency may favor deregulation and support mining industries. Either outcome would likely have a positive impact on precious metals.
Why should investors consider Krauth’s book, The Great Silver Bull?The book explores silver as a “generational opportunity” and provides insights into its economic fundamentals, investment potential, and strategies for physical silver and mining stocks. Written in a straightforward, accessible format, it helps investors understand silver’s market dynamics and the factors that influence its long-term value.
The post Understanding the Bullish Case for Silver: Insights from Peter Krauth appeared first on Golden State Mint Blog.
“Silver dump after Trump news? Think again! Analysis shows broader market dynamics at play as silver-to-commodities ratio tests 2011 high levels – when silver hit $50/oz…”Recent market movements have caused some concern among precious metals investors, with many pointing to a “dump” in gold and silver prices. However, a deeper analysis reveals a different story: what appeared to be a silver-specific decline was actually part of a broader commodities market movement.
The catalyst for this market shift was Trump’s election news, which triggered a “risk-on” sentiment in the markets. While silver prices did fall, this decline needs to be viewed in the proper context. During this period, investors moved toward risk assets, causing stocks and Bitcoin to surge while commodities, including silver, experienced a general decline.
Notably, silver’s performance relative to other commodities remained stable. In fact, the silver-to-commodities ratio is currently testing a significant technical level – the May 2011 high, which coincided with silver reaching $50 per ounce. This ratio has encountered this resistance zone several times in recent history:
- The 2011 peak, when silver hit its $50 high
- Two touches during the 2016 top
- The current period (excluding the 2020 lockdown period, which is considered an artificial anomaly)
This technical resistance zone is particularly significant as it suggests silver’s relative strength against the broader commodities complex remains intact, despite the recent price movements. The fact that silver is maintaining such levels relative to other commodities indicates underlying strength rather than weakness in the precious metal.
The key takeaway is that recent price movements in silver should be viewed within the broader context of overall commodity market behavior rather than as a silver-specific event. This suggests that what some have labeled as a “silver smash” is more accurately described as a temporary shift in market sentiment affecting the entire commodities sector.
For investors, this means the fundamental case for silver remains strong, particularly as it tests historically significant levels relative to other commodities. The current silver-to-commodities ratio suggests we may be approaching levels not seen since silver’s dramatic 2011 peak, pointing to potential significant moves ahead in the precious metal market.
Written by Rafi Farber of The Jerusalem Post.
This article is for informational purposes only. The opinions and analysis herein are those of the author and are not financial advice. The Jerusalem Post (JPost.com) does not endorse or recommend any investments based on this information. Investors should consider their financial situation, investment goals, and risk tolerance before making any decisions. Consulting a qualified financial advisor is recommended. JPost.com is not liable for any investment losses from using this information. The information provided is for educational purposes only and should not be considered as trading or investment advice.The post Silver Smashed!? Not Really. Silver Nears 2011 High vs Commodities appeared first on Golden State Mint Blog.
In a recent “Metals Minute” commentary by Blue Line Futures LLC, precious metals expert Phil Streible highlighted a decline in both gold and silver prices overnight.Key Levels of SupportStreible expressed concern over the weakening trend in the precious metals market, citing a range of factors contributing to the downward pressure. As he noted, “The gold market is trading at the 50-day moving average, but we don’t want to see Futures trade below it.”
A key level of support for gold has been identified at $2,653.00. Streible emphasized the importance of this level, stating, “A lot of analysts are calling out there for $2,500 gold.” If gold were to break below this level, it could have significant implications for the broader market, including silver.
Silver’s StrugglesSilver, another precious metal under scrutiny, is currently holding onto trend support at $31.17. However, a breach of this level could lead to a sharp decline, potentially reaching the $30 mark.
Streible also discussed the impact of the recent US election on the precious metals market. The expectation of fewer interest rate cuts in 2025 and the potential for increased inflation under a Trump administration have negatively impacted gold’s appeal as a safe-haven asset.
Cryptocurrency CompetitionAdditionally, the surge in cryptocurrency prices, particularly Bitcoin and Ethereum, has diverted investor attention away from precious metals. As Streible observed, “This rotation is underway out of the precious metals markets into US equities and into the crypto Market as well.”
While the current market conditions appear challenging for gold and silver, Streible cautioned investors to remain vigilant and monitor key economic indicators. He emphasized the importance of tight stop-loss orders and reduced upside targets.
Phil Streible, The Chief Market Strategist with Blue Line Futures, discusses Gold, Silver, Copper, Platinum, and other commodity topics. Tune into today’s Metals Minute for key levels and actionable trade ideas covering your favorite Precious Metals, overnight developments, and what to watch for every trading day.
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This week, we’ll look at a couple of interesting long term charts of both gold and the Dow to see how technical analysis suggests they MIGHT play out in the decades ahead. While there is a healthy dose of speculative analysis in both charts, my goal this week is to blend creativity and open-mindedness with the historical record of the price action to reveal possible long-term paths that won’t surprise you should they unfold over the coming years.
The first chart we’ll look at is gold, and immediately it should be plain to see that it has traded within the blue 4-point channel that began when gold was revalued to $35 in the 1930s, forming Point 1. Point 2 was formed just as gold began trading freely in the 1970s; Point 3 was achieved at the 1980 mania top; and Point 4 at the 2001 bottom – all historic times for gold. Next, note that gold has traded within a smaller yellow channel that began with Point 1 in the 1990s. There is nothing speculative about the 4 existing points of these channels. However, whether each can reach Point 5, how and when they get there is where I will take some creative liberty.
IF we were to see a fractal move of the 1970s gold bull run, the following would occur:
- Gold would perfectly backtest the trendline connecting the 1980 and 2011 tops,
- Gold would achieve Point 5 of the blue channel within the next decade around $20,000,
- Gold would then perfectly backtest the yellow channel from above,
- Gold would hit the following values in this order: $5,000, $2,500, $20,000, $10,000.
There are no guarantees that gold will take this fractal path. However, if it did, it would make complete sense from a technical analysis perspective. The question you now have to ask yourself is this: Is this a possible ride you are willing to stomach over the next 10 years?
The next chart we’ll look at is the Dow, and you’ll see that its entire trading history can be described as an ascending channel that’s defined more by its midline price action than its lower and upper rails. This is a classic case of when the midline reveals a channel that most fail to acknowledge. Next, you’ll note that whenever price gets stretched to extremes away from the midline, it always makes a slow, grinding return and can take decades for price to again achieve and surpass the old high permanently. The high of 1899 wasn’t passed for good until 1933! The high of 1929 wasn’t eclipsed permanently until 1954! Even the 2000 high wasn’t passed permanently until 2012. Notice that in each of these cases, price dipped below the channel midline before eclipsing its old high.
Once again, the Dow finds itself historically stretched from its midline. Where it returns, nobody knows, but one thing is certain: The current level of the Dow intersects its channel midline in 2042, 17 years from now! By historical standards, there would be nothing unusual about that value at that date. One would look at the chart and tell you it makes perfect sense. Even scarier, so too would make sense a trip to the channel’s lower rail, which doesn’t exceed 10,000 until 2037!
Something to think about.
Written by Mike Roy of GoldBroker.
The post The Golden Road to $20,000 and Dow’s Lost Decades Ahead appeared first on Golden State Mint Blog.
Russia’s gold reserves exceed $200 billion for the 1st time. The share of gold in the country’s international reserves is now at 32.9%.In a significant milestone that underscores Russia’s commitment to precious metals, the country’s gold reserves have surpassed $200 billion for the first time, reaching a record $207.7 billion in October, according to the Bank of Russia. This achievement comes on the heels of the Ministry of Finance’s recent announcement to increase its daily currency and gold purchases by 35.5%.
The surge in gold holdings has pushed the precious metal’s share in Russia’s international reserves to 32.9%, up from 31.5% in September. This marks the highest proportion of gold in the country’s reserves since November 1999, when it stood at 34%.
The current gold allocation represents a dramatic shift from June 2007, when gold made up just 2.1% of reserves – the lowest in modern Russian history. However, it still falls short of the all-time high of 56.9% recorded on January 1, 1993.
This strategic buildup of gold reserves aligns with Russia’s broader financial strategy. As reported earlier, the Ministry of Finance is set to increase its daily currency and gold purchases to 4.2 billion rubles, demonstrating a coordinated approach to strengthening the country’s financial position.
Key Developments:* Gold reserves reached $207.7 billion in October 2023 * Gold now comprises 32.9% of total international reserves * Total international reserves showed a modest decrease from $633.7 billion to $631.6 billion * Daily currency and gold purchases are being increased as part of the strategic reserve management
The dramatic increase in gold holdings reflects a calculated move to diversify away from traditional reserve currencies. While total international reserves saw a slight decline from $633.7 billion in September to $631.6 billion in October, the increasing proportion of gold suggests a deliberate strategy to hedge against global financial uncertainties.
This latest milestone in gold reserves, combined with the recently announced increase in daily precious metal purchases, indicates a comprehensive approach to building resilience in Russia’s financial system. The strategy appears focused on establishing a strong foundation of tangible assets, particularly in precious metals including gold, silver, and palladium.
Looking AheadAs global financial markets continue to evolve, Russia’s growing emphasis on gold reserves could set a precedent for other nations seeking to diversify their reserve holdings. The coming months will be crucial in understanding whether this strategic shift towards precious metals will inspire similar moves by other central banks worldwide.
This historic achievement in gold reserves, coupled with the planned increase in daily purchases, positions Russia’s financial system for what appears to be a long-term strategy focused on building sustainable economic resilience through tangible assets.
Written by Eran Tal of The Jerusalem Post
This article is for informational purposes only. The opinions and analysis herein are those of the author and are not financial advice. The Jerusalem Post (JPost.com) does not endorse or recommend any investments based on this information. Investors should consider their financial situation, investment goals, and risk tolerance before making any decisions. Consulting a qualified financial advisor is recommended. JPost.com is not liable for any investment losses from using this information. The information provided is for educational purposes only and should not be considered as trading or investment advice.The post Russia’s Gold Reserves Hit Historic $207.7 Billion Mark appeared first on Golden State Mint Blog.
Gold down as dollar surges in early morning trading. The yellow metal extended declines early Monday after tumbling last week on rising bond yields and a stronger dollar after Donald Trump’s reelection to the White House. The dollar index rose 0.3% in early morning trading following last week’s weekly gain.
Investors are awaiting the release of key inflation data Wednesday for further direction and will be closely following comments from Fed officials this week.
The U.S. government and the bond market will be closed Monday for the Veterans Day holiday, and markets may be volatile because of low volumes.
Front-month gold futures fell 2% last week to settle at $2,694.80 an ounce on Comex after the most-active December contract slid 0.4% Friday. Bullion rose 3.4% in October after gaining 5.2% in September and advancing 2.2% in August. The metal is up 30% in 2024. The December contract is currently down $58.90 (-2.19%) an ounce to $2639.50 and the DG spot price is $2636.00.
The yellow metal tumbled last week after Trump was reelected and Republicans gained control of the U.S. Senate. Control off the U.S. House hasn’t yet been determined.
Separately, the Fed reduced its benchmark federal funds rate by 25 basis points Thursday to 4.50% to 4.75%, in line with economists’ expectations. Lower interest rates are typically considered bullish for gold. The Fed’s decision was the second rate cut in a row after a 50 basis point reduction in September. The Fed had previously kept rates at 5.25% to 5.50% for a year after raising them by 5.25 percentage points since March 2022 to rein in inflation.
This week will bring the latest inflation indicator, the closely watched consumer price index report for October, on Wednesday. The Fed closely watches both inflation and labor market data when setting monetary policy.
Investors also will be closely following remarks this week from Fed Governor Christopher Waller, Richmond Fed President Tom Barkin and Philadelphia Fed President Patrick Harker on Tuesday, as well from the presidents of the New York, Dallas, St. Louis and Kansas City Feds on Wednesday.
Most investors tracked by the CME FedWatch Tool are betting that the Fed will cut rates by another 25 basis points in December, ending the year at 4.25% to 4.50%. The rest expect the central bank to keep rates unchanged next month.
Front-month silver futures fell 3.8% last week to $31.45 an ounce on Comex after the December contract decreased 1.3% Friday. Silver advanced 4.3% in October after rallying 7.9% in September and gaining 0.7% in August. It’s up 31% in 2024. The December contract is currently down $0.709 (-2.25%) an ounce to $30.740 and the DG spot price is $30.80.
Spot palladium dropped 10% last week to $1,002.00 an ounce after it slid 2.9% Friday. Palladium increased 11% in October after gaining 3.2% in September and rising 3.2% in August. Palladium is down 10% this year. The current DG spot price is down $0.20 an ounce to $1000.00.
Spot platinum retreated 2.4% last week to $975.80 an ounce after falling 2.2% Friday. Platinum rose 1.5% in October after increasing 5.6% in September and sliding 5.2% in August. Platinum is down 2.2% this year. The DG spot price is currently up $4.30 an ounce to $980.80.
Disclaimer: This editorial has been prepared by Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or a recommendation regarding any particular security, commodity, or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities, or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand, and accept this disclaimer.
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The post Gold Down as Dollar Surges appeared first on Golden State Mint Blog.
Source: www.stockcharts.com
For the second week in a row gold fell, losing this time 2.0%. Silver was worse, down 3.8%. However, both remain up 30%+ on the year. The trend remains solidly to the upside. Platinum, whose performance is sluggish at best, fell 2.4% and is down 4.4% in 2024. Of the near precious metals, palladium lost 10.5% while copper was down 1.4%. The Gold Bugs Index (HUI) was off 1.7% while the TSX Gold Index (TGD) fell 1.9%. That generally the gold stocks held in on the week is one of the positives we gleaned from this week’s sell-off because normally the stocks get hit harder.
The culprit for the fall of gold? Continued strength in the U.S. economy and a soaring US$ Index, celebrating Trump’s victory. Trump’s promises on the surface are good for the U.S. dollar, but trade wars and more could end the celebration. Lower taxes and deregulation would also be bad for the U.S. dollar as the deficit is poised to rise, possibly substantially. All could unleash a new round of inflation, putting pressure on the Fed to hike rates even as Trump wants the Fed to them. Fed Chair Jerome Powell’s declaration that he can’t be fired (he’s right) is small comfort to a president who would have no hesitation in opening a brawl with him. BTW, Trump appointed Powell. But it’s based on recommendations and a vote from the Fed Board of Governors who wield the power. A massive increase in debt would be music to gold’s ears. Even in Trump’s first term, gold gained over 60% but then so did the SPX. Gold also responds positively to geopolitical risks. A reminder that, just because Trump was elected, that doesn’t end the culture wars and the huge political divide in the U.S. today.
We are a bit concerned that, because gold closed under $2,700 this past week, we could have more downside before we return to the upside. A break now of $2,650 the week’s low could trigger further selling to $2,600 or even down to $2,550 and the 100-day MA. It can’t be ruled out unless we regain back above $2,750 first. With move above $2,770 a new high is probable.
The strong U.S. dollar this week was bad news for gold as gold usually moves inversely to the U.S. dollar. But gold gains against other currencies that lose value to the U.S. dollar. Didn’t work this week, however, as gold in Cdn$ fell 2.3% while gold in euros was off 0.7%.
For the short term, we are a little negative towards gold, but long term we remain quite bullish. As we’ve noted many times, pullbacks like this are healthy in a bull market. You just don’t want it to break under key points. And right now, that point is $2,550 that could trigger a sharper decline to $2,400. Under $2,350, the decline could get worse.
Source: www.stockcharts.com
Silver as usual followed gold lower this past week, but the drop was worse. Silver fell 3.8%, far outpacing gold’s decline of 2.0%. Silver remains up 30% in 2024; however, we are down 10.3% from the recent high near $35. That is correction territory. We thought we were breaking out when we leaped to $35, but so far it hasn’t held and we did not like the fact we dropped back under $32. Still, we are only testing that uptrend line from the August 2024 low. However, we wouldn’t want to see it break. Another break under $31 would not be good and then we could fall to $29.50/$30.00. We regain back above $33 and new highs could be in order above $34. We’ll see this week against the backdrop of the CPI and PPI.
Source: www.stockcharts.com
Like everything related to the metals this past week, gold stocks fell. The TSX Gold Index (TGD) was down 1.9% while the Gold Bugs Index (HUI) lost 1.7%. That’s the bad news. The good news is their fall relative to gold and silver was about the same as gold but better than silver. That they didn’t get hit harder is actually good news. We also finished the week on an uptrend line but below the 50-day MA and just above the 100-day MA at 360. Below that, the 165-day EMA lies at 345 and finally the 200-day MA is at 326. Those areas would also be support. In the volatile world of gold stocks, we are down about 11% from the recent high. That is a fairly normal type of correction. On the run to the 455 all-time high in 2011, there were a few drops of about 15%. So not unusual—so far. The volatility comes from their thin nature as outstanding stock for the public is low. Many companies are held in funds, insiders, and more. That stock doesn’t usually come out with any regularity. We need to regain 400 to suggest we’ve made a bottom, and 405 to suggest we could take out the recent high at 417. Remember, we are still up almost 30% on the year, so it’s not all bad.
Disclaimer
David Chapman is not a registered advisory service and is not an exempt market dealer (EMD) nor a licensed financial advisor. He does not and cannot give individualized market advice. David Chapman has worked in the financial industry for over 40 years including large financial corporations, banks, and investment dealers. The information in this newsletter is intended only for informational and educational purposes. It should not be construed as an offer, a solicitation of an offer or sale of any security. Every effort is made to provide accurate and complete information. However, we cannot guarantee that there will be no errors. We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the contents of this commentary and expressly disclaim liability for errors and omissions in the contents of this commentary. David Chapman will always use his best efforts to ensure the accuracy and timeliness of all information. The reader assumes all risk when trading in securities and David Chapman advises consulting a licensed professional financial advisor or portfolio manager such as Enriched Investing Incorporated before proceeding with any trade or idea presented in this newsletter. David Chapman may own shares in companies mentioned in this newsletter. Before making an investment, prospective investors should review each security’s offering documents which summarize the objectives, fees, expenses and associated risks. David Chapman shares his ideas and opinions for informational and educational purposes only and expects the reader to perform due diligence before considering a position in any security. That includes consulting with your own licensed professional financial advisor such as Enriched Investing Incorporated. Performance is not guaranteed, values change frequently, and past performance may not be repeated.
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Could the split in prices be showing signs of a weakening economy?Gold has been one of the top winners of 2024, and despite reduced global inflation rates, it continues to outclass other commodities that are showing signs of slowing.
Gold prices are hovering near all-time highs at $2,700 an ounce despite several down trading sessions spurred by the U.S. election of Donald Trump. Many other commodities, however, aren’t performing near as well.
Yellow gold and black goldWorld Gold Council’s Global Head of Research Juan Carlos Artigas said research shows no long-term correlation between gold and oil. However, the strength of the U.S. dollar always influences commodity prices, at times leading very different assets to make similar moves.
“So, while oil prices do not ‘cause’ the gold price to rise — or fall — the economic environment that leads to a surge in oil can also result in higher gold prices,” he said.
Gold and oil prices have noticeably diverged in the second half of 2024. (Source: TradingView)Correlation tends to drop under weak economiesWhile the long-term correlation is near zero, when the correlation between gold and oil is becomes less robust and prices diverge, history shows it can be an indicator of a weaker economy.
This reduction in correlation has occurred during the 2008 economic crisis, the dot com bubble, and even in the late 1970s and early 80s.
“Oil and gold tend to perform well in periods of high inflation, albeit for different reasons,” Artigas said. “High oil prices can push consumer price baskets higher, resulting in high inflation. When high inflation persists, driven by commodities or other factors, investors look for hedges, often lifting gold investment demand — and its price — higher.”
Gold and oil prices have not shown a significant correlation over the long term. (Source: World Gold Council)Written by Tim Zyla of The Jerusalem Post
This article is for informational purposes only. The opinions and analysis herein are those of the author and are not financial advice. The Jerusalem Post (JPost.com) does not endorse or recommend any investments based on this information. Investors should consider their financial situation, investment goals, and risk tolerance before making any decisions. Consulting a qualified financial advisor is recommended. JPost.com is not liable for any investment losses from using this information. The information provided is for educational purposes only and should not be considered as trading or investment advice.The post Gold forms notable divergence from oil appeared first on Golden State Mint Blog.
For further confirmation, I find it valuable to analyze silver priced in euros. This method removes the impact of U.S. dollar fluctuations, offering a clearer view of silver’s intrinsic strength or weakness. Interestingly, silver priced in euros often respects round numbers like €26, €27, and €28, frequently establishing key support and resistance levels at these points. These levels are worth monitoring closely—take a look for yourself. On Tuesday, silver closed above both the €28 level and a downtrend line that started in May, marking a very bullish development. The final hurdle is for silver to decisively close above the €30 level on high volume, which would be the signal that silver is ready to take off.
Silver mining stocks are also important to watch for confirming silver’s price movements, as they often mirror investor sentiment toward the metal. The Global X Silver Miners ETF (symbol: SIL), the most heavily traded silver mining stock ETF, has been stuck in a flat range since April. A strong, high-volume close above the $36 to $37 resistance zone would signal that both silver mining stocks and silver itself are poised for a significant breakout. After surging last Tuesday, SIL is very close to breaking out.
Similarly, the Amplify Junior Silver Miners ETF (symbol: SILJ)—a key proxy for junior silver mining shares—has been range-bound for the past five months. A decisive, high-volume close above the $13 to $13.50 resistance zone would indicate the start of a rally for both silver mining shares and silver itself. After its sharp rise on Tuesday, SILJ is very close to breaking out.
Gold, a major driver of silver prices, is generating a tailwind for silver after breaking through two key resistance levels in the past month and a half. In a recent Substack piece, I explained how gold’s breakout across multiple currencies sets the stage for an imminent surge toward $3,000.
The gold-to-silver ratio is a valuable indicator for gauging silver’s price direction. A double top chart pattern appears to have formed over the past two months, indicating a likely decline in the ratio. This suggests that silver may soon start outperforming gold. A close below the 83 to 84 support zone is key to confirming the start of a silver rally and its outperformance of gold. Following silver’s strong performance on Tuesday, the ratio is starting to break below the critical 83 to 84 support zone—an unmistakable sign of strength for silver.
The price of copper is often an underappreciated factor in silver’s performance. Copper’s decline over the past several months has dragged silver down with it, but the copper rebound I’ve been anticipating following a technical breakout should significantly strengthen silver’s rally.
Another potential bullish factor for silver, gold, and copper is the prospect of a weaker U.S. dollar as the Federal Reserve begins its rate-cutting cycle. Since commodities typically move inversely to the U.S. dollar, this is a critical development to monitor. The key level to watch is the 100 support on the U.S. Dollar Index. A close below this level would strongly suggest a continued decline toward the 90 support level. At the time of writing, the U.S. Dollar Index is trading at 99.95.
As silver nears a critical breakout, the convergence of multiple indicators signals a strong bullish outlook. Recent economic developments, such as the U.S. rate cut and China’s stimulus measures, have fueled momentum in commodities like silver, gold, and copper. Silver’s ability to break through key resistance levels, both in U.S. dollars and euros, alongside potential strength in silver mining stocks and a weakening U.S. dollar, reinforces the bullish outlook. As the gold-to-silver ratio shows signs of decline and copper rebounds, the stage is set for silver to make significant gains, with $50 as a key intermediate-term target. Investors should keep a close eye on these developments as silver’s next major bull market may be just days away.
The post Silver is Starting to Break Out. Here’s What to Watch appeared first on Golden State Mint Blog.
The latest reading of the Fed’s preferred inflation gauge showed prices increased at a slower pace than expected on a monthly basis in August.
The core Personal Consumption Expenditures (PCE) index, which strips out the cost of food and energy and is closely watched by the Federal Reserve, rose 0.1 % from the prior month during August, below Wall Street’s expectations for 0.2% and the 0.2% reading seen in July.
Over the prior year, prices rose 2.7% in August, matching Wall Street’s expectations and coming in higher than 2.6% seen in July. On a yearly basis, overall PCE increased 2.2%, its lowest annual increase since February 2021.
“We’ve come on a string of pretty good inflation readings over the last several months, and that was coming after an acceleration in inflation in the first quarter,” PIMCO economist Tiffany Wilding told Yahoo Finance. “So I think fed officials are pretty feeling pretty good about where inflation is sitting.”
The report is the first look at inflation since the Federal Reserve cut interest rates by half a percentage point on Sep. 18. In a press conference after the decision, Powell noted the Fed now has “greater confidence” in inflation’s path down the central bank’s 2% target.
Powell argued that further cooling in the labor market is now as big of a concern for the Fed as inflation.
“The upside risks to inflation have really come down, the downside risks to employment have increased,” Powell said. “And because we have been patient and held our fire on cutting — while inflation has come down, I think we’re now in a very good position to manage the risks to both of our goals.”
Friday’s data now comes as investors debate whether the Fed will cut interest rates by 25 or 50 basis points at its November meeting. Following Friday’s release, investors were pricing in a 54% chance of a 50 basis point interest rate cut, above the 50% chance seen a week ago, per the CME FedWatch Tool.
Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the Federal Reserve in Washington, Wednesday, Sept. 18, 2024. (AP Photo/Ben Curtis) (ASSOCIATED PRESS)Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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Summary Gold is one of the best-performing asset classes year-to-date, outperforming U.S. and international equities and bonds, commodities and other real assets. * More recently, the primary catalyst for higher gold prices has been the Fed’s interest rate policy. * Looking forward, we believe gold is well-positioned to continue its rally, especially if Western investors return to the market. Cinefootage VisualsGold’s rally is starting to heat up. With more rate cuts on the horizon and signs of Western investors returning, we see gold prices potentially reaching even higher in the near term.*
Gold is one of the best-performing asset classes year-to-date, outperforming U.S. and international equities and bonds, commodities and other real assets (broadly speaking). Continued global central bank buying and heightened geopolitical tensions were among the key drivers of gold’s strong returns earlier in the year. More recently, the U.S. Federal Reserve’s (Fed’s) pivot on interest rates and nascent signs of returning investment demand have been more prevalent drivers and could, in our view, lead to even higher prices in the near-term.
Gold Has Delivered Impressive Year-to-Date Performance
Source: FactSet. Data as of September 23, 2024. “U.S. Stocks” represented by the S&P 500 Index. “REITs” represented by FTSE NAREIT All REITs Index. “EM Stocks” represented by MSCI Emerging Markets Index. “International Stocks” represented by MSCI AC World ex USA Index. “U.S. TIPS” represented by Bloomberg U.S. TIPS (1-3 Year) Index. “U.S. Bonds” represented by Bloomberg U.S. Aggregate Bond Index. “International Bonds” represented by Bloomberg Global Aggregate ex US Index. “Commodities” represented by Bloomberg Commodity Index. Past performance is not indicative of future results.
Purchases from global central banks, particularly those in China and other emerging markets, has been a developing trend since the Global Financial Crisis (GFC). For the last several years, including the first half of 2024, this has contributed to strong gold demand. This trend, in our view, may suggest a broader desire by these countries to “de-dollarize,” or reduce their dependence on the U.S. dollar. Not only have global central banks increased their gold reserves, many have communicated that they plan to continue purchasing more gold in the future.
Gold Reserves of China and Other Emerging Markets Are Growing
Source: Goldman Sachs, World Gold Council, VanEck. Data as of June 2024.
More recently, the primary catalyst for higher gold prices has been the Fed’s interest rate policy. The U.S. has focused on addressing high-interest rates in an attempt to achieve a “soft landing” for the economy following a period of record-high inflation. The Fed’s recent 50 basis point reduction in its key interest rate was generally welcomed by gold markets. Historically, gold has performed well during such rate-cutting cycles, with an average cumulative return of around 25% over 500 trading days following the Fed’s first cut. Rate cuts tend to weaken the U.S. dollar, further boosting gold’s appeal to global investors, and as uncertainty about the broader economy grows, gold benefits from its status as a safe-haven asset.
Gold Historically Performs Well Following First Fed Rate Cuts
Source: JPMorgan, VanEck. Data as of June 2024. Past performance is not indicative of future results.
Absent from gold’s recent rally has been Western investment demand, tracked via gold-backed exchange-traded funds (ETFs), but flows into gold-backed ETFs have started to pick up. Historically, gold ETF flows have been a catalyst for higher gold prices. The question remains whether the disconnect between flows and prices will close and, if so, what implications it will have for an even higher gold price.
Until Recently, Gold Prices and ETF Gold Holdings Were Closely Connected
Source: World Gold Council. Data as of September 20, 2024. Past performance is not indicative of future results.
Looking forward, we believe gold is well positioned to continue its rally, especially if Western investors return to the market. The anticipation of further rate cuts by the Fed, along with continued inflationary pressures and geopolitical risks, are likely to further bolster gold’s appeal as an attractive alternative to a weaker dollar and a hedge against market volatility. With this backdrop, we believe that gold prices could reach their inflation-adjusted highs of $2,800 per ounce in the near term.
Important DisclosuresIndex definitions: Bloomberg Commodity Index is a broadly diversified index that tracks the commodity markets through commodity futures contracts and is made up of exchange-traded futures on physical commodities, which are weighted to account for economic significance and market liquidity. Bloomberg Global Aggregate ex USD Index measures the performance of global investment grade fixed-rate debt markets that excludes U.S. dollar-denominated securities. Bloomberg U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. Bloomberg U.S. TIPS (1-3 Year) Index measures the performance of the U.S. treasury inflation-linked bond market of obligations with maturities of 1-3 years. FTSE NAREIT All Equity REITs Index is a free-float adjusted, market capitalization-weighted index of U.S. Equity REITs. Constituents of the Index include all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than mortgages secured by real property. MSCI Emerging Markets Index tracks large and mid-cap representation across emerging markets countries. MSCI AC World ex USA Index covers a large portion of the global equity opportunity set outside of the United States. It includes large and mid-cap stocks from 22 developed market countries and 24 emerging market countries. S&P 500 Index consists of 500 widely held common stocks covering industrial, utility, financial and transportation sector.
Please note that VanEck may offer investment products that invest in the asset class(es) or industries included in this blog.
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
Investments in commodities can be very volatile and direct investment in these markets can be very risky, especially for inexperienced investors.
Gold investments are subject to the risks associated with concentrating its assets in the gold industry, which can be significantly affected by international economic, monetary and political developments. Investments in gold may decline in value due to developments specific to the gold industry. Foreign gold security investments involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, or political, economic or social instability. Gold investments are subject to risks associated with investments in U.S. and non-U.S. issuers, commodities and commodity-linked derivatives, commodities and commodity-linked derivatives tax, gold-mining industry, derivatives, emerging market securities, foreign currency transactions, foreign securities, other investment companies, management, market, non-diversification, operational, regulatory, small- and medium-capitalization companies and subsidiary risks.
All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future performance.
© Van Eck Associates Corporation.
The post Ready, Set, Gold! Bull Run May Have Just Begun appeared first on Golden State Mint Blog.
Granules of gold and silver are seen in glass jars at the Krastsvetmet non-ferrous metals plant in the Siberian city of Krasnoyarsk, Russia March 10, 2022. REUTERS/Alexander Manzyuk/File PhotoSummary* Silver up more than 35% in 2024 * China growth story to be key for the metal (Reuters) – Silver prices have bubbled up to their highest in over a decade on the back of bullion’s stellar bull run and China’s stimulus measures, although some analysts expect the rally to fade as industrial sector demand remains a concern.
Spot silver – both an investment asset due to its relationship with gold and an industrial metal – rose to $32.71 per ounce on Thursday, its highest since December 2012, and has gained more than 35% so far in 2024, leading the precious metals complex.
Precious metals yearly performanceChina’s central bank unveiled its biggest stimulus this week since the COVID 19 pandemic and is expected cut its seven-day reverse repo rate. The U.S. Federal Reserve lowered interest rates with a half-percentage-point reduction last week.
“China stimulus is giving industrial metals a boost, something silver traders had been waiting for,” Ole Hansen, head of commodity strategy at Saxo Bank, said.
“Continued gold strength combined with stable to higher industrial metal prices should see silver continue to outperform gold, with the gold/silver ratio falling back towards the 70 to 75 area, potentially driving a 10% outperformance in silver,” Hansen added.
The gold-silver ratio, denoting how many ounces of silver one ounce of gold can buy, is used by the market to gauge future trends as it indicates silver’s current performance against its historical correlation with gold.
Gold-Silver ratio hits lowest point since July“Interest rate cuts should provide a bullish impulse for global activity and support silver consumption. We see prices rising to $35 over the next 3 months and $38 over the next 6-12 months,” Citi analyst Max Layton said.
Macquarie, which expects that silver market deficits will persist throughout its 5-year forecast window, said investor flows are likely to remain key for near-term price action, with ETF holdings arguably offering the greatest scope for support.
A graphic on the resumption of inflows in the world’s largest silver ETFHowever, consolidation in China’s solar industry and slower growth in the world’s second biggest economy could pose headwinds for silver in the near-term.
“China’s newest support measures on their own will probably be insufficient to drive a turnaround in growth and traders do appear to be overestimating the likelihood of another 50 bps cut by the Fed in November,” said Hamad Hussain, assistant climate & commodities economist at Capital Economics.
Written by Brijesh Patel
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Don’t overlook silver.
Gold has been in the spotlight this year. The yellow metal has set multiple records and has outperformed a red-hot stock market.
Meanwhile, in the shadows, silver has enjoyed a nice run-up of its own. The white metal is up 29 percent year to date, about the same as gold in percentage terms.
And this silver bull may have an even brighter road ahead of it than gold.
According to analysts at UBS, silver will likely outperform gold over the next 12 months.
Bullish on Gold!It’s not that UBS has soured on gold. In a recent note, analysts said plenty of momentum remains with the Federal Reserve pivoting into an easing cycle. And there are other bullish factors in play as well.
“It’s not just the expectations of lower yields at play, with further support from macro and geopolitical uncertainties, and the continuing trend of USD diversification by central banks.”
The UBS analysts said that the geopolitical uncertainty and tension are “likely” to extend into 2025, “with the next U.S. government (and its policies) uncertain.”
“We expect gold to remain a favored market hedge for both geopolitical and rate risks. Historically, the metal has outperformed equities during periods of elevated volatility, which again proved to be the case in recent months despite a less dovish market consensus on the pace of Federal Reserve rate cuts ahead.”
Even More Bullish on Silver!Although silver has kept pace with gold this year, most people perceive it as lagging.
And silver is underpriced compared to gold from a historical perspective.
As the UBS report notes, the gold-silver ratio is extremely wide. It is currently over 84:1. That means it takes over 84 ounces of silver to buy one ounce of gold.
To put that into perspective, the average in the modern era has been between 40:1 and 60:1.
Historically, after widening, the ratio has always returned to the mean. And it has done so with a vengeance, sometimes even overshooting that mean. The ratio fell to 30:1 in 2011 and below 20:1 in 1979.
UBS analysts expect the gold-silver ratio to narrow over the next 12 months, likely dropping back into the 60s. That would mean a significant rally for silver, even as gold continues to climb.
“We maintain our view that silver is set to benefit from a rising gold price environment, which is aligned with Fed policy easing.”
The UBS report also notes the favorable supply and demand dynamics.
Silver demand outstripped supply for the third straight year in 2023 as mine output dropped and industrial demand set a record.
“Our expectation that the silver market will remain in deficit over the coming years implies continuous declines in above-ground inventories, which should help fundamentally underpin prices as well as act as a tailwind for investor interest.”
UBS’s projections fit with historical trends.
Silver has historically outperformed gold in a gold bull market, particularly in the later stages. For instance, gold charted a gain of around 40 percent during the pandemic. Meanwhile, silver was up a whopping 141 percent.
Technical factors also signal a looming gold breakout, with a secular cup and handle pattern in play.
History, fundamentals, and technical factors all look bullish for silver. Wise investors are paying attention.
The post Is Silver Poised to Outperform Gold in This Gold Bull Market? appeared first on Golden State Mint Blog.
(Bloomberg) — Applications to refinance mortgages surged for a second week as more Americans capitalized on the cheapest borrowing costs in two years.
Mortgage Bankers Association’s refinancing index jumped 20.3% in the week ended Sept. 20 to the highest level since April 2022, the group said Wednesday. The contract rate on a 30-year fixed mortgage eased 2 basis points to 6.13%, the eighth straight weekly drop and the longest stretch of declines since 2018-2019.
That helped boost the group’s home-purchase applications index by 1.4% last week to the highest level since early February. The fifth straight weekly advance in the measure points to burgeoning demand in a housing market that’s gradually finding some footing.
At the same time, home financing costs may start to stabilize. Yields on the 10-year Treasury note have edged higher in the last week as traders debate the magnitude of Federal Reserve’s expected interest-rate cut in November as well as the path for reductions.
The average contract rate on a 15-year mortgage and the five-year adjustable-rate mortgage ticked up last week after sharp declines in the prior two weeks.
The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75% of all retail residential mortgage applications in the US.
©2024 Bloomberg L.P.
The post US Mortgage Rates Fall Again, Triggering Big Wave of Refinancing appeared first on Golden State Mint Blog.
US stocks traded mixed on Wednesday after markets hit their latest all-time highs, as investors looked to upcoming data for clues to the health of the economy and the chances of another jumbo rate cut.
The Dow Jones Industrial Average (^DJI) reversed earlier gains to fall about 0.4% while the S&P 500 (^GSPC) held onto positive momentum, rising about 0.1% on the heels of record closes for both major indexes. The tech-heavy Nasdaq Composite (^IXIC) rose about 0.4% after initially opening in the red.
The question now becomes whether or not the US economy could find itself in a recession, with concerns fanned by a surprisingly weak reading on consumer confidence. The debate centers on whether the Federal Reserve lowered rates by a bigger-than-usual 0.5% in response to a slowing economy, and what further malaise means for another hoped-for deep cut.
On the data front, new home sales declined in August following a sharp increase the month prior as ultra-high mortgage rates and lofty prices kept buyers mostly on the sidelines.
Mortgage applications, however, jumped to the highest level since 2022, according to MBA data released before the bell. The growth was driven by homeowners seeking to refinance loans as rates drop.
But the spotlight is firmly on Thursday’s second quarter GDP print and Friday’s crucial reading on the PCE index — the inflation gauge favored by the Fed.
The parade of Fed speakers continues with Governor Adriana Kugler, whose comments will likewise be scrutinized for insight into the size and pace of coming rate cuts when she appears later Wednesday.
Meanwhile, the boost to markets from China’s big stimulus launch faded amid growing skepticism about the steps will be successful in turning around its economy.
Wed, September 25, 2024 at 10:19 AM EDTNew home sales fall in AugustNew home sales declined in August following a sharp increase the month prior as ultra-high mortgage rates and lofty prices kept buyers mostly on the sidelines.
New single-family home sales slid 4.7% month-over-month to an annualized rate of 716,000, according to government data released Wednesday morning. Sales did fall less than expected, however, as economists had been anticipating a decline of 5.3%.
The median sales price decreased 4.6% to $420,600, marking the seventh straight month of year-over-year price declines. Mortgage rates are also declining as rates have fallen for eight consecutive weeks.
Mortgage applications jumped to the highest level since 2022, according to MBA data released before the bell. The growth was driven by homeowners seeking to refinance loans as rates drop.
Wed, September 25, 2024 at 9:35 AM EDTS&P 500, Dow open higherThe S&P 500 and Dow opened in positive territory on Wednesday after each hit an all-time high the day prior.
The benchmark S&P 500 (^GSPC) rose about 0.1%, while the Dow Jones Industrial Average (^DJI) inched up roughly 0.2%. The tech-heavy Nasdaq Composite (^IXIC) hugged the flat line.
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Source: www.stockcharts.com
Gold has responded positively to the Fed rate cut. The cut helped lower the US$ Index, which is positive for gold. The result was gold soared to another new all-time high, closing at $2,646. $2,700 is on the radar. Nothing like an aggressive rate cut by the Fed to get things going. But the gain on the week was only about 1.4%. Silver also rose about 1.4%. However, platinum continues its woes, losing 2.5%, and is down 4.0% on the year compared to gold, up 27.7%, and silver, up 30.8%. Copper gained 2.5% and appears to once again be breaking out. We saw up moves on a number of copper-based stocks this past week.
Other reasons gold is pushing higher are the escalation of the wars between Russia/Ukraine and Israel/Hamas/Hezbollah, Houthis and, indirectly, Iran and Syria. Economist Martin Armstrong reported on his private blog that a munitions dump north of Moscow was hit using British-made, long-range missiles that may have contained nuclear components because of the huge hole they left. This is not verified, but does highlight the potential for a major escalation in that war. In the Middle East there is very little sign that the sides are even talking. Peace is further away than ever, given the attacks against Hezbollah this past week. Gold is a geopolitical safe haven.
Domestically, it is the same, as violence is rising as we get closer to the election, an election sure to be challenged if Trump loses and possibly as well if Harris loses. Neither side has even the remotest of will to talk to each other. Talk of clashes between the sides is also dominating the discussion. The assassination attempts against Trump also highlight the gravity of the situation. Gold is a safe haven from domestic politics as well.
Finally, as we have noted before, central bank buying of gold continues as they try to exit U.S. treasuries. The U.S.’s thoughts of moving $300 billion of seized Russian assets to Ukraine has made numerous countries nervous, prompting the purchase of gold. Russia is also doing business in gold rather than in U.S. dollars since they have been removed from SWIFT. That allows Russia to continue trade and avoid sanctions.
The gain this year for gold is the largest since 2010, yet we see few signs, if any, that gold has topped. The RSI has risen into overbought territory, but we’ve seen in the past that this condition can remain longer than the shorts can stay solvent in a strong market. Forecasts are for gold to hit $2,700 by January 2025, possibly sooner. The massive cup and handle pattern that formed between 2011 and earlier this year projects up to at $3,100–$3,200. If that level was taken out, the next stop could be $3,800.
Downside under $2,450 could suggest further losses, but under $2,300 would suggest that the rally is over. The reasons for holding gold continue to pile up. Yet gold today remains very under-owned, especially in North America. The biggest fear is governments putting controls on gold, as gold moving higher shows a lack of confidence in governments. We continue to see higher prices ahead accompanied by periodic sharp pullbacks.
Source: www.stockcharts.com
When bullion rises, who leads? It should be silver. But silver also leads to the downside. The much-despised gold/silver ratio is still extremely high, at a too-high level that is currently 84. It peaked at 127 during the height of the pandemic. In 2011, at the top of the market for gold and silver, the ratio was about 31. The all-time low was 15.6, but that was way back in 1980. Today, silver would need to be at $169 to reach that level. We have a long way to go. Even the most recent lows of 64 in 2021 and 73 in July 2024 are a way away. Silver did not lead this past week, but at least it tied gold’s gains of about 1.4%. We appear to be breaking that downtrend line from the May top. The close at $31.50 does suggest we should take out the July top with potential targets up to at least $37 and possibly up to $40. Support is now at $30, but a breakdown under $26.50 would be highly negative with the first warning sign at $28.
Source: www.stockcharts.com
Gold stocks continue to climb, although the pace this past week was no doubt painfully slow for many gold bugs. Still, we once again made 52-week highs so there were some positives. On the week, the TSX Gold Index (TGD) rose just under 0.3% while the Gold Bugs Index (HUI) was up a feeble 0.05% or generously rounded to 0.1%. We remain well between the rising channel that looks a bit like an ascending wedge (bearish) triangle. The top of the channel is up around 390/400. The breakout from a huge symmetrical triangle in July 2024 with the start of the triangle dating back to 2015 is projected to send the TGD to new record highs at 600–650. The high of the past few years is at 416, set in July 2020, but we are getting close to that one. The all-time high was 455, set back in 2011. We are already through the point that suggests to us that we should see new all-time highs over 455. The TGD currently is down almost 17% from its all-time highs. That’s much better than the HUI, which remains down 49% from its all-time high. Different components account for the difference. The RSI is only at 63, so it has considerable room to move higher before becoming overbought. We expect to see the July 2020 high taken out on this move. Below 350 is a support zone, but under that the correction could be deeper.
Disclaimer
David Chapman is not a registered advisory service and is not an exempt market dealer (EMD) nor a licensed financial advisor. He does not and cannot give individualized market advice. David Chapman has worked in the financial industry for over 40 years including large financial corporations, banks, and investment dealers. The information in this newsletter is intended only for informational and educational purposes. It should not be construed as an offer, a solicitation of an offer or sale of any security. Every effort is made to provide accurate and complete information. However, we cannot guarantee that there will be no errors. We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the contents of this commentary and expressly disclaim liability for errors and omissions in the contents of this commentary. David Chapman will always use his best efforts to ensure the accuracy and timeliness of all information. The reader assumes all risk when trading in securities and David Chapman advises consulting a licensed professional financial advisor or portfolio manager such as Enriched Investing Incorporated before proceeding with any trade or idea presented in this newsletter. David Chapman may own shares in companies mentioned in this newsletter. Before making an investment, prospective investors should review each security’s offering documents which summarize the objectives, fees, expenses and associated risks. David Chapman shares his ideas and opinions for informational and educational purposes only and expects the reader to perform due diligence before considering a position in any security. That includes consulting with your own licensed professional financial advisor such as Enriched Investing Incorporated. Performance is not guaranteed, values change frequently, and past performance may not be repeated.
The post Technical Scoop: Positive Curve, Low Inflation, Precious Safety appeared first on Golden State Mint Blog.
Last week, the Federal Reserve made a significant move by cutting its overnight lending rate by 50 basis points. This marks the first rate cut since 2020, signaling the Fed is aggressively supporting the economy amid a backdrop of softening economic data. For investors, understanding how similar rate cuts have historically impacted markets and which sectors tend to benefit is key to navigating the months ahead.
In this post, we will explore the historical market performance following similar 50-basis-point rate cuts, highlight the best-performing sectors and market factors after such cuts, and outline three critical risks investors should be aware of heading into year-end.
Historical Outcomes To Rate CutsA 50-basis-point rate cut, especially the first one, is an aggressive action by the Fed. The Fed historically uses such a sizable cut during economic slowdowns or rising recession risks. Here are a few notable examples:
- January 2001: Following the dot-com bubble bursting, the Fed cut rates by 50 basis points in January 2001 to stabilize the economy. While the S&P 500 initially rallied, the broader market eventually experienced continued declines due to the deepening tech recession.
- October 2007: In the early stages of the Global Financial Crisis, the Fed implemented a 50-basis-point cut to inject liquidity into the system. As credit markets imploded due to an accelerating mortgage crisis, the immediate response from the stock market was positive, but the underlying financial instability resulted in prolonged market weakness throughout 2008.
- July 2019: The Fed’s most recent rate cut was in July 2019, responding to concerns about global trade tensions and an economic slowdown. Again, the market initially rallied, with the S&P 500 posting positive returns in the months following the cut. That period is notable because the rate cut was more of a precautionary measure, as the most recent rate cut seems to be, rather than a reaction to an existing economic downturn.
This is just an analysis of the Federal Reserve’s most recent rate cuts. Reviewing the history of rate-cutting cycles back to 1960 reveals some interesting points. The table below shows the 3-month average of the Effective Fed Funds Rate, the total decrease during a rate-cutting cycle, and related market outcomes or events.
It is worth noting that while many analysts point to periods where the Fed cut rates and stocks initially rose over the next few months to a year, in many cases, those rate cuts preceded more significant events, as shown in the chart below.
The 1995 AnalogyFor example, many analysts point to 1995 as a similar period to today, when the Fed initially cut rates, and the market continued to rise without realizing a recession. However, a difference between 1995 and today is the inversion of the yield curve. In 1995, the yield curve never inverted, signaling a healthy economy. As shown, the yield curve did not invert until 1998, and the Fed resumed its rate cuts with a recession following in 2000, triggering the “Dot.com” crisis.
It is not unusual for investors to see an initial positive response in the short term as they welcome the Fed’s efforts to stimulate economic growth. Furthermore, prevailing bullish sentiment and momentum continue pushing higher asset prices. As shown in the table above, the primary determinant of whether the market experiences a significant correction or not hinges on a recessionary impact.
Historically, performance over a six-month to two-year period is primarily dependent on whether the rate cut successfully stimulates the economy or if deeper economic issues persist. For example, in 2001 and 2007, the six-month performance following the rate cuts was negative due to underlying economic challenges, while in 2019, the market continued to perform well until the onset of the pandemic-related economic shutdown.
Given this background, where should investors focus their attention?
Best-Performing Sectors and Market FactorsWhen the Federal Reserve reduces interest rates, in this case by 50 basis points, the decline in borrowing costs tends to benefit different sectors and asset classes in varying ways. While there are many options, here are five areas to start your research based on historical trends.
- Large-Cap Stocks: Large-cap stocks, and in particular, the “Mega-cap” stocks, tend to benefit the most immediately after a rate cut. With strong balance sheets and the ability to access cheaper capital, they can expand operations, boost profit margins, and, most importantly, buy back shares. Furthermore, these companies are highly liquid and benefit more from passive indexing flows than small and mid-cap companies.
- Small-Cap Stocks: Speaking of small-cap stocks, they tend to see a delayed response. These companies primarily use floating-rate debt; lower borrowing costs improve their financial strength. However, they are more sensitive to economic cycles, so recessions remain an important risk. Investors favor large-cap stocks, but small-caps may gain momentum once economic conditions stabilize.
- Treasury Bonds: Bonds tend to perform well during interest rate cuts. Bond prices typically rise as rates fall, providing investors with capital appreciation. Longer-duration Treasury bonds historically perform as lower interest rates drive demand for fixed-income assets.
- Real Estate Investment Trusts (REITs): REITs benefit significantly from rate cuts, as lower interest rates reduce borrowing costs for real estate acquisitions and development. Additionally, REITs provide steady income through dividends, which become more attractive as bond yields decline.
- Gold: Gold tends to perform well during an interest rate-cutting cycle when the economy slips into a recession and the dollar weakens. However, gold has already had a tremendous run in anticipation of the Fed’s most recent rate cut, so much will depend on the strength or weakness of the dollar and economic outcomes.
Some Areas To ConsiderWith that information, and given the historical performance of various sectors and market factors following rate cuts, here’s how investors might consider positioning their portfolios:
- Large-Cap Stocks: Focus on high-quality, large-cap stocks that can benefit from lower borrowing costs and have a strong track record of weathering economic uncertainty. Companies in consumer staples, technology, and healthcare tend to perform well in rate-cut environments.
- Fixed Income: To capitalize on rising bond prices, consider adding exposure to long-term bonds or bond ETFs**. Fixed-income investments provide stability and income, which can be particularly attractive in a low-rate environment.
- REITs and Income-Producing Assets: Look for opportunities in REITs and other income-generating assets, which benefit from lower interest rates and provide reliable cash flow through dividends.
- Small/Midcap Companies: Consider selective exposure to small and mid-capitalization companies that have low debt levels and strong balance sheets and pay a dividend.
Three Key Risks for Investors Post Rate-CutWhile there are potential benefits to a Fed rate cut, there are also risks:
- Presidential Election: Given the disparity between the current candidate’s economic policies, particularly around tax rates and deficit spending, there is a risk of market participants derisking ahead of the outcome. One key issue to focus on is the outcome of the congressional races. A bifurcated outcome between control of the House and Senate would be most favorable for Wall Street as it would limit any drastic changes to current economic and regulatory policies.
- Economic Recession: As noted above, the most significant determinant between rate-cutting cycles, market corrections, and bear markets is the onset of a recession. The markets will likely respond negatively if upcoming data shows significant deterioration, particularly in employment and services-related data. In such an event, sectors such as financials and cyclicals are particularly vulnerable to prolonged economic downturns, as banks may face higher loan defaults and reduced demand for their services.
- Geopolitical Risks: Geopolitical tensions, particularly around trade, energy supply, or global conflicts, can exacerbate market volatility. External shocks such as escalating trade wars or energy supply concerns can weigh on investor sentiment and disrupt global markets even with lower rates. For instance, disruptions in the oil market or increased trade tensions with major economies could derail the positive effects of rate cuts.
- The Japanese Yen:* In August, we discussed the impact of the “Yen Carry Trade”* on the financial markets. That risk has not subsided, particularly should the Bank of Japan continue to hike interest rates while the rest of the world is cutting them. Such a move by the Bank of Japan would likely create another spike in the Japanese yen, creating another “margin call” for those highly levered positions held by Wall Street.
Conclusion: Navigating the Market Post-Rate CutThe Federal Reserve’s 50-basis-point rate cut signals a proactive effort to support the economy amid potential risks. Historically, the S&P 500 and various sectors have responded positively to rate cuts in the short term, with large-cap stocks and bonds often leading the way. However, investors should remain cautious of risks such as the upcoming election, recession, geopolitical tensions, and the Japanese Yen that could impact market performance in the coming months.
At RIA Advisors, we remain allocated to the equity markets as momentum, relative strength, and the overall trend remain bullishly biased. However, we continue to regularly implement risk management protocols, evaluate opportunities, and closely watch the incoming economic data.
While everyone is trying to guess how this turns out, history suggests exercising some caution seems prudent. For us, it is always preferable to err on the side of caution. While it is easy to reallocate cash into equities, it is much more difficult to recoup losses.
Trade accordingly.
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Summary* The Fed’s 0.50% rate cut has driven gold prices to $2620 per ounce, with further gains expected due to potential additional rate cuts and quantitative easing. * Geopolitical uncertainties, such as US-China-Russia tensions and Middle East conflicts, could further boost gold prices, potentially reaching $5200 per ounce. * The monetary base to gold ratio suggests gold is undervalued, indicating significant appreciation potential, especially if the ratio returns to 2011 levels. * Risks include the possibility of less aggressive easing than expected and the Fed successfully avoiding a recession, which could limit gold’s gains. Anthony Bradshaw
One of the most important pieces of economic news has recently been the Fed’s 0.50% rate cut. Gold has therefore touched a high of $2600 per ounce. Some economists predict the $3000 mark is possible as early as mid-2025. According to Aakash Doshi, head of commodities, North America at Citi Research, gold could reach $3,000 per ounce by mid-2025. Mr. Doshi also predicted $2,600 by the end of 2024. But this target has already been reached. As I am writing this, gold prices are near $2620 per ounce. In my opinion, this forecast is too conservative. Every asset class, including gold has a market price at which it is currently trading and also an intrinsic value at which it should trade if the market were rational. Right now despite the remarkable rally, gold has further gains to make, given the likelihood that a series of rate cuts will follow. Let me explain why and under which conditions it would surge higher.
My previous work on gold pricesIn my previous article about gold, I wrote that gold prices remained unchanged despite easing geopolitical tensions and inflation exceeding the Fed’s target. These factors did not make gold go down in value. Consumer spending data published at the time suggested the US economy was not slowing down, giving the Fed no reason to ease monetary policies. The situation is quite different now. The recent macroeconomic data suggests the economy’s slowdown. Also, the decreasing inflation numbers allowed the Fed to ease on Wednesday by 50 basis points. Just before the Fed’s meeting, I wrote an article where I suggested the 0.50% rate cut was in the cards.
Why is gold near its all-time highs?So, why is gold at its all-time highs? In other words, there has been an unstoppable rally since the beginning of July this year.
Goldprice.org
Goldprice.org
But the recent several days of rallying gold prices were due to the Fed cutting the interest rates on Wednesday.
At the same time, it is noteworthy that most investors buy on expectations. They are not that concerned with the current market conditions or the recent news. Instead, they invest for the future. Right now, the market expects the Fed to keep decreasing the interest rates. It seems strange, though, because the Fed does not expect the era of cheap money. According to Jerome Powell’s press-conference, America is “not going back’ to ultra-low interest rates” or to a situation where there were trillions of dollars of sovereign bonds trading at negative rates. Although Powell feels the neutral rate is likely significantly higher than it was back then, he is not yet sure how high it is. But this contradicts the fact that the first rate cut was so substantial. One of the FOMC’s members, namely Fed’s Governor Michelle Bowman, called for a quarter-point cut instead. So, it seems to me that a decrease of 0.50% was just the beginning. And given the fact, the interest rates are relatively high, many more cuts could follow.
Let us also not forget that there are other measures the Fed can take to ease the monetary conditions to the extreme. This is known as QE (quantitative easing) or money printing, in plain words. This is when the Fed buys back the Treasuries to flood the US economy with some extra cash. This was actively done during the 2008 crisis and also during the Covid-19 pandemic. It is also possible the Fed would eventually do this during the current easing cycle. So, if everything goes according to the plan, in the next several years gold will only keep rising because the correlation between the yellow shiny metal and the interest rates is strongly negative.
Sunshine Profits
Now let us talk about gold’s potential in the next several years of the easing cycle.
Why is $3000 gold too low?I, personally, think that the gold price of $3000 per ounce many economists predict as early as mid-2025 is far too conservative. Why is that, and how can one estimate the fair value of gold, given that it does not generate any cash flows? Well, there is a so-called monetary base to gold ratio, which shows the relationship between the money mass and the gold prices. If the ratio is high, it means that gold is highly undervalued compared to the money mass. This is not exactly the case right now.
US M2/Gold Ratio
“In gold we trust” report
The ratio is not as high as it used to be in the 1970s or the beginning of 2000s. However, it is not as low as it used to be in 1980 or in 2011. So, it is quite average, which means it can easily decrease further. But the fact that this ratio is quite average under the current market conditions means that gold can appreciate much further. This is because the interest rates are near decade highs.
Federal Reserve
When interest rates are so high, it means there is not much money mass in the economy. So, assuming the ratio touches the levels reached in 2011, around 5, that is, from the current level of 10, gold should appreciate twofold, thus totaling $5200. That is because we can safely assume the money mass would rise substantially, thus raising the ratio, so gold should have further space to run.
Why could gold surge?Apart from a series of rate cuts and potential for quantitative easing, which could push gold to unseen before highs, there are several factors, which could make gold surge.
- First and foremost, this is geopolitical uncertainty. By this, I mean any major political conflicts, wars, trade wars and rising tensions between countries. For example, there could be deteriorating relations between the US, China, and Russia. Alternatively, the conflict between Gaza and Israel can get even more countries involved. Something like this is happening now. Tensions in the Middle East have escalated further following Hezbollah leaders’ exploding pagers. The situation can obviously escalate further.
- Then, the USD can also lose its dominance as the world’s reserve currency. This will definitely not happen dramatically overnight. At the same time, certain countries, including Saudi Arabia and the BRICS are moving away from trading in USDs, which could obviously decrease the demand for the US dollar, thus also diminishing its importance. As an alternative to the dollar, it is possible that an international currency will eventually be created. It could be backed by gold, as a unit of account.
RisksNow, let me talk to you about some possible risks.
- It is always a poor idea to buy an asset at its all-time highs. Gold is an asset class that is trading at its record highs because everyone expects aggressive easing. But the easing process may not be as aggressive as everyone expects. So, the disappointed investors may therefore cut their positions in the precious metal.
- If there is an economic crisis and the market starts panicking, the gold prices may initially fall because the US dollar would strengthen. But this tends to be very short-lived. After most asset classes’ depreciation, the Fed would start easing even more aggressively, which will make most asset classes appreciate again.
- The economic cycle – the period between recessions – will last even longer than most analysts expect. In other words, the Fed will successfully manage to avoid a recession and will make the US economy grow faster than most macroeconomists expect. So, the Fed would not have to take extra measures like QE (quantitative easing) to improve the economic indicators. This will mean limited (not as high as expected, that is) gains for gold.
ConclusionIn conclusion, I would say that gold has much further room to run. The current level of about $2600 per ounce was just the beginning. Even the $3000 predicted by several analysts will be reached very fast because the easing cycle has just started, it seems. Add to that the fact the monetary base to gold ratio is not at its all-time highs and that the interest rates are still very high. Further bullish factors include geopolitical uncertainty and the USD losing its status as the world’s reserve currency.
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The post Forget $3000 Gold – It Is Worth Much More appeared first on Golden State Mint Blog.
I’m gonna do a quick video on silver this weekend. For whatever reason, I’m seeing a lot of analysts trying to call a top in metals and I don’t understand why. I also see them trying to call a top in the stock market; not really understanding that either. Why is it that when something is making new highs, people want to try and call it a top? Baffling to me. So, let me just go over this real quick. This intermediate degree rally broke out above this major resistance that had been in place for what three, three and a half years?
The problem was that it came very late in this intermediate cycle. And the rule is that breakouts that occur late in a cycle usually don’t produce sustained moves. You need to break out that occurs early in a cycle to get a sustained move. If a normal cycle link, let’s say is 20-25 weeks, and you get a breakout on week 17 where you’re going to need some weeks for the declining phase of the cycle. And so there’s just not enough time to get a sustained move, generally speaking. So, that was the problem right here with this breakout above $30; it came very late in the intermediate cycle.
Gary Savage is a 57-year-old retired entrepreneur living in Las Vegas. He has been investing in stocks and commodities for 15+ years. He is a self-made multi-millionaire and attributes his financial success to savvy investments made in owning/selling several businesses, real estate, and, more recently, the stock market. He is also an Olympic weightlifting champion, and world record holder. Gary’s stock market investment philosophy and success owes to an unusually disciplined and keen understanding of market cycles combined with cutting edge sentiment data which allows him to anticipate and articulate how larger trends are likely to unfold. His analysis is almost always in strong contrast to what the public is thinking – and, provocatively, several steps ahead of the crowd. Gary’s renown as a recognized trading/investment expert in the areas of precious metals, stock market, oil and currency markets is demonstrated by his numerous internationally published articles in these market areas. Gary publishes the Smart Money Tracker, a market newsletter available online by subscription only, and also the SMT free blog.
The post Analysts Calling Tops in Metals What Are They Thinking appeared first on Golden State Mint Blog.
(Bloomberg) — While the stock market rallied after the long-awaited Federal Reserve rate cut last week, there’s a sense of unease accompanying the gains.
Referring to the Fed’s shift to a bigger rate cut than had been expected even a week before the meeting, Charlie McElligott, cross-asset strategist at Nomura Securities, wrote in a note that the “‘fear of left-tail’ then self-fulfills the right-tail outcome” and that it’s “pushing the market out of recession trades, instead capitulating back into soft-landing” expectations.
That change in market perception is in turn causing a forced re-risking and exposure grabbing, according to McElligott. Some is mechanical, with leveraged exchange-traded funds buying across products, while market-overwriting funds are forced to snap back up short call positions. Other investors who reduced risk after the August volatility spike now have to purchase at record highs — an uncomfortable prospect with a hotly contested presidential election, an uncertain macroeconomic picture and corporate earnings approaching.
“A big re-positioning ultimately sets the table for the next wobble,” says McElligott, adding that more risk taking at some point necessitates downside hedging, which in turn changes the options market’s dealer positioning into something that acts as “accelerant fuel for ugly market events.”
There are signs of that hedging in measures of volatility and skew, signaling that despite US equity gauges rallying to record highs after the Fed decision, investors are willing to pay more for protection. The Cboe VVIX Index — measuring the volatility of VIX options commonly used to guard against a steep selloff — remains about 20% above its level from the beginning of June. And Nations SkewDex, which gauges the relative cost of bearish put options, is also elevated.
In other signs of tail-risk hedging, investors picked up buying of Cboe Volatility Index calls and call spreads — purchasing 85 and 90 calls in particular — and of S&P 500 Index (^SPX) put spreads. Going into the Fed meeting, non-commercial net-short VIX positions were the smallest since 2019.
A pickup in hedging — while protecting individual investors — may leave options dealers short gamma, forcing them to sell more to stay balanced in a sharp market drop.
The central bank’s half-point rate cut raised the question of whether the Fed’s hand had been simply forced, if the market’s big fear of a hard landing, best expressed during the August selloff, was scary enough for policymakers to make a big cut and reassure the soft landing narrative.
And while all the technicalities of the market play their own game, the debate about how low rates can go and how stimulative a cut actually is has just begun.
“We continue to believe that central banks will have less leeway to ease in 2025 than they and many investors believe,” wrote Berenberg economist Holger Schmieding. “Continued loose fiscal policy, persistent underlying inflation pressure and structural labor shortages are reasons against cutting rates too deeply.”
©2024 Bloomberg L.P.
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By Suzanne McGee and Carolina Mandl
(Reuters) – Investment advisers are urging clients to dump hefty cash allocations now that the Federal Reserve has begun its much-anticipated interest-rate easing, a process they expect to limit the appeal of money-market funds in the coming months.
Retail money-market funds have attracted $951 billion in inflows since 2022, when the Fed started its rate-hiking cycle to tame inflation, according to the Investment Company Institute, which represents investment funds. Their assets stood at $2.6 trillion on Sept. 18, roughly 80% higher than at the beginning of 2022.
“As policy rates fall, the appeal of money-market funds will wane,” said Daniel Morris, chief market strategist at BNP Paribas Asset Management.
On Wednesday, the U.S. central bank cut the federal funds rate by a larger-than-usual 50 basis points to a range of 4.75% to 5%, which makes holding cash in deposit accounts and cash-like instruments less appealing.
“You’re going to have to shift everything … further up in the amount of risk you’re accepting,” said Jason Britton, Charleston-based founder of Reflection Asset Management, who manages or oversees around $5 billion in assets. “Money-market assets will have to become fixed-income holdings; fixed income will move into preferred stocks or dividend-paying stocks.”
Money-market funds – ultra low-risk mutual funds that invest in short-term Treasury securities and other cash proxies – are a way to gauge investor interest in the nearly risk-free returns they offer. When short-term interest rates climb, money-market returns rise with them, increasing their appeal to investors.
“Investors need to be aware that if they’re counting on a certain level of income from that portion of their portfolio, they may need to look at something different, or longer-term, to lock in rates and not be as exposed to the Fed lowering interest rates,” said Ross Mayfield, investment strategist at Baird Wealth.
Carol Schleif, chief investment officer of BMO Family Office, expects investors to keep some cash on the sidelines to wait for opportunities to buy stocks.
It could take a week or more for initial reactions to the Fed’s decision on Wednesday to show up in money-market fund flows and other data, analysts note. While the Investment Company Institute reported an overall decline in money-market holdings in its last weekly report on Thursday, retail positions were little changed to higher and advisers said it has been tough to persuade that group to abandon their cash holdings.
Christian Salomone, chief investment officer of Ballast Rock Private Wealth, said clients faced with lower returns on cash are eager to invest in something else.
Still, “investors are stuck between a rock and a hard place,” Britton said, faced with a choice between investing in riskier assets or earning a smaller return from cash-like products.
(Reporting by Suzanne McGee and Carolina Mandl; additional reporting by Davide Barbuscia; editing by Megan Davies and Rod Nickel)
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(Bloomberg) — Asian stocks extended a rally in global equities as jobs data backed the view that the US economy is headed for a soft landing. The yen gained as the Bank of Japan left interest rates unchanged.
The MSCI Asia Pacific Index rose as equities in Japan, South Korea and Australia advanced, while mainland Chinese shares slipped. A gauge of global stocks set a fresh peak alongside US shares Thursday.
The BOJ kept its monetary policy settings steady Friday, signaling it sees no need to hurry with interest rate hikes as it monitors financial markets after its July increase and hawkish views spooked investors. Data released earlier showed the nation’s key inflation gauge accelerated in August for a fourth consecutive month.
“The focus now shifts to Governor Ueda’s press conference,” said Shoki Omori, chief desk strategist at Mizuho in Tokyo. “Depending on the degree of this tone, if the hawkish stance is clearly conveyed to the market, the USD/JPY exchange rate is expected to trend downward.”
Treasury yields were little changed on Friday, while an index of dollar strength was locked in a narrow range.
A drop in US jobless claims to the lowest since May signaled the labor market remains healthy despite a slowdown in hiring. This added a boost to risk appetite and eased concerns the Fed may have been too slow to trim borrowing costs when it cut rates by half a percentage point on Wednesday.
The equity gains on Thursday and Friday mark a “delayed euphoric reaction,” to the Fed but one that may retreat, according to Nick Ferres, Chief Investment Officer of Singapore-based Vantage Point Asset Management. “Valuation is already heroic and risk compensation is poor, particularly if the earnings cycle disappoints.”
Over in China, the country is considering removing some of the largest remaining curbs on home purchases after previous measures failed to revive a moribund housing market, according to people familiar with the matter. That pushed the BI China Real Estate Owners and Developers Valuation Peer Group gauge higher.
Meanwhile, the nation’s banks maintained their benchmark lending rates for September, as policymakers held off on further monetary stimulus while financial institutions struggle with record-low profit margins. The Securities Times reported on Friday that this week’s Fed rate cut has provided room for China to boost monetary and fiscal stimulus to support the economy.
The European Union and China agreed to intensify discussions to avert looming tariffs on electric cars ahead of a deadline that’s only days away.
Elsewhere, Wall Street banks are divided on the pace and extent of upcoming Federal Reserve rate cuts. JPMorgan Chase & Co. expect another 50 basis point reduction in November, while Goldman Sachs Group Inc. anticipates 25 basis point cuts at each meeting from November to June next year.
In Asia, Taiwan’s property and construction stocks dropped Friday following the central bank’s decision to increase the amount of funds banks must hold in reserve to cool the sizzling property market.
Data set for release include inflation for Hong Kong and foreign exchange reserves for India.
In commodities, gold steadied near a record high while oil was on track for the biggest weekly advance since April after the US rate cut.
Key events this week:
- Japan rate decision, Friday
- Eurozone consumer confidence, Friday
- Canada retail sales, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 12:52 p.m. Tokyo time
- Nikkei 225 futures (OSE) rose 2%
- Japan’s Topix rose 1.4%
- Australia’s S&P/ASX 200 rose 0.4%
- Hong Kong’s Hang Seng rose 1.3%
- The Shanghai Composite fell 0.2%
- Euro Stoxx 50 futures fell 0.2%
- Nasdaq 100 futures fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1165
- The Japanese yen rose 0.3% to 142.16 per dollar
- The offshore yuan rose 0.3% to 7.0453 per dollar
- The Australian dollar was little changed at $0.6819
Cryptocurrencies
- Bitcoin rose 0.8% to $63,565.84
- Ether rose 1.1% to $2,493.88
Bonds
- The yield on 10-year Treasuries was little changed at 3.71%
- Japan’s 10-year yield was unchanged at 0.850%
- Australia’s 10-year yield was little changed at 3.92%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold rose 0.2% to $2,592.04 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu.
©2024 Bloomberg L.P.
The post Stocks Extend Rally, Yen Gains as BOJ Holds Rate: Markets Wrap appeared first on Golden State Mint Blog.
Inflation refers to the general rise in the price of goods and services. The U.S. Federal Reserve aims to keep the consumer price index (CPI) measure of inflation growing at an annual rate of 2%, and the central bank will adjust the federal funds rate (overnight interest rates) when it deviates too far from that target.
The CPI hit a 40-year high of 8% in 2022, triggering one of the most aggressive campaigns to hike interest rates in the history of the Fed. The rate of inflation has cooled considerably since then, so the central bank appears set to reverse that policy.
That means interest rates may be cut for the first time since March 2020. If history is any guide, that could trigger a big move in the benchmark S&P 500 (SNPINDEX: ^GSPC) stock market index — but the direction might surprise you.
The Fed could cut interest rates three times before the end of 2024The U.S. government injected trillions of dollars’ worth of stimulus into the economy during 2020 and 2021 to counteract the negative economic effects of the COVID-19 pandemic. At the same time, the Fed slashed interest rates to a historic low of 0% to 0.25%, and it injected trillions of dollars into the financial system through quantitative easing (QE) by buying government and agency bonds.
Loose monetary policy and drastic increases in money supply tend to be inflationary, but disruptions to global supply chains also drove prices higher. Factories and shippers were periodically shutting down all over the world to stop the spread of COVID-19, which led to shortages of everything from televisions to cars.
So, a cocktail of factors sent the CPI surging during 2022, which triggered the flurry of rate hikes that followed. The federal funds rate ultimately settled at 5.25% to 5.50% after the Fed’s last rate hike in August 2023. That’s a long way from the pandemic low point.
But here’s the good news: It’s working. The CPI ended 2023 at 4.1%, and it came in at an annualized rate of 3% in June 2024, which is the most recent reading. In other words, inflation is closing in on the Fed’s 2% target.
That’s why most experts are expecting imminent rate cuts. According to the CME Group‘s FedWatch tool, the Fed is likely to cut rates three times by the end of 2024 (once each in September, November, and December).
The stock market doesn’t always respond well to rate cutsConventional wisdom suggests rate cuts are great for the stock market. They reduce the yield on risk-free assets like cash and Treasury bonds, which pushes investors into growth assets like stocks and real estate.
However, if we examine the chart below, which overlays the federal funds rate with the S&P 500 going all the way back to 2000, we can see that falling interest rates often foreshadow a decline in the stock market.
^SPX ChartTo be clear, the prevailing trend is always up for the S&P 500, so long-term investors shouldn’t be swayed by the potential for imminent weakness. Plus, there were some overriding themes in the past that make this correlation a little murky. In other words, we have to look at why the Fed was cutting rates during the periods depicted in the above chart:
- During the early 2000s, the dot-com tech bubble burst, which triggered a recession in the economy. The S&P 500 fell by 9.1% in 2000, 11.9% in 2001, and 22.1% in 2002.
- During the late 2000s, the global financial crisis forced a decisive intervention by the Fed, which included rapid rate cuts and the introduction of QE for the first time. The S&P 500 plunged 37% in 2008.
- Finally, the sharp fall in rates in 2020 was triggered by the pandemic. The S&P 500 suffered a peak-to-trough decline of 31.8% in 2020, but it actually ended the year in positive territory thanks to all of the stimulus I mentioned earlier.
Therefore, we can’t exactly say that the stock market fell because the Fed cut rates. Rather, it likely fell on each of those occasions because of what else was happening in the underlying economy.
Image source: Getty Images.Will this time be different?There are no signs of an impending crisis for the U.S. economy right now, nor of a garden-variety recession. But there are some signs of weakness. The unemployment rate, for example, has ticked higher to 4.3% (from 3.7% in January), and a softening jobs market can be a precursor for weak consumer spending in the near future.
Since the CPI is almost back to the Fed’s target, it probably isn’t appropriate to maintain a restrictive policy stance. Plus, interest rate moves tend to have a lagged effect on the economy, so it’s possible we haven’t even seen the full effect of the Fed’s past hikes just yet.
By the same token, any rate cuts at the end of this year probably won’t feed through to the economic data until sometime in 2025. That means the sooner the Fed starts cutting, the higher the probability the U.S. economy will avoid any unnecessary deterioration down the road.
The stock market trades based on corporate earnings, and it’s very hard for companies to deliver growth in a slowing economy. If Wall Street starts to reduce earnings forecasts, that will almost certainly lead to a down period for stocks. In that scenario, the S&P 500 could be falling while the Fed is cutting rates at the same time.
The Fed typically cuts rates when it observes weakness in the economy, which can be a signal that the S&P 500 is heading lower in the short term. But imminent rate cuts aren’t a reason to sell stocks — as I mentioned earlier, they often recover over the long term, so any weakness might actually be a buying opportunity.
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Interest Rates Are About to Do Something They Haven’t Done Since March 2020, and It Could Trigger a Big Move in the Stock Market was originally published by The Motley Fool
The post Interest Rates Are About to Do Something They Haven’t Done Since March 2020, and It Could Trigger a Big Move in the Stock Market appeared first on Golden State Mint Blog.
By James KnightleyConsumer resilience continuesThe initial wave of today’s US data was quite a bit firmer than expected with retail sales rising 1% month-on-month versus the 0.4% consensus with the control group, which excludes some of the volatile items, seeing sales rise 0.3% MoM versus expectations of a 0.1% gain. There were some downward revisions to the history, but this is still a firmer-than-anticipated outcome.
The headline figure was boosted by a 3.6% MoM jump in vehicle sales, but there was also decent strength in electronics (+1.6%), building materials (+0.9%), food & beverage (+0.9%) and health/personal care (+0.8%). These gains more than offset weakness in miscellaneous stores (-2.5%), sporting goods (-0.7%), department stores (-0.2%) and clothing (-0.1%). We had been thinking the risks were skewed to the downside on the basis that the June control groups gain of 0.9% was vulnerable to a correction after hot and humid weather across the US boosted traffic at shopping malls. This resilience in consumer spending gives enough excuse to push the market to increasingly favor a 25bp Fed interest rate cut over a 50bp move in September.
US retail sales levels
Source: Macrobond, INGJobless claims show lay-offs remain lowMeanwhile, jobless claims surprisingly moderated to 227k from 234k (consensus 235k) with continuing claims dipping to 1864k from 1871k (consensus 1870k). This is the second consecutive slowing in initial jobless claims and is the lowest number since the first week of July. As such it reinforces the message that the rise in the unemployment rate is being caused by increased labor supply exceeding labor demand rather than job lay-offs, which again points to a greater chance of a 25bp cut than a 50bp move that we had penciled-in in the wake of the jobs report.
Weekly initial jobless claims
Source: Macrobond, INGIndustrial production remains subduedRounding out the main US numbers, we have industrial production falling 0.6% MoM with June’s growth rate revised down to +0.3% from an initially reported +0.6% gain. Hours worked in the sector are the best guide for output growth and the fact they fell 0.6% indicated downside risk to the consensus forecast of a 0.3% decline. Hurricane Beryl played a major part of this as it disrupted the Gulf Coast. The ISM manufacturing index remains in contraction territory and weak orders levels point to a sector that will continue to struggle. Nonetheless, the US economy is dominated by services these days and that remains in a stronger position, for now.
MoM change in industrial output and the hours worked in the sector
Source: Macrobond, INGContent DisclaimerThis publication has been prepared by ING solely for information purposes irrespective of a particular user’s means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.
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Because of Silver, you get these improved performance characteristics:
1. 600-mile range (about double the average range on today’s market)
2. Full charge in 9 minutes
3. Lighter weight
4. Lifespan of 20 years
Samsung’s development of solid-state battery technology is poised to significantly impact the electric vehicle (EV) market. These batteries, which incorporate a silver-carbon (Ag-C) composite layer for the anode, offer several key advancements over traditional lithium-ion batteries.
Key Features and Benefits
- Range and Lifespan: Samsung’s solid-state batteries promise an impressive 600-mile range on a single charge and a lifespan of 20 years.
- Charging Time: These batteries can charge in just nine minutes, addressing one of the major hurdles in EV adoption.
- Energy Density: With an energy density of 500 Wh/kg, these batteries are nearly twice as dense as current mainstream EV batteries, allowing for longer travel distances in a smaller, lighter package.
- Safety: The use of a solid electrolyte instead of a liquid one reduces the risk of fires, making these batteries safer than traditional options
Impact on the Silver Market
The introduction of Samsung’s solid-state batteries could have a substantial impact on the silver market. It is estimated that each battery cell may require up to 5 grams of silver, leading to a potential demand of 1 kg of silver per vehicle for a 100 kWh capacity battery pack. If 20% of the global car production (approximately 16 million vehicles) adopts this technology, the annual silver demand could reach 16,000 metric tons.
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KanawatTH/iStock via Getty ImagesAfter a lively start for the month of August, gold still has several technical and fundamental advantages in its favor on an intermediate-term (six-to-12-month basis). That said, the near-term outlook suggests headwinds will persist in the next several weeks, making it difficult for gold prices to mount a sustained rally. But as I’ll explain here, the big picture outlook remains favorable for higher gold prices starting in fall.
Let’s begin this analysis by taking a look at gold’s technical backdrop. Despite the multiple headwinds that gold has faced this summer—ranging from unfavorable sentiment for speculators to competition from cryptos—the precious metal managed to hold its own while refusing to bow to broad commodity market selling pressure.
But after treading water for over three months, gold has just made an attempt at breaking free from its trading range on safety-related demand. In my previous article in mid-June, I observed regarding the SPDR Gold Shares ETF (GLD):
…there’s a good chance GLD will manage to continue treading water near current levels before the rising 90-day moving average (the next most important trend line in my technical tool kit) catches up and presumably incites some new buying interest from technically-oriented traders.
That’s pretty much what happened, as the chart below shows GLD maintaining a mostly lateral trend until the 90-day line came into play later that month, pushing gold higher.
BigChartsAs you can see, however, gold still hasn’t managed to take flight in a sustained fashion, and I believe the reason for that is due to a lack of decisive commitment to either a bullish or a bearish market stance. That is, there appears to be no clear consensus in the sentiment data among retail participants as to which direction gold is headed in the near-term outlook.
Shown below is the most recent gold sentiment indicator from the DailyFX website, which reveals that as of this writing, 52% of retail traders are net long gold. That’s very close to a neutral position for the metal, and such positioning is often followed by lateral trading ranges due to the market’s indecisiveness.
DailyFXIf this same principle holds true again, we should expect to see gold making only minimal upside progress at best; at worst, a sideways trend can be expected (or perhaps even minor weakness). However, I don’t anticipate gold to show a conspicuous degree of weakness going forward, due to the tremendous geopolitical and global economic uncertainties that are keeping safety-related demand for the metal very much alive.
Indeed, every time in recent months the bears have attempted to control the gold trend, resurgent safety demand has allowed the bulls to quickly regain control of the market and push prices back up. I don’t expect this dynamic to change anytime soon, and I suspect the 90-day moving average will also continue to serve as a strong supporting benchmark for the gold price.
From a fundamental perspective, global gold demand remains “firm” according to the latest insights from the World Gold Council (WGC). The organization’s Gold Demand Trends for the second quarter of 2024 was released a couple of weeks ago, and it revealed that while there was a decline in retail bar and coin investment from western countries—along with lower jewelry sales—continued strength in central bank demand kept the total demand for gold trending higher.
In fact, gold demand reached its highest Q2 level on record, according to WGC, as shown in the graph below.
World Gold CouncilThe WGC observed that, “Central bank net gold buying was 6% higher y/y at 183 [tons], driven by the need for portfolio protection and diversification.” Additionally, demand for bars, coins and ETFs was said to be “robust” in the East, despite declines in the West, while Western ETF investment flows have “started to return so far in Q3.”
The persistence of investment flows and central bank demand cannot be understated, as both factors are key reasons the metal has been able to maintain its longer-term upward trajectory since 2022 when the buying intensified. For the remainder of 2024, WGC sees revived Western investment flows balancing out weaker consumer demand. Meanwhile, central banks in emerging markets continue to support the gold bull market, particularly in Kazakhstan, Oman, Kyrgyzstan and Poland—mainly for political reasons, as several nations not currently allied with the U.S. are trying to diversify away from the dollar.
So, while I expect gold to continue facing headwinds from mixed investor sentiment in the near term, you may be asking, “What, then, could serve as the catalyst for gold’s next meaningful move higher?” My answer to that question is the growing expectation that the Federal Reserve will lower its benchmark interest rate by at least 25-basis points in September.
Falling rates are one of gold’s most important directional catalysts, and the commencement of declining rates has historically been followed by a converse reaction (i.e. rising prices) on gold’s part. And while some analysts argue that gold’s current price has already discounted a loose rate policy on the Fed’s part, I would disagree with this assessment as the Fed has consistently remained opaque in stating its rate cut intentions.
While Fed Chairman Powell recently told reporters that while “a reduction in our policy rate could be on the table at the September meeting,” he hasn’t fully confirmed it. Thus, a rate cut on September 18 would likely carry enough of a relief factor that investors would almost certainly pivot more decisively toward owning gold once the Fed has confirmed its rate intentions.
All told, while the current investor sentiment backdrop suggests gold will continue to struggle to rally in a sustained fashion in the near term, ongoing institutional demand should keep the big-picture bullish case for gold fully intact. What’s more, the long-awaited commencement of a more dovish interest rate policy—likely starting next month—should provide a stimulus for higher prices this fall. For now, I continue to assign a “hold” rating on gold for investment purposes.
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Jonathan KitchenIntroductionEarlier today, the Bureau of Labor Statistics released the Consumer Price Index for the month of July. The report indicated that inflation rose at 0.2% in the month of July, and 2.9% on a year-over-year basis. When removing the volatile elements of food and energy, core inflation also rose at 0.2% in the month of July and 3.2% on a year-over-year basis. The weight of the inflation report has been somewhat subdued by the softening labor market, but the overall disinflationary trend is supportive of an introductory rate cut this fall.
Bureau of Labor StatisticsBureau of Labor StatisticsWhile July’s month-over-month change in core inflation is hotter than June’s, it matches May’s changes. The last three months combined are clearly the softest three inflationary reads of the past year, and when annualized, come out to just 1.6%. Even adding the hotter April read and annualizing the last four months brings us slightly over 2%. The economy is beginning to string together several months of tame inflation data pointing to a 2% trend, despite the current year-over-year trends being higher.
Bureau of Labor StatisticsBureau of Labor StatisticsIndicators Leading Up to the Inflation ReportIn advance of the report, economists and investors were optimistic that the disinflationary story would continue its trend. One of the largest inputs to consumer inflation is wages. After year-over-year wage growth flirted with 6% in early 2022, average hourly earnings have steadily declined to 3.6% on a year-over-year basis, a trend that is closely matching the disinflationary trend.
Bureau of Labor StatisticsAnother source of price inflation is consumer credit. After the stimulus packages of 2020 and 2021, consumer loans grew at 10-12% year over year through 2022. As interest rates have risen, consumer loan demand has fallen, and after two quarters of contraction, the rate of consumer lending growth was still tame at 2% in the second quarter.
Federal ReserveGoods Deflation Continues to HelpDurable goods deflation continues to help push core inflation towards the 2% target. In July, the month-to-month change in durable goods pricing was negative for the 14th consecutive month. On a year-over-year basis, durable goods prices declined by 4.1%, which was the same as last month and continues to be the lowest point of this business cycle.
Bureau of Labor StatisticsBureau of Labor StatisticsProgress on Services, But Elevated Pricing RemainsFor the first time since April 2022, year-over-year services inflation fell to under 5% at 4.9%. While year-over-year services inflation has declined in fourteen of the last seventeen months, it remains elevated. By comparison, service sector inflation in July 2017, 2018, and 2019 was 2.4%, 3.1%, and 2.8% respectively on a year-over-year basis. July’s monthly service sector inflationary change was the third lowest in the past twelve months, so there is hope that disinflation will continue in services.
Bureau of Labor StatisticsBureau of Labor StatisticsThe leading issue within the service sector remains housing. During July, housing inflation rose by 0.35% which represented the higher threshold of monthly changes over the last twelve months. At 4.3% year over year, housing inflation seems poised to stall as supply constraints continue to dominate the industry. Rent changes also fell in line with housing. As the prospect of rate cuts looms large, the Fed is going to need to accept the goods and services pricing dichotomy to effectively move towards a neutral rate.
Bureau of Labor StatisticsBureau of Labor StatisticsBureau of Labor StatisticsBureau of Labor StatisticsConclusionThe debate seems to have shifted from whether to cut to debating over how much the Federal Reserve should cut in its meeting next month. I continue to be skeptical of the possibility of a soft landing, and while economic metrics are softening, we need to keep in mind that we got here via overaggressive monetary easing. I would not want to risk a re-firing of inflation and the threat of stagflation by having over-accommodating monetary policy. Thus, I believe a 25-basis point cut is more warranted, with additional cuts to follow if future economic trends support them.
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Rapidly increasing industrial and military demand for silver is depleting global inventories, and the rate may well accelerate quickly.
Silver demand has outstripped supply for three straight years and the Silver Institute projects another market deficit this year.
In 2023, the silver market charted a structural deficit of 184.3 million ounces. The projection is for an even larger supply shortfall this year in the neighborhood of 215 million ounces. This would be the second-largest silver market deficit ever recorded.
According to an article published by the Jerusalem Post, surging demand coupled with declining mine output “could have far-reaching implications for markets, investors, and industries reliant on the precious metal.”
“As the clock ticks towards 2025, the global market braces for the profound impact of industrial and military silver demand on inventories. Stakeholders across sectors must navigate this evolving landscape with strategic foresight and innovation to mitigate the looming supply crunch.”
Rapidly rising industrial demand, specifically in the solar energy sector, is driving the growing market deficits.
Industrial demand for silver set a record of 654.4 million ounces in 2023 and it is expected to hit new highs this year. According to The Silver Institute, ongoing structural gains from green economy applications underpinned this surge in silver demand.
“Higher than expected photovoltaic (PV) capacity additions and faster adoption of new-generation solar cells raised global electrical & electronics demand by a substantial 20 percent. At the same time, other green-related applications, including power grid construction and automotive electrification, also contributed to the gains.”
According to a research paper by scientists at UNSW, solar manufacturers will likely require over 20 percent of the current annual silver supply by 2027.
By 2050, solar panel production will use approximately 85–98 percent of the current global silver reserves.
Demand for silver is also growing in the tech sector due to its conductivity and reflectivity.
Meanwhile, militaries around the world are using more silver. According to the Jerusalem Post, “Silver’s use in advanced defense systems, including weaponry, communication devices, and surveillance equipment, is crucial due to its superior electrical conductivity and resistance to corrosion.”
Even as demand increases, silver mines are producing less silver and there are fewer discoveries of new deposits. According to the Jerusalem Post, “The exploration of new silver deposits is becoming increasingly difficult and costly.”
“As high-quality ores become scarcer, mining companies face challenges in maintaining production levels.”
SBC Global Research projects that “without substantial investment in new mining projects or recycling initiatives, the silver market may face a notable supply-demand imbalance by mid-decade, potentially driving up prices and intensifying competition for this essential metal.”
The Post highlighted three market implications of this silver supply crunch.
- Price volatility
- Investment opportunities
- Supply chain strain
Silver isn’t currently priced for this dynamic.
In fact, silver is significantly undervalued compared to gold. The current gold-silver ratio is just over 88-1. That means it takes over 88 ounces of silver to buy an ounce of gold.
To put that into perspective, the average in the modern era has been between 40:1 and 60:1. Historically, the ratio has always returned to that mean. And when it does, it does it with a vengeance. The ratio fell to 30-1 in 2011 and below 20-1 in 1979.
Given the current silver price, the silver-gold ratio, and the supply and demand dynamics, silver appears to be on sale.
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(Bloomberg) — A bid to break up Alphabet Inc.’s Google is one of the options being considered by the Justice Department after a landmark court ruling found that the company monopolized the online search market, according to people with knowledge of the deliberations.The move would be Washington’s first push to dismantle a company for illegal monopolization since unsuccessful efforts to break up Microsoft Corp. two decades ago. Less severe options include forcing Google to share more data with competitors and measures to prevent it from gaining an unfair advantage in AI products, said the people, who asked not to be identified discussing private conversations.
Alphabet shares were down 3.8% at 10:13 a.m. in New York, the most since Aug. 5, when a federal judge ruled the company has an illegal monopoly in the search market.
Regardless, the government will likely seek a ban on the type of exclusive contracts that were at the center of its case against Google. If the Justice Department pushes ahead with a breakup plan, the most likely units for divestment are the Android operating system and Google’s web browser Chrome, said the people. Officials are also looking at trying to force a possible sale of AdWords, the platform the company uses to sell text advertising, one of the people said.
The Justice Department discussions have intensified in the wake of Judge Amit Mehta’s Aug. 5 ruling that Google illegally monopolized the markets of online search and search text ads. Google has said it will appeal that decision, but Mehta has ordered both sides to begin plans for the second phase of the case, which will involve the government’s proposals for restoring competition, including a possible breakup request.
What’s at Stake in Google Antitrust Ruling: Quick Take
A Google spokesman declined to comment on the possible remedy. A Justice Department spokeswoman also declined to comment.
The US plan will need to be accepted by Mehta, who would direct the company to comply. A forced breakup of Google would be the biggest of a US company since AT&T was dismantled in the 1980s.
Justice Department attorneys, who have been consulting with companies affected by Google’s practices, have raised concerns in their discussions that the company’s search dominance gives it advantages in developing artificial intelligence technology, the people said. As part of a remedy, the government might seek to stop the company from forcing websites to allow their content to be used for some of Google’s AI products in order to appear in search results.
Breakup
Divesting the Android operating system, used on about 2.5 billion devices worldwide, is one of the remedies that’s been most frequently discussed by Justice Department attorneys, according to the people. In his decision, Mehta found that Google requires device makers to sign agreements to gain access to its apps like Gmail and the Google Play Store.
Those agreements also require that Google’s search widget and Chrome browser be installed on devices in such a way they can’t be deleted, effectively preventing other search engines from competing, he found.
Mehta’s decision follows a verdict by a California jury in December that found the company monopolized Android app distribution. A judge in that case hasn’t yet decided on relief. The Federal Trade Commission, which also enforces antitrust laws, filed a brief in that case this week and said in a statement that Google shouldn’t be allowed “to reap the rewards of illegal monopolization.”
Google paid as much as $26 billion to companies to make its search engine the default on devices and in web browsers, with $20 billion of that going to Apple Inc.
Mehta’s ruling also found Google monopolized the advertisements that appear at the top of a search results page to draw users to websites, known as search text ads. Those are sold via Google Ads, which was rebranded from AdWords in 2018 and offers marketers a way to run ads against certain search keywords related to their business. About two-thirds of Google’s total revenue comes from search ads, amounting to more than $100 billion in 2020, according to testimony from last year’s trial.
If the Justice Department doesn’t call for Google to sell off AdWords, it could ask for interoperability requirements that would make it work seamlessly on other search engines, the people said.
Data Access
Another option would require Google to divest or license its data to rivals, such as Microsoft’s Bing or DuckDuckGo. Mehta’s ruling found that Google’s contracts ensure not only that its search engine gets the most user data – 16 times as much as its next closest competitor — but that data stream also keeps its rivals from improving their search results and competing effectively.
Europe’s recently enacted digital gatekeeper rules imposed a similar requirement that Google make available some of its data to third-party search engines. The company has said publicly that sharing data can pose user privacy concerns, so it only makes available information on searches that meet certain thresholds.
Requiring monopolists to allow rivals to have some access to technology has been a remedy in previous cases. In the Justice Department’s first case against AT&T in 1956, the company was required to provide royalty-free licenses to its patents.
In the antitrust case against Microsoft, the settlement required the Redmond, Washington, tech giant to make some of its so-called application programming interfaces, or APIs, available to third-parties for free. APIs are used to ensure that software programs can effectively communicate and exchange data with each other.
AI Products
For years, websites have allowed Google’s web crawler access to ensure they appear in the company’s search results. But more recently some of that data has been used to help Google develop its AI.
Last fall, Google created a tool to allow websites to block scraping for AI, after companies complained. But that opt-out doesn’t apply to everything. In May, Google announced that some searches will now come with “AI Overviews,” narrative responses that spare people the task of clicking through various links. The AI-powered panel appears underneath queries, presenting summarized information drawn from Google search results from across the web.
Google doesn’t allow website publishers to opt-out of appearing in AI Overviews, since those are a “feature” of search, not a separate product. Websites can block Google from using snippets, but that applies to both search and the AI Overviews.
While AI Overviews only appear on a fraction of searches, the feature’s roll-out has been rocky after some excerpts offered embarrassing suggestions, like advising people to eat rocks or to put glue on pizza.
©2024 Bloomberg L.P.
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Investors love patterns. Whether charting technical indicators or dissecting an earnings report, finding themes that repeat can offer investors a sense of predictability amid chaotic markets.
The most reliable patterns in finance tend to be based on the calendar year.
Seasonality, as it’s called, refers to predictable and recurring changes in markets that tend to happen at the same time every year. And though markets have steadied after last week’s abrupt sell-off, stock market bears looking at seasonal patterns will be encouraged by this history ahead of this year’s election.
Ryan Detrick, chief market strategist at Carson Group, recently joined Yahoo Finance’s Stocks in Translation podcast to break down some of these patterns for investors. Though Detrick has long been an advocate for understanding the forces of seasonality at work in the markets, he cautioned: “We would never blindly just invest in seasonality.”
Still, investors have nearly a century of solid data from the S&P 500 (^GSPC) to analyze market trends.
For example, consumer spending usually increases during the holiday season. Back-to-school shopping boosts retail sales in late August and early September. And summer vacations or holidays can slow down overall market activity and lower trading volumes.
All of this creates observable patterns in the market that influence prices of stocks, bonds, commodities, and even cryptocurrencies. This data allows returns from each day of the year to be analyzed to find the average loss or gain, and those results can be combined to create a seasonality map for the year.
The chart shows that stocks tend to go up each year, but average annual gains are interrupted by a big downturn from September into October. This data reflects the numerous market crashes that have occurred in September and October, including Black Monday in October 1987 and Black Tuesday in October 1929.
Toward the end of October, things tend to turn around, on average, and stocks often rise into year-end, capped off by the much-vaunted Santa Claus Rally.
But August is also no picnic for investors, either.
“Historically, when August is down, it tends to really be down more than any other month,” Detrick said, citing significant events such as Iraq’s invasion of Kuwait in 1990, the Asian Contagion in 1997, and the downgrade of US debt by S&P in 2011.
As the S&P 500’s seasonality map shows, not much happens in August — on average.
But we can see the effects of a pickup in volatility by studying the seasonality of the VIX (^VIX), which offers a different set of seasonal clues for investors to decipher.
The chart below was created by averaging the monthly closing VIX levels from 1990 — the beginning of the index’s calculations — through 2023. It shows that volatility typically bottoms in July, then picks up in August, crescendos in October, and then trails off into year-end.
But seasonality isn’t just about monthly patterns.
The four-year US election and presidential cycle provides a unique lens through which to view market behavior.
Each of the four years has its own characteristics and tendencies, and the fourth year of the cycle averages a 7% gain in the S&P 500, Detrick noted.
But seasonality also has plenty of limitations, not the least of which is a somewhat limited data set, and Detrick reminds investors that what matters in the current environment is uncertainty — about the election, the Fed, the US economy, and more.
“It’s important to remember that scary headlines and pullbacks are normal in most years,” Detrick said.
And while seasonality can give us clues about how the market got here, and where it could be headed next, it’s not a crystal ball, just a tool.
“We’ve gotten through this before,” Detrick said. “Investors need to remember that we’re going to get through this again.”
On Yahoo Finance’s podcast Stocks in Translation, Yahoo Finance editor Jared Blikre cuts through the market mayhem, noisy numbers, and hyperbole to bring you essential conversations and insights from across the investing landscape, providing you with the critical context needed to make the right decisions for your portfolio. Find more episodes on our video hub. Watch on your preferred streaming service, or listen and subscribe on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
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WASHINGTON (AP) — Wholesale price increases in the United States eased in July, suggesting that inflation pressures are further cooling as the Federal Reserve moves closer to cutting interest rates, likely beginning next month.The Labor Department reported Tuesday that its producer price index — which tracks inflation before it reaches consumers — rose 0.1% from June to July and 2.2% from a year earlier.
Excluding food and energy prices, which tend to fluctuate from month to month, so-called core wholesale prices were unchanged from June and up 2.4% from July 2023. The increases were milder than forecasters had expected and were nearly consistent with the Fed’s 2% inflation target.
The producer price index can provide an early sign of where consumer inflation is headed. Economists also watch it because some of its components, notably healthcare and financial services, flow into the Fed’s preferred inflation gauge — the personal consumption expenditures, or PCE, index.
On Wednesday, the Labor Department will release the most well-known inflation measure, the consumer price index. Forecasters have estimated that consumer prices rose 0.2% from June to July, after actually falling 0.1% the previous month, and 3% from July 2023, according to a survey by the data firm FactSet.
Inflation has plummeted since peaking at a four-decade high in mid-2022. But as Americans prepare to vote in the November presidential election, many remain unhappy with consumer prices, which are nearly 19% higher than were before the inflationary surge began in the spring of 2021. Many have assigned blame to President Joe Biden, though it’s unclear whether they will hold Vice President Kamala Harris responsible as she seeks the presidency.
In its fight against high inflation, the Fed raised its benchmark interest rate 11 times in 2022 and 2023, taking it to a 23-year high. From 9.1% in June 2022, year-over-year consumer price inflation has eased to 3%.
The U.S. jobs report for July, which was much weaker than expected, reinforced the widespread expectation that the Fed’s policymakers will begin cutting rates when they meet in mid-September to try to support the economy. The jobs report showed that the unemployment rate rose for a fourth straight month to 4.3%, still healthy by historical standards but the highest level since October 2021.
Over time, a succession of rate cuts by the Fed would likely lead to lower borrowing costs across the economy — for mortgages, auto loans and credit cards as well as business borrowing and could also boost stock prices.
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WASHINGTON (Reuters) – U.S. producer prices increased less than expected in July as a rise in the cost of goods was tempered by cheaper services, indicating that inflation continued to moderate.
The producer price index for final demand gained 0.1% last month after rising by an unrevised 0.2% in June, the Labor Department’s Bureau of Labor Statistics said on Tuesday. Economists polled by Reuters had forecast the PPI gaining 0.2%.
In the 12 months through July, the PPI increased 2.2% after climbing 2.7% in June.
Slowing inflation and a cooling labor market have led financial markets to anticipate that the Federal Reserve will start its easing cycle in September. With the U.S. central bank now increasingly concerned about labor market weakness, after the unemployment rate surged to near a three-year high of 4.3% in July, a rate cut of 50 basis points cannot be ruled out.
The Fed has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range for a year, having raised it by 525 basis points in 2022 and 2023.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
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For the second week in a row, gold prices rose, albeit a small 0.2%. This came in the face of the Japanese meltdown that spilled over into North American markets. However, for the rest of the precious metals market it wasn’t such a positive week. Silver fell 2.8%, platinum remains moribund, down 3.9% this past week, and as for the near precious metals, palladium did catch a bid up 1.6% but copper remains in a hole, losing 2.7% this past week. The gold stocks didn’t fare much better with the Gold Bugs Index (HUI) down 2.1% and the TSX Gold Index (TGD) off 3.0%. Gold is being buoyed by thoughts of a Fed rate cut. The potential for an economic slowdown, even a recession, also bolstered gold. Gold has become the number one metal of choice as a safe haven particularly in Asia. Gold is up 19.4% thus far in 2024, outpacing both the S&P 500 and the tech-laden NASDAQ. Yet gold remains undervalued and under-owned, particularly in North America. Asians are much more likely to purchase gold. Gold also responded to a lower 10-year treasury note on Friday as the metal was up some $10.
The pattern that gold is forming is taking on the look of a possible ascending triangle. A breakout to new highs above $2,525 could target up to almost $2,700. The main reason to own gold is as a safe haven in times of geopolitical uncertainty and a low interest rate environment, and as a hedge against currency depreciation. Gold, the metal, is preferred over gold stocks which, while leveraged to the price of gold, have liability. Witness the recent collapse of Victoria Gold when its heap leach pad failed and the contamination spread into local waters, killing fish and threatening drinking supplies.
Silver continues to underperform gold. Silver fell this past week by 2.8% but remains up 14.5% for 2024. However, gold is up 19.4% in 2024. We’re also up 32% from the October 2023 low. But gold is up almost 36% from a comparable low. Gold has made ongoing new all-time highs while silver is almost 45% under its all-time high. It all seems odd in the face of huge demand for silver and ongoing supply problems. The structural deficit has been going on for four years, yet silver remains repressed. We did find support above $26, a level we considered quite important to hold if we are to move higher. Support ranges from $26 to $26.50. The low so far is $26.50. But there is considerable to work to be done if silver is to resume a leadership role. A move first above $30 would be important, but silver needs to break above $31.30 to suggest new highs above the May high of $32.75. The gold/silver ratio remains in favor of gold, even if the ratio is overall falling, albeit slowly
It was not an overly pleasant week for the gold stocks. With the Japanese meltdown spilling over into North America, gold stocks were hit as hard as any other stock. On the week, the TSX Gold Index (TGD) fell 3.0% while the Gold Bugs Index (HUI) dropped 2.1%. As we have often noted, when the stocks suffer a cold the gold stocks get pneumonia, even if the best-performing asset is gold itself. The drop this past week pushed the TGD down to its 50-day MA, but so far it has held. What is needed is upside follow-through this coming week. Regaining 350 would be positive, but we need to regain back above 365 to suggest new highs ahead. However, what is needed is that if any further downside develops it would be important to hold 330. A drop under that level could swiftly send us to 310 or even 300. The 200-day MA is currently at 295. So far, this has the look of a classic ABC-type correction from that July high of 367. The TGD fell just over 10% from the July high. 10%-plus corrections are not unusual for the TGD, even in a bull market. We are reminded that during the 2009–2011 bull run, the TGD had six corrections of 10% or more, including at least one where the index fell 25%. But the TGD rose over 200% from the October 2008 low to the September 2011 high. So far, the TGD is up over 50% from the February 2024 low. However, the index is still down roughly 25% from that 2011 high. That’s 13 years and counting since the last major high. We’ve often cited how cheap the gold stocks are in relation to gold. That hasn’t changed. We’ve never seen such a long period when the gold stocks have remained undervalued vis-à-vis gold itself.
Disclaimer
David Chapman is not a registered advisory service and is not an exempt market dealer (EMD) nor a licensed financial advisor. He does not and cannot give individualized market advice. David Chapman has worked in the financial industry for over 40 years including large financial corporations, banks, and investment dealers. The information in this newsletter is intended only for informational and educational purposes. It should not be construed as an offer, a solicitation of an offer or sale of any security. Every effort is made to provide accurate and complete information. However, we cannot guarantee that there will be no errors. We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the contents of this commentary and expressly disclaim liability for errors and omissions in the contents of this commentary. David Chapman will always use his best efforts to ensure the accuracy and timeliness of all information. The reader assumes all risk when trading in securities and David Chapman advises consulting a licensed professional financial advisor or portfolio manager such as Enriched Investing Incorporated before proceeding with any trade or idea presented in this newsletter. David Chapman may own shares in companies mentioned in this newsletter. Before making an investment, prospective investors should review each security’s offering documents which summarize the objectives, fees, expenses and associated risks. David Chapman shares his ideas and opinions for informational and educational purposes only and expects the reader to perform due diligence before considering a position in any security. That includes consulting with your own licensed professional financial advisor such as Enriched Investing Incorporated. Performance is not guaranteed, values change frequently, and past performance may not be repeated.
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The gold price was sold quietly and a bit unevenly lower starting at the 6:00 p.m. EDT Globex open in New York on Thursday evening, with its low tick printed at 2 p.m. China Standard Time on their Friday afternoon. It began to head higher from there, but every serious-looking rally attempt after that was capped and turned lower by ‘da boyz’…with the last one coming about 1:05 p.m. in COMEX trading in New York.
The low and high ticks in gold were recorded by the CME Group as $2,433.90 and $2,453.40 in the October contract — and $2,456.10 and $2,476.50 in December. The August/October price spread differential in gold at the close in New York on Friday afternoon was $18.30…October/ December was $23.00… December/February was $21.90 — and February/April was $18.30 an ounce.
Gold was closed in New York on Friday afternoon at $2,430.70 spot, up $3.30 on the day. Net volume was on the lighter side at 160,000 contracts — and there were a bit under 5,000 contracts worth of roll-over/switch volume on top of that.
I saw that a hefty 611 gold, plus 2 silver contracts were traded in August yesterday — and we’ll find out later this evening how much of this shows up in the Daily Delivery and Preliminary Reports.
After chopping quietly sideways for the first three hours of Globex trading, the silver price jumped up a bit starting shortly after the 9:30 a.m. CST open in Shanghai on their Friday morning — and from that point it was sold/ engineered lower until shortly before 2 p.m. CST. From that juncture it wandered/chopped quietly sideways to a bit lower until the market closed at 5:00 p.m. EDT in New York on their Friday afternoon. Like for gold, every rally attempt no matter how tiny, met the same fate.
The high and low ticks in silver were recorded as $27.84 and $27.325 in the September contract. The September/December price spread differential in silver at the close in New York yesterday was 39.4 cents — and December/ March25 was 36.1 cents an ounce.
Silver was closed on Friday afternoon in New York at $27.44 spot, down 7.5 cents from Thursday. Net volume was very much on the quieter side at around 41,800 contracts — and there were a bit over 19,500 contracts worth of roll-over/switch volume out of September and into future months in this precious metal…mostly into December of course…but with a decent amount into March25 as well.
The platinum price edged a bit higher until around 9:40 a.m. China Standard Time on their Friday morning — and an hour and change later ‘da boyz’ appeared — and their efforts lasted until the 10 a.m. EDT afternoon gold fix in London. Its ensuing rally was over by the 11 a.m. EDT Zurich close — and it was sold lower anew until an hour before trading ended. Platinum was closed lower by 12 bucks at $923 spot.
Palladium rallied a bit starting at the 9:00 a.m. open of Globex trading in Shanghai — and that lasted until around 11 a.m. CST. From there it wandered quietly sideways until it ran into ‘something’ shortly after the noon silver fix in London. ‘Da boyz’ then worked their magic until 3 p.m. in the very thinly-traded after-hours market in New York — and it didn’t do much after that. Palladium was closed at $886 spot, down 27 dollars on the day.
Based on the kitco.com spot closing prices in silver and gold posted above, the gold/silver ratio worked out to 88.6 to 1 on Friday…compared to 88.2 to 1 on Thursday.
Here’s the 1-year Gold/Silver Ratio Chart…courtesy of Nick Laird. Click to enlarge.
The dollar index closed very late on Thursday afternoon at 103.21 — and then opened higher by 5 basis points once trading commenced at 7:45 p.m. EDT on Thursday evening, which was 7:45 a.m. China Standard Time on their Friday morning. Then, after a brief tick higher, it traded mostly flat until it began to head lower at 9:12 a.m. CST. That quiet sell-off ended around 8:10 a.m. in London — and from there it crept higher at an ever-decreasing rate until around 9 a.m. in New York. It was sold two steps lower from that juncture until 10:25 a.m. — and then chopped a bit higher until around 12:20 p.m. EDT. It proceeded to wander quietly sideways until the market closed at 5:00 p.m.
The dollar index finished the Friday trading session at 103.14…down 7 basis points from its close on Thursday.
Here’s the DXY chart for Friday…thanks to marketwatch.com as usual. Click to enlarge.
And here’s the 5-year U.S. dollar index chart that appears in this spot every Saturday column, courtesy of stockcharts.com as always. The delta between its close…102.99…and the close on the DXY chart above, was 22 basis points below its spot close. Click to enlarge.
Any attempt by the both silver and gold to react to that dollar swoon in early trading in New York, wasn’t allowed to be reflected in their respective prices.
U.S. 10-year Treasury: 3.9420%…down 0.0550/(-1.3760%)…as of the 1:59 p.m. EDT close
Here’s the 5-year 10-year U.S. Treasury chart from the yahoo.com Internet site — which puts the yield curve into a somewhat longer-term perspective. Click to enlarge.
The ten-year closed the week higher by 27 basis points, but the Fed made sure that although it traded above 4.00% on Thursday, it wasn’t allowed to close with that handle. And as I continue to point out, the Fed has had the yield curve under lock-down since 19 October of last year.
The gold shares headed lower almost right from the moment that trading began at 9:30 a.m. in New York on Friday morning — and their respective low ticks were set around 9:50 a.m. EDT. They then rallied rather sharply until around 10:55 a.m. — and from there they wandered/ chopped quietly sideways until the markets closed at 4:00 p.m. EDT. The HUI closed higher by 1.08 percent.
Here’s Nick’s 1-year Silver Sentiment Index chart, updated with Friday’s candle. It closed up 1.36 percent, despite the fact that silver was closed down on the day. Click to enlarge.
The star was Fortuna Silver, as it closed up 4.83 percent on its Q2/24 earnings report from a day or so ago — and the biggest underperformer was Endeavour Silver, as they closed lower by 1.60 percent.
I didn’t see any news yesterday on any of the silver companies that comprise the above Silver Sentiment Index.
The new short report came out yesterday — and it showed that the short position in First Majestic Silver rose by 8.37% to 16.97 million shares sold short on the NYSE…5.72% of the float.
The silver price premium in Shanghai over the U.S. price on Friday was 10.67 percent.
Here are the usual three charts that appear in this spot in every weekend missive. They show the changes in gold, silver, platinum and palladium in both percent and dollar and cents terms, as of their Friday closes in New York — along with the changes in the HUI and the new Silver Sentiment Index.
Here’s the weekly chart — and it’s no surprise that everything silver is getting brutalized on an absolute basis…but on a relative basis, it’s the other way around. Click to enlarge.
Here’s the month-to-date chart — and it’s wall-to-wall red — and what I said about gold and silver and their equities on the weekly chart, is the same on this chart…but that’s very cold comfort.
This one shows the year-to-date changes — and only platinum and hapless palladium remain down year-to-date…thanks to ‘da boyz’. Everything gold is outperforming everything silver. But as I said earlier, considering how badly ‘da boyz’ have leaned on silver relative to gold during the last month, the silver equities aren’t doing all that bad. Click to enlarge.
Of course — and as I mention in this spot every Saturday — and will continue to do so…is that if the silver price was sitting close to its all-time $50 high, like gold is currently close to its new all-time intraday high of this past Monday…it’s a given that the silver equities would be outperforming their golden cousins by an absolute country mile.
The CME Daily Delivery Report for Day 9 of August deliveries showed that only 5 gold — and 2 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.
In gold, the only short/issuer that mattered was Goldman Sachs, issuing 4 contracts out of its client account. The two biggest long/stoppers were the same as they’ve been all month so far…JPMorgan and BMO [Bank of Montreal] Capital, picking up 3 and 2 contracts respectively. One of the contracts stopped by JPMorgan was for its house account.
In silver, the lone short/issuer was Advantage — and JPMorgan and ADM picked up 1 contract each for their client accounts.
In platinum, there were 2 contracts issued and stopped.
The link to yesterday’s Issuers and Stoppers Report is here.
Month-to-date there have been 17,181 gold contracts issued/reissued and stopped — and that number in silver is 702 contracts. In platinum it’s 94 contracts — and in palladium…2.
The CME Preliminary Report for the Friday trading session showed that gold open interest in August rose by 140 contracts, leaving 4,028 still around…minus the 5 contracts mentioned a few paragraphs ago. Thursday’s Daily Delivery Report showed that 57 gold contracts were actually posted for delivery on Monday, so that means that 140+57=197 more gold contracts just got added to the August delivery month.
I’m still wondering about those 4,000 gold contracts that remain open in August — and why the shorts…no more than one or two in total…are being so shy about coughing up the metal. As I said earlier this week, there’s absolutely no financial benefit to them for holding out.
Silver o.i. August declined by 17 contracts, leaving 113 still open, minus the 2 contracts mentioned a bunch of paragraphs ago. Thursday’s Daily Delivery Report showed that 18 silver contracts were actually posted for delivery on Monday, so that means that 18-17=1 more silver contract was added to August deliveries.
Total gold open interest rose by 4,600 COMEX contracts — and total silver o.i. rose by 205 contracts. Both these numbers are subject to some revisions by the time the CME gets around to posting the final figures on their Internet site later on Monday morning CDT.
I’ll resurrect Thursday’s open interest data one more time. In the Preliminary Report it showed an increase of 7,033 COMEX contracts, which was far less than I was expecting…but the final number was only 1,502 contracts…WTF? That amazing 936 contract Preliminary Report drop in silver o.i. turned into a decline of 1,243 COMEX contracts in the final number on the CME’s website…which is incredible considering silver closed higher by 92 cents on Thursday. I have more on this in The Wrap.
There were no reported changes in either GLD or SLV on Friday.
The new short report was posted on The Wall Street Journal‘s website very early on Friday evening EDT — and it showed that the short position in SLV dropped by 34.59%…from 20.90 million shares, down to 13.14 million shares. The short position in GLD also declined, it by 6.40%…from 11.32 million shares sold short, down to 10.59 million shares sold short.
This is the lowest short position in silver since mid March when it was 12.61 million troy ounces.
The short position in SLV remains too large by at least 5 million shares — and the short position in GLD is of no concern.
Considering the huge mountain of silver that was deposited into SLV during the two week reporting period that ended on Wednesday, July 31…I was expecting/hoping for a bigger number than that. But some of those short may be “short against the box” — and the deposit just hasn’t been reported yet. This is a devious technique that some shorts use — and that Ted had pointed out over the years.
The next short report is due out on Monday, August 26.
In other gold and silver ETFs and mutual funds on Planet Earth on Friday, net of any changes in COMEX, GLD and SLV inventories, there were a net 65,757 troy ounces of gold removed — and all because of the 90,669 troy ounces removed from Amundi/GOLD…an ETF that I’d not heard of before. A net 1,223,980 troy ounces of silver were removed as well — and all because of the 2,312,001 troy ounces pulled out of iShares/SVR.
There was no sales report from the U.S. Mint yesterday — and nothing month-to-date, either.
The only activity in gold over at the COMEX-approved depositories on the U.S. east coast on Thursday were the 5,112.009 troy ounces/159 kilobars that left Brink’s, Inc. There was no paper activity — and the link to this is here.
There was very hefty activity in silver, as one truckload/606,833 troy ounces arrived at Asahi — and two truckloads/1,216,718 troy ounces were shipped out.
The first [big] truckload…634,135 troy ounces…left Brink’s, Inc. — and the second/582,582 troy ounces departed Delaware.
There was also some paper activity, as one truckload/600,659 troy ounces were transferred from the Registered category and back into Eligible over at Brink’s, Inc.
The link to Thursday considerable COMEX action in silver, is here.
It was also pretty busy over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday, with all of the activity happening at Brink’s, Inc. as usual. They reported receiving 510 of them — and shipped out 1,997 kilobars. The link to this, in troy ounces, is here.
The Shanghai Futures Exchange reported that a net 593,218 troy ounces/one truckload of silver was removed from their inventories on Friday, which now stands at 30.002 million troy ounces.
Türkiye updated their website with July’s gold and silver import numbers — and it showed that they imported 6.193 tonnes/199,110 troy ounces of gold that month…plus 47.940 tonnes/1,541,324 troy ounces of silver.
Here are the usual 20-year charts that show up in this space in every weekend column. They show the total amounts of physical gold and silver held in all know depositories, ETFs and mutual funds as of the close of business on Friday.
During the week just past, there were a net 149,000 troy ounces of gold removed. But a net 2.177 million troy ounces of silver were added. Click to enlarge.
According to Nick Laird’s data on his website, there were a net 518,700 troy ounces of gold added — plus a net 26.556 million troy ounces of silver were added to all the world’s known depositories, mutual funds and ETFs during the last four weeks.
Retail bullion sales are still exceedingly slow…and one has to wonder about those 1.7 million silver eagles that the mint reported selling at the end of July. Who bought those? Premiums vary. They’re very high at Kitco…but somewhat to much lower in most other places.
Then there’s the huge quantities of silver that will be required by all the silver ETFs and mutual funds once institutional buying finally kicks in….which has been obvious in SLV, plus other ETFs this past month.
And as Ted stated a while ago now, it would appear that JPMorgan has parted with well over 500 million troy ounces of the at least one billion troy ounces that they’d accumulated since the drive-by shooting that commenced at the Globex open at 6:00 p.m. EDT on April 30, 2011.
If they continue in this vein, they are going to have to continue to cough up even more ounces to feed this year’s deficit…another 215 million of them according to that latest report from The Silver Institute…which I’m sure didn’t include the approximately 120 million ounces that India purchased earlier in the year…plus most of the 13.9 million ounces that China imported in June…plus what into SLV and other silver ETFs over the last month.
The physical demand in silver at the wholesale level continues unabated — and that was on full display yet again this week…as frantic deposits and withdrawals continued at the COMEX, SLV — and other ETFs and mutual funds. The amount of silver being physically moved, withdrawn, or changing ownership seems to be hitting new heights with each passing week — and that trend has continued without respite this past week as well. This manic in/out activity, as Ted had been pointing out for years, is a sure sign that 1,000 oz. good delivery bars are becoming ever harder to come by.
New silver has to be brought in from other sources [JPMorgan] to meet the ongoing demand for physical metal. This will continue until available supplies are depleted…which will be the moment that JPMorgan & Friends stop providing silver to feed this deepening structural deficit, now in its fourth year.
The vast majority of precious metals being held in these depositories are by those who won’t be selling until the silver price is many multiples of what it is today.
Sprott’s PSLV is the third largest depository of silver on Planet Earth with 174.0 million troy ounces — and some distance behind the COMEX, where there are 302.4 million troy ounces being held…minus the 103 million troy ounces mentioned in the next paragraph.
It’s now been proven beyond a shadow of a doubt that 103 million troy ounces of that amount in the COMEX is actually held in trust for SLV by JPMorgan according to a letter Ted received from the CFTC earlier this year. That brings JPMorgan’s actual silver warehouse stocks down to around the 31.8 million troy ounce mark…quite a bit different than the 134.77 million they indicate they have — and precisely unchanged from what they showed last Friday.
But PSLV is still some distance behind SLV, as they are the largest silver depository, with 465.7 million troy ounces as of Friday’s close…up 6.8 million troy ounces from a week ago.
The latest short report from yesterday, showed that the short position in SLV fell by a hefty 34.59 percent…from 20.09 million shares sold short in the prior short report…down to 13.14 million shares in the current report.
BlackRock issued a warning several years ago to all those short SLV, that there might come a time when there wouldn’t be enough metal for them to cover. That would only be true if JPMorgan decides not to supply it to whatever entity requires it…which is most certainly a U.S. bullion bank, or perhaps more than one.
The next short report will be posted on The Wall Street Journal‘s website very early on Monday evening EDT on August 26.
Then there’s that other little matter of the 1-billion ounce short position in silver held by Bank of America in the OTC market…with JPMorgan & Friends on the long side. Ted said it hadn’t gone away — and he’d also come to the conclusion that they’re short around 25 million ounces of gold with these same parties as well. The latest report for the end of Q1/2024 from the OCC came out about three weeks ago — and after carefully scrutiny, I noted that nothing much had changed since the end of Q4/2023.
The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, showed the expected declines in the commercial net short positions in both silver and gold…but weren’t anywhere near as impressive as I expected…especially in gold, which had a rather spectacular surprise under the hood. I’ll get into that in a bit.
In silver, the Commercial net short position declined by an unspectacular and irrelevant 739 COMEX contracts…3.695 million troy ounces of the stuff.
They arrived at that number by increasing their long position by 601 contracts — and also reduced their short position by 138 contracts. It’s the sum of those two numbers that represents their change for the reporting week.
Under the hood in the Disaggregated COT there weren’t big changes, which is no surprise. The Managed Money traders increased their net long position by a scant 169 COMEX contracts…which they arrived at by reducing their long position by 1,361 contracts — and reduced their short position by 1,530 contracts. It’s the difference between those two numbers that represents their change for the reporting week.
The Other Reportables reduced their net long position by 149 COMEX contracts — while the Nonreportable/small traders reduced their net long position by 759 contracts.
Doing the math: 759 plus 149 minus 169 equals 739 COMEX contracts…the change in the Commercial net short position.
The Commercial net short position in silver now stands at 69,631 contracts/348.155 million troy ounces of silver…down those 739 contracts from the 70,370 contracts/351.850 million troy ounces they were short in the August 2 COT Report.
The Big 4 shorts decreased their net short position by 1,058 contracts, down to 51,490 contracts during the reporting week…from the 52,548 contracts they were short in last Friday’s COT Report…which is still hugely bearish.
The Big ‘5 through 8’ shorts actually increased their net short position, them by 906 contracts…from the 22,110 contracts in last Friday’s COT Report, up to 23,016 contracts in yesterday’s COT Report. This is about 10,000 contracts more than they ‘normally’ hold short.
The Big 8 commercial shorts in total decreased their overall net short position from 74,658 contracts, down to 74,506 COMEX contracts week-over-week…a decrease of an insignificant 152 COMEX contracts…the difference between the above two numbers, which is still very bearish.
Making up the difference between the change in the commercial net short position…739 contracts — and what the Big 8 traders did…152 contracts… Ted’s raptors, the small commercial traders other than the Big 8, were buyers for the fourth week in a row…increasing their long position by 739-152=587 COMEX contracts — and are now net long silver 4,875 contracts.
Please don’t forget that the collusive commercial traders can only buy what they can trick/engineer the Managed Money traders et al. into selling. Even then its a fight between the Big 4, the Big ‘5 through 8’ — and Ted’s raptors for the spoils of these engineered price declines. That was the case again this week.
The price action in silver during the reporting week certainly indicated that there was going to be a fairly decent decline in the Commercial net short position in silver, but that didn’t happen. As for why it didn’t…I have no idea.
The Big 8 collusive commercial shorts in silver, minus their uneconomic and market-neutral spread trades, are still short a bit over 55% of the entire open interest in silver in the COMEX futures market — and what they do is all that matters.
So, from a COMEX futures market perspective, the set-up is still very bearish in silver…but as Ted mentioned on several occasions over the years, at some point what the numbers show in the COT Report won’t matter, as the drumbeat of that structural supply/demand deficit grows ever louder. The manic in/out movement in silver in the COMEX, SLV and other ETFs and mutual funds, is the ongoing proof of that.
In gold, the commercial net short position fell by 3,823 contracts, or 382,300 troy ounces of the stuff. I was hoping for a number many, many multiples of that — and the reason it wasn’t was a shocker, as you’ll soon see.
The commercial traders arrived at that number by reducing their long position by a surprising and hefty 10,573 COMEX contracts — and also reduced their short position by 14,396 contracts. It’s the difference between those two numbers that represented their change for the reporting week.
Under the hood in the Disaggregated COT Report, the Managed Money traders didn’t do much, as they decreased their long position by 1,578 COMEX contracts…accomplished by selling 5,283 long contracts — and reducing their short position by 3,705 contracts as well.
The Other Reportables were also sellers, reducing their net long position by 6,274 contracts…while the Nonreportable/small traders were surprising buyers, increasing their net long position by 4,029 COMEX contracts.
Doing the math: 1,578 plus 6,274 minus 4,029 equals 3,823 COMEX contracts, the change in the commercial net short position.
The commercial net short position in gold now sits at 269,034 contracts/26.903 million troy ounces of the stuff…down those 3,823 contracts from the 272,856 contracts/27.286 million troy ounces they were short in the August 2 COT Report.
But here comes the shocker…which even took me by surprise.
The Big 4 shorts actually increased their net short position by 13,343 COMEX contracts…from 188,527 contracts, up to 201,870 contracts. I don’t remember the last time that the Big 4 were short north of 200,000 contracts in gold…but I was a lot younger than I am now the last time it happened.
The Big ‘5 through 8’ shorts decreased their net short position, them by 5,229 contracts…from the 72,039 contracts they held short in last Friday’s COT Report, down to 66,810 contracts held short in the current COT Report — and still a bearish short position for them as well…but much reduced from the 79,550 contracts they were short just three weeks ago.
The Big 8 short position increased from 260,566 contracts/26.057 million troy ounces, up to 268,680 contracts/26.868 million troy ounces…an increase of 8,114 COMEX contracts.
It was Ted’s raptors…the small commercial traders other than the Big 8…that were the most aggressive buyers for the second week in a row, as they reduced their eye-watering short position from 12,291 COMEX contracts, down to a piddling 354 contracts…as they bought back 11,937 short contracts during the reporting week just past. I’ll have more on this below the chart.
Here’s Nick Laird’s 9-year COT Report chart for gold…updated with the above data. Click to enlarge.
Over the last three reporting weeks Ted’s raptors…the small and equally collusive commercial traders other than the ‘Big 8’…have reduced their short position from 38,509 COMEX contracts, down to just 354 contracts as of yesterday’s COT Report.
Their short covering was so aggressive during this past reporting week that it forced one or more members of the ‘Big 4’ shorts to add to their short positions, because if they hadn’t, the gold price would have blown sky high.
The ‘Big 4’ also had to contend with the Big ‘5 through 8’ shorts…as they bought back 5,229 short contracts. The Big ‘5 through 8’ have also been aggressive buyers over the last two week as well…buying back 12,740 short contracts over that time period.
So it was a food fight in the commercial category…as the raptors and the Big ‘5 through 8’ shorts zoomed the ‘Big 4’ shorts.
As of this COT Report, the collusive ‘Big 8’ are short somewhere between 60 and 65% of the entire open interest in gold in the COMEX futures market… once their market-neutral spread trades are subtracted out…as the raptors are now market neutral. How’s that for a concentrated short position?
There’s still no sign that the Big 4 commercial shorts…all bullion banks and investment houses…are loosening their iron grip on the precious metals…au contraire. But the rest of the commercial shorts are running for the exits.
In the other metals, the Managed Money traders in palladium increased their net short position by a further 477 COMEX contracts — and are net short a record 16,283 contracts…52.7 percent of total open interest. And also, not surprisingly, all of the other four categories in the Disaggregated COT Report are net long palladium…the Swap Dealers in the commercial category in particular.
In platinum, the Managed Money traders decreased their net long position by 3,776 contracts during the reporting week — and are now back on the short side by 562 COMEX contracts. The traders in the Producer/Merchant category are mega net short 24,031 COMEX contracts…and the Swap Dealers in the commercial category are now net long 8,106 COMEX contracts. The traders in both the Other Reportables and Nonreportable/small traders categories are net long platinum by very decent amounts as well…the Other Reportables in particular.
It’s the world’s banks in the Producer/Merchant category that are ‘The Big Shorts’ in platinum, as stated in yesterday’s Bank Participation Report…which I’ll get into in a bit.
In copper, the Managed Money traders decreased their net long position by a further 3,269 COMEX contracts — but remain net long copper by 6,936 COMEX contracts…about 173 million pounds of the stuff as of yesterday’s COT Report…down from the 255 million pounds they were net long copper in last Friday’s report.
Copper, like platinum, continues to be a wildly bifurcated market in the commercial category. The Producer/Merchant category is net short 43,209 copper contracts/1.080 Billion pounds — while the Swap Dealers are net long 14,928 COMEX contracts/373 million pounds of the stuff.
Whether this means anything or not, will only be known in the fullness of time. Ted said it didn’t mean anything as far as he was concerned, as they’re all commercial traders in the commercial category. However, this bifurcation has been in place for as many years as I can remember — and that’s a lot.
In this vital industrial commodity, the world’s banks…both U.S. and foreign… are net long 8.4 percent of the total open interest in copper in the COMEX futures market as shown in the August Bank Participation Report that came out on Friday…down from the 11.8 percent they were net long in July’s. I thought for sure that they would have increased their net long position in copper in this report, but they didn’t.
At the moment it’s the commodity trading houses such as Glencore and Trafigura et al., along with some hedge funds, that are net short copper in the Producer/Merchant category, as the Swap Dealers are net long, as pointed out above.
The next Bank Participation Report is due out on Friday, September 6.
Here’s Nick Laird’s “Days to Cover” chart, updated with the COT data for positions held at the close of COMEX trading on Tuesday, August 6. It shows the days of world production that it would take to cover the short positions of the Big 4 — and Big ‘5 through 8’ traders in every physically traded commodity on the COMEX. Click to enlarge.
In this week’s data, the Big 4 traders are short about 114 days of world silver production… down about 3 days from the last COT report. The ‘5 through 8’ large traders are short an additional 51 days of world silver production…up about 2 days from last Friday’s COT Report, for a total of about 165 days that the Big 8 are short — and down 1 day from last week.
Those 165 days that the Big 8 traders are short, represents 5.5 months of world silver production, or 372.53 million troy ounces/74,506 COMEX contracts of paper silver held short by these eight commercial traders. Several of the largest of these are now non-banking entities, as per Ted’s discovery a year or so ago. August’s Bank Participation Report that came out yesterday, continues to confirm that this is still the case — and not just in silver, either.
The small commercial traders other than the Big 8 shorts, Ted’s raptors, are now net long silver by 4,875 COMEX contracts…as they increased their long position by 587 contracts during the past reporting week.
In gold, the Big 4 are short about 63 days of world gold production…up about 4 days from last Friday’s COT Report. The ‘5 through 8’ are short an additional 21 days of world production, down about 2 days from last week…for a total of 84 days of world gold production held short by the Big 8 — and up 2 days from the prior COT Report.
Besides the grotesque situation in silver in the above chart, I’ll point out just how short the Big 4 traders are in both platinum and gold…relative to the short position the Big 8 shorts in total…75% in gold — and 77% in platinum. Simply outrageous. How’s that for a concentrated short position?
The Big 8 commercial traders are short 50.5 percent of the entire open interest in silver in the COMEX futures market as of yesterday’s COT Report, up a bit from the 49.3 percent that they were short in last Friday’s COT Report — and a bit over the 55 percent mark once their market-neutral spread trades are subtracted out.
Spread trades are not reported in the Producer/Merchant category by the CFTC — and the reason as Ted has said was very simple. If one knew how many spread trades they had on, then you could calculate, to the contract, exactly how short they were in every COMEX commodity that they trade in — and those numbers are closely guarded secrets by both the CFTC and the CME Group.
In gold, it’s 55.9 percent of the total COMEX open interest that the Big 8 are short, up big from the 51.0 percent they were short in last Friday’s COT Report — and something over the 60 percent mark once their market-neutral spread trades are subtracted out.
The reason for that increase was because of the 30,269 decrease in gold’s total open interest during the reporting week, as the rest of those uneconomic and market-neutral spread trades put on earlier in July, were closed out during this past reporting week. But a big chunk of that decrease [about half] was also delivery related at the start of the August delivery month. A change of that size in open interest obviously affects the above percentage calculation of the Big 8 short position.
Ted was of the opinion that Bank of America is short about one billion ounces of silver in the OTC market, courtesy of JPMorgan & Friends. He was also of the opinion that they’re short 25 million ounces of gold as well. And with the latest report from the OCC in hand, I see that their position remains mostly unchanged…maybe down a bit, but nothing material.
The short position in SLV now sits at 13.14 million shares as of yesterday’s short report…down 34.59 percent from the 20.09 million shares sold short in the prior report. The next short report is due out on Monday, August 26.
The situation regarding the Big 4/8 commercial short position in gold and silver remains obscene and grotesquely bearish. It didn’t change in silver this past reporting week…and got worse in gold.
As Ted had been pointing out ad nauseam, the resolution of the Big 4/8 short positions will be the sole determinant of precious metal prices going forward — and not a thing has changed over the years in that regard.
The August Bank Participation Report [BPR] data is extracted directly from yesterday’s Commitment of Traders Report data. It shows the number of futures contracts, both long and short, that are held by all the U.S. and non-U.S. banks as of last Tuesday’s cut-off in all COMEX-traded products.
For this one day a month we get to see what the world’s banks have been up to in the precious metals. They’re usually up to quite a bit — and they certainly were again this past month.
[The August Bank Participation Report covers the five-week time period from July 2 to August 6 inclusive]
In gold, 5 U.S. banks are net short 108,825 COMEX contracts, up 26,900 contracts from the 81,925 contracts that these same 5 U.S. banks were short in July’s BPR. This is still the largest short position that the U.S. banks have held since January of 2020. It’s obscene.
Also in gold, 23 non-U.S. banks are net short 66,863 COMEX contracts, down 2,606 contracts from the 69,469 contracts that 25 non-U.S. banks were short in July’s BPR. This is the second month in a row that the non-U.S. banks have reduced their short position.
At the low back in the August 2018 BPR…these same non-U.S. banks held a net short position in gold of only 1,960 contacts — so they’ve been back on the short side in an enormous way ever since.
Although some of the largest U.S. and foreign bullion banks are in the Big 8 short category in gold, some of the hedge fund/commodity trading houses are short even more grotesque amounts of gold than the banks in that category. It’s also a strong possibility that the BIS could be short gold in the COMEX futures market as well.
As of August’s Bank Participation Report, 28 banks [both U.S. and foreign] are net short 36.6 percent of the entire open interest in gold in the COMEX futures market…up from the 33.3 percent that 30 banks were net short in the July BPR.
Here’s Nick’s BPR chart for gold going back to 2000. Charts #4 and #5 are the key ones here. Note the blow-out in the short positions of the non-U.S. banks [the blue bars in chart #4] when Scotiabank’s COMEX short position was outed by the CFTC in October of 2012. Click to enlarge.
In silver, 5 U.S. banks are net short 26,904 COMEX contracts, down 4,627 contracts from the 31,531 contracts that these same 5 U.S. banks were short in the July BPR.
The biggest short holders in silver of the five U.S. banks in total, would be Citigroup, Wells Fargo, Bank of America — and maybe JPMorgan from time to time.
Also in silver, 17 non-U.S. banks are net short 34,263 COMEX contracts, down 3,883 contracts from the 38,146 contracts that 18 non-U.S. banks were short in the July BPR…their third largest short position since March 2020….when they were short 42,666 COMEX contracts.
I would suspect that HSBC, Barclays and Standard Chartered hold by far the lion’s share of the short position of these non-U.S. banks…as do some of Canada’s banks as well perhaps. And, like in gold, the BIS could also be actively shorting silver. The remaining short positions divided up between the other 12 or so non-U.S. banks are immaterial — and have always been so. The same can be said of most of the 23 non-U.S. banks in gold.
As of August’s Bank Participation Report, 22 banks [both U.S. and foreign] are net short 41.4 percent of the entire open interest in the COMEX futures market in silver — down from the 45.0 percent that 23 banks were net short in the July BPR.
Here’s the BPR chart for silver. Note in Chart #4 the blow-out in the non-U.S. bank short position [blue bars] in October of 2012 when Scotiabank was brought in from the cold. Also note August 2008 when JPMorgan took over the silver short position of Bear Stearns—the red bars. It’s very noticeable in Chart #4—and really stands out like the proverbial sore thumb it is in chart #5.
In platinum, 5 U.S. banks are net short 15,142 COMEX contracts in the August BPR, down 2,257 contracts from the 17,399 contracts that these same 5 U.S. banks were short in the July BPR.
At the ‘low’ back in September of 2018, these U.S. banks were actually net long the platinum market by 2,573 contracts. So they have a very long way to go just to get back to market neutral in platinum…if they ever intend to, that is. They look permanently stuck on the short side to me, a fact that I point out regularly.
Also in platinum, 20 non-U.S. banks dropped their net short position by a whopping 7,731 contracts…down to 3,576 contracts, from the 11,307 contracts that 16 non-U.S. banks were net short in the July BPR.
Back in the December 2023 BPR, these non-U.S. banks were net short a microscopic 35 platinum contracts…so they’re back to heading in the right direction — and in an obvious hurry to get there.
Platinum remains the big commercial shorts No. 2 problem child after silver… but a very distant No. 2 down the list. How it will ultimately be resolved is unknown, but most likely in a paper short squeeze, as the known stocks of platinum are minuscule compared to the size of the short positions held — and that’s just the short positions of the world’s banks I’m talking about here.
Of course there’s now a structural deficit in it [and palladium] as well.
And as of August’s Bank Participation Report, 25 banks [both U.S. and foreign] were net short 23.1 percent of platinum’s total open interest in the COMEX futures market, down big from the 37.5 percent that 20 banks were net short in July’s BPR.
In palladium, 5 U.S. banks are net long another new record of 4,724 COMEX contracts in the August BPR, up a piddling 70 contracts from the 4,654 contracts that 4 U.S. banks were net long in the July BPR.
Also in palladium, 14 non-U.S. banks are net long 809 COMEX contracts, up from the 358 contracts that 15 non-U.S. banks were net long in the July BPR.
And as I’ve been commenting on for almost forever, the COMEX futures market in palladium is a market in name only, because it’s so illiquid and thinly-traded. Its total open interest in yesterday’s COT Report was only 30,871 contracts…compared to 81,153 contracts of total open interest in platinum…147,537 contracts in silver — and 480,645 COMEX contracts in gold.
But I should point out that open interest in palladium has been on a slow but steady increase over the last few years, because I remember when it was less than 9,000 contracts. So it’s nowhere near as illiquid as sit used to be.
As I say in this spot every month, the only reason that there’s a futures market at all in palladium, is so that the Big 8 commercial traders can control its price. That’s all there is, there ain’t no more.
As of this Bank Participation Report, 19 banks [both U.S. and foreign] are net long 17.9 percent of the entire COMEX open interest in palladium… down a bit from the 19.7 percent of total open interest that 19 banks were net long in the July BPR. The reason that the percentage is down and not up, is because of the increase in total open interest during the month, which obviously affects the percentage calculation.
For the last 3+ years, the world’s banks have not been involved in the palladium market in a material way. And with them still net long, it’s all hedge funds and commodity trading houses that are left on the short side. The Big 8 commercial shorts, none of which are banks, are short 40.4 percent of total open interest in palladium as of yesterday’s COT Report.
Here’s the palladium BPR chart. Although the world’s banks are net long at the moment, it remains to be seen if they return as big short sellers again at some point like they’ve done in the past.
Excluding palladium for obvious reasons, and almost all of the non-U.S. banks in gold, silver and platinum…only a small handful of the world’s banks, most likely no more than 5 or so in total — and mostly U.S.-based…along with the BIS most likely…continue to have meaningful short positions in the other three precious metals.
As I pointed out above, some of the world’s commodity trading houses and hedge funds are also mega net short the four precious metals…far more short than the U.S. banks in some cases. They have the ability to affect prices if they choose to exercise it…which I’m sure they’re doing at times. But it’s still the collusive bullion banks at Ground Zero of the price management scheme.
And as has been the case for years now, the short positions held by the Big 4/8 traders is the only thing that matters…especially the short positions of the Big 4…or maybe only the Big 1 or 2 in both silver and gold. How this is ultimately resolved [as Ted kept pointing out] will be the sole determinant of precious metal prices going forward.
The Big 8 commercial traders continue to have an iron grip on their respective prices — and it will remain that way until they either relinquish control voluntarily, are told to step aside…or get overrun.
Considering the current state of affairs of the world as it stands today — and the structural deficit in silver — and now most likely the other three precious metals as well, the chance that these big bullion banks and commodity trading houses could get overrun at some point, is not zero — and certainly within the realm of possibility if things go totally non-linear, as they just might.
But…as Ted kept reminding us from time to time…if they do finally get overrun, it will be for the very first time…which obviously wasn’t allowed to happen this past week, either.
The next Bank Participation Report is due out on Friday, September 6.
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A look at the day ahead in U.S. and global markets from Mike Dolan
Off-radar for much of the past week’s market turbulence, U.S. inflation updates this week will reveal just how much latitude the Federal Reserve has to meet pumped-up expectations around its first interest rate cut next month.
Helped in part by Monday’s holiday in Tokyo – the epicenter of much of the recent volatility explosion – calmer world markets were barely recognizable from last Monday’s wild ride.
With the S&P500 ending last week basically unchanged despite days of outsize swings, the VIX volatility gauge has returned close to long-term means around 20.
Worries about the U.S. labor market were soothed by falling weekly jobless claims and the aggregate corporate earnings picture remains robust, with annual profit growth for the S&P500 close to 14% through the second quarter with the reporting season now winding down.
What the wave of jobs anxiety and market turbulence has embedded however is bigger bets on Fed easing – with futures still priced halfway between a quarter- and a half-point cut next month and seeing 102 basis points of easing to year-end.
Whether the Fed has the confidence to go that far will hinge in part on inflation readings like those due this week.
Unusually, the producer price inflation report on Tuesday precedes the CPI update. The former should remain soft, with headline annual PPI expected to have run as low as 2.3% in July.
Monthly CPI readings of 0.2% should prove relatively benign for the Fed too, with “core” annual consumer price inflation forecast to have ebbed slightly to 3.2%.
In other words, there should be nothing to scare the horses if the number comes in on consensus – with even Fed hawks now acknowledging it’s time to ease as long as disinflation continues.
“Should the incoming data continue to show that inflation is moving sustainably toward our 2% goal, it will become appropriate to gradually lower the federal funds rate to prevent monetary policy from becoming overly restrictive on economic activity and employment,” Federal Reserve Governor Michelle Bowman said on Saturday.
Bowman, who until recently insisted another rate hike was still on the table, nudged back on bets of big rate cuts based on the July employment report alone, saying it may have “exaggerated the degree of cooling”.
INFLATION EXPECTATIONS
Before we get to the week’s CPI report, the New York Fed gives a glimpse on Monday of household inflation expectations as it releases its July survey. Median 3- and 5-year outlooks have recently slipped back below 3%.
And markets too appear to have lowered their inflation expectations during the upheavals of recent weeks.
Ten-year “breakeven” inflation views embedded in inflation-protected Treasury securities fell to within a whisker of the Fed’s 2.0% inflation target last week – their lowest since early 2021. Although they have firmed a bit since, they’re still only at 2.1%.
A green light for the Fed perhaps.
The quieter start to the week has Treasury yields a fraction higher, though still below the 4.0% threshold breached over the past 10 days.
The dollar index was a touch higher.
Wall St stock futures and European indexes were a touch higher.
Chinese mainland stocks underperformed, with much of the market attention there on big swings in the government bond market over the past week.
In deals, shares of BT Group jumped 6.6% after India’s Bharti Enterprises agreed to buy around a 24.5% stake from the British telecommunication firm’s top shareholder, Altice UK.
Key developments that should provide more direction to U.S. markets later on Monday:
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New York Fed’s inflation expectations survey
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US Treasury sells 3 and 6-month bills
(By Mike Dolan, editing by Alex Richardson; mike.dolan@thomsonreuters.com)
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In this article, I will present evidence that shows it is highly likely the next US President will inherit a major recession and stock bear market. This is likely to dominate the early years of their administration, which will lower his or her popularity and make it difficult to implement their agenda.
In addition to being interesting, I hope this information will help investors who want to prosper during the challenging times ahead.
Betting Markets Currently Favor TrumpAccording to the table below from Real Clear Politics, betting markets are predicting Trump will likely win the Presidency with 58% odds. Harris is second with 33% odds, and Michelle Obama is a distant third with only 3% odds. Whoever wins the election will likely have a challenging time in their early years if there is a recession and bear market, particularly with the country already highly divided politically.
Real Clear PoliticsPresidential Economic Policies Are Not Likely To Prevent RecessionIt is unlikely that the next President will have any major influence on the likelihood of a recession and bear market. If Trump is elected, he may try to implement higher tariffs, trade restrictions, and tougher immigration policies while trying to offset the negative impact of these policies on the economy by reducing regulations and lowering income taxes. Unfortunately, high-budget deficits and the huge government debt problem will likely persist, since neither party has a plan to restructure major entitlement programs like Social Security or Medicare, which is the key driver of long-term debt and deficits.
Federal Reserve Monetary Policy Drives Boom-Bust Business CycleUnlike Presidential fiscal policies, I believe Federal Reserve monetary policy is the key driver of the boom-bust business cycle. That is why Wall Street hangs on every word said by Fed Chair Jay Powell and his central planning colleagues.
According to the Austrian Business Cycle Theory, developed a century ago by Austrian economists Ludwig von Mises and F.A. Hayek, unsustainable economic booms are caused by central and commercial banks creating new money out of thin air. The inevitable busts occur when they slow money supply growth or, even worse, contract it.
In response to the Covid panic of 2020, the Fed created 40% more US dollars. That led to the highest inflation rates since the early 1980s. That high “transitory” inflation forced the Fed to raise the Federal Funds interest rate by over five percentage points over the past couple of years, which is the biggest increase in over 40 years. Every time there has been a large increase in rates by the Fed, there has been a recession.
One of the Fed’s preferred inflation measures is “SuperCore CPI”, which is services inflation less shelter. SuperCore CPI rose 4.8% in June, which is 2.4 times higher than the Fed’s 2% target. This suggests the Fed should not be cutting rates anytime soon if they are serious about fighting the inflation they created, but I believe they will as unemployment rises and a recession becomes obvious.
For those investors who believe the Fed can prevent a recession with rate cuts at this point, I remind them that the Fed slashed rates all throughout the early 2000s and 2008-2009 recessions, but that failed to prevent them or their related stock bear markets.
The chart below shows the Federal Funds rate going back 70 years. It indicates that recessions (shaded gray) began after significant Fed rate hikes, including in the early 2000s, 2008-2009, and 2020. It also shows that the Fed has held rates at a similar level and for a similar year-long period as they did before the Great Recession. This is not a bullish chart for the economy.
FREDYield Curve Inversion Always Precedes RecessionsDue to the Fed rate hikes, short-term rates are higher than long-term rates, which is called an “inverted yield curve”. Every time the yield curve has been this inverted in the past 100 years, there has been a major recession. That includes the Great Depression of the 1930s. The 10-Year/1-Year Treasury yield curve has been inverted for the past two years, as shown in the chart below. That is longer than the 18 months of yield curve inversion before the Great Recession of 2008-2009. Historically, the longer the yield curve inversion, the longer the subsequent recession.
FREDMoney Supply Has Been DecliningDue to the Fed’s tight monetary policies, the Fed’s Monetary Base (currency plus bank reserves) has declined 11% since December 2021, as this chart shows.
FREDThe popular M2 money supply has declined by 3.5% since March 2022. I believe a better money supply measure is one that does not double count and includes money that can be immediately spent. Based on the work of economist Murray N. Rothbard, this can be defined as M2 less small time deposits less retail money market funds plus Treasury Deposits with Federal Reserve Banks. This measure is down 12.7% since May 2022, as shown here. That is the biggest decline since the Great Depression.
FREDHousing Demand Is In RecessionHousing demand is very sensitive to interest rates, which makes it an excellent leading economic indicator. Due to mortgage rates more than doubling over the past few years and very high home prices relative to incomes, buying conditions for homes are near the worst levels in history and housing demand is very weak.
As a result, the NAHB Housing Market Index (blue line in the chart below) has fallen to a level typically seen during recessions. In addition, housing starts (red line) are down 4.4% year-over-year.
NAHBManufacturing And PMIs Are In RecessionManufacturing is also a proven leading economic indicator. As shown below, manufacturers’ new orders (ex-defense and aircraft) are declining -0.3% year-over-year. That is not an inspiring sign for the economy.
FREDThe composite of the ISM manufacturing and services purchasing manager indexes (“PMIs”) is below 51, which typically only occurs in a recession, as shown below.
Arch Global EconomicsReal Retail Sales Are DecliningDeclining real retail sales are a typical recession sign. In June, real retail sales fell 0.7%. As the following chart shows, real retail sales have been flattish or declining for more than two years. Imagine how much real retail sales can decline when unemployment starts rising significantly, as it typically does about two years after the yield curve inverts.
FREDUnemployment Is Rising At A Recessionary PaceSpeaking of unemployment, there are numerous signs it is getting worse.
One sign is temporary job losses, which are a leading employment indicator since temporary workers are the easiest type of employee to lay off. Temporary job losses have totaled 515,000 since March 2022 and are falling at a rate only seen in recessions. That is also true of other leading employment indicators such as job openings, quits, and hires.
Another sign of a recession is declining full-time jobs. While part-time jobs have increased, a whopping 1.6 million full-time jobs have been lost over the past year. As this chart shows, full-time jobs are falling at a pace only seen around recessions.
FREDHistorically, a recession has always occurred when the four-week moving average of continuing unemployment insurance claims rose 20% or more. So far, they have increased 37% from their lows in June 2022, as shown here.
FREDAnother sign of a recessionary jobs market is the combined ISM manufacturing and services Employment Composite has been below the neutral 50 level for months, as shown here.
Longview EconomicsPerhaps the simplest and most useful employment indicator is the unemployment rate. Historically, whenever it has risen at least 0.5% from its lows, there has been a recession. So far, it has increased 0.7% from its low of 3.4% in 2023 to 4.1% now.
FREDLeading Economic Index Is Declining At A Recessionary PaceThe Conference Board’s Leading Economic Index is a composite of 10 proven leading economic indicators. As the chart below shows, it is declining -5% year-over-year. That is similar to the declines seen at the beginning of recent recessions.
The Conference BoardStock Market Valuation Is At All-Time HighWhat does a recession mean for the stock market, when we’re at the beginning of the “AI revolution”? Remember when Internet mania drove the stock market to such high valuations in 2000 that the NASDAQ ended up collapsing about 80% during the relatively brief and mild recession of the early 2000s?
The stock market always falls into a bear market during a recession. The higher the starting valuation, the deeper the bear market that usually follows.
As this chart from economist and fund manager John Hussman shows, the stock market is now at the highest valuation level in history…even higher than the valuations seen at the Tech Bubble peak of 2000 or even the 1929 peak.
This stock market valuation ratio (which is similar to Warren Buffett’s preferred valuation ratio: total stock market capitalization to GDP) has a century of accurately forecasting long-term (12-year) returns for the S&P 500 better than any other valuation metric. Based on this all-time high valuation level, the S&P 500 is likely to be at least 50% lower in 12 years.
Hussman Strategic AdvisorsWhat Can Investors Do?With a new President likely to inherit a recession and bear market, what can an informed investor do?
The easiest strategy is to identify when the bear market is likely starting based on technical indicators and simply invest in Treasury bills or a money market fund and earn 5% interest risk-free.
I believe they can also consider investing in gold and silver. I recently argued that gold and silver are in a bull market uptrend that is likely to continue for a while.
For those investors willing to take on more risk in the goal of seeking higher returns during a bear market, they can buy inverse ETFs that rise in price when stocks fall, such as SH or PSQ.
I wish you the best of luck in navigating the challenging times ahead. Please let me know your thoughts in the comments below, so we can all continue learning from each other.
adamkazThe post The Next President Will Likely Inherit A Major Recession And Stock Bear Market appeared first on Golden State Mint Blog.
US stocks rose during morning Trading Friday, poised for a comeback bid as investors embraced new pricing data that showed inflation continuing to ease, solidifying expectations for coming interest-rate cuts.
The Dow Jones Industrial Average (^DJI) added 1.6%, or more than 600 points, after the blue-chip index eked out a closing gain. The S&P 500 (^GSPC) rose about 1%, while the Nasdaq Composite (^IXIC) climbed 0.8%, both coming off a failed attempt to rebound from this week’s tech-led sell-off.
Stocks are looking positive after a volatile series of sessions that have put the major gauges on track for hefty weekly losses. The Nasdaq and the S&P 500 have taken a bruising as Big Tech earnings undermined confidence in the AI trade, spurring the ongoing exodus from megacaps into small cap stocks.
That pause in this year’s rally has Wall Street questioning whether the sell-off is a turning point to sustained lower prices or a typical bull-market pullback. In play are earnings-fueled concerns about softness in the US economy, though Thursday’s surprisingly hot GDP print eased those somewhat.
Friday’s big data point was the closely watched Personal Consumption Expenditures (PCE) index, which provided more fuel to the notion of a still-strong economy and gradually cooling inflation. “Core” PCE, which strips out the cost of food and energy and is closely watched by the Fed, came in slightly higher than expectations but rose at its slowest pace in over three years.
Investors are also getting set for quarterly earnings next week from four more “Magnificent Seven” techs — Apple (AAPL), Microsoft (MSFT), Amazon (AMZN) and Meta (META).
Fri, July 26, 2024 at 11:45 AM EDTThe Fed inches closer to easingFed officials will huddle next week to decide the next the next course of action on interest rate policy. While the market widely expects officials to hold rates steady in July, the meeting’s significance comes as officials hint at where they stand for their September meeting, when observers predict the first rate will arrive.
“We expect the Fed to keep its policy rate unchanged in July while signaling progress on reducing inflation has resumed,” said Bank of America Global Research analyst Michael Gapen in a report on Friday.
Even though Fed officials have indicated that recent inflation readings are encouraging, some analysts still do not believe that a September cut is guaranteed. Fed officials have emphasized that more data is needed before they can pull the trigger on an easing cycle.
“The Fed is optimistic that cuts are likely in the near-term, but we do not think it is willing to signal September is a done deal,” Gapen said. “It could happen, but it would depend on the data.”
Gapen also noted that easing inflation has prompted the Fed to emphasize both sides of its dual mandate, instead of just focusing on price stability. That will give officials leeway to cut rates for a variety of reasons.
“Cuts can happen because the economy cools, because inflation slows, or both.”
Fri, July 26, 2024 at 11:00 AM EDTStocks trending in morning tradingHere are some of the stocks leading Yahoo Finance’s trending tickers page during morning trading on Friday.
3M (MMM): Shares of the manufacturing company rose more than 15% early Friday after raising the low end of its full-year adjusted earnings guidance and reporting second quarter sales that came in above expectations.
DexCom (DXCM): The manufacturer behind glucose monitors saw its shared plummet close to 40% Friday morning after the company shocked Wall Street with a cut its annual revenue forecast tied to fewer new customers and an internal restructuring.
Deckers Outdoors (DECK): Shares of the footwear designer rose 7% after the company reported Q1 results that beat estimates, with net sales of $825.3 million coming in better than the $807.8 million Wall Street was expecting. Deckers also raised its full-year profit forecast.
Coursera (COUR): The online learning platform that has been under pressure because of the looming threat of an AI-led disruption in education, surged more than 40% Friday after earnings came in above expectations. Coursera said it surpassed more than 2 million enrollments in its array of generative AI offerings.
Fri, July 26, 2024 at 10:22 AM EDTComing rate cuts could calm fears of slowing growthThis week’s topsy-turvy trading was fueled in part by fears of slowing growth, and second guessing tied to Big Tech’s AI push.
But Friday’s favorable inflation reading, which will boost the case for the Fed to start cutting rates, could help calm those fears, as more affordable borrowing will help the economy to continue to expand.
“Recently, the market has pivoted to fears of slowing growth over fears of sticky inflation, and we think both concerns are valid, but if the Fed is able to lower rates in a predictable and reasonable manner then the economy should continue to expand and inflation should (very slowly) proceed lower to the Fed’s target,” said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance, in a note on Friday.
A recent stream of encouraging inflation data has also helped minimize less favorable price pressure data from the first quarter, which Fed officials have said prompted them to rethink their rate-cutting timeline and instead instill a plan of higher rates for longer.
Without that impediment, central bankers now have more leeway to start cutting rates. “For the past few months the inflation data have been cooperating,” Zaccarelli said. And as long as the data keeps coming in to boost the Fed’s confidence in slowing inflation, multiple cuts could be in store for the year.
Fri, July 26, 2024 at 9:31 AM EDTStocks poised for rebound after encouraging inflation dataThe final session of a volatile trading week had stocks set for a rebound as new inflation data showed easing price pressures, boosting investor confidence in a widely expected September rate cut.
The Dow Jones Industrial Average (^DJI) added 0.6%, or about 200 points, after the blue-chip index eked out a closing gain. The S&P 500 (^GSPC) rose about 0.8%, while the Nasdaq Composite (^IXIC) climbed 1.1%, both coming off a failed attempt to rebound from this week’s tech-led sell-off.
Fri, July 26, 2024 at 8:56 AM EDTFed’s preferred inflation gauge steadies ahead of expected cutsThe latest reading of the Fed’s preferred inflation gauge showed prices increased slightly more than expected in June.
The core Personal Consumption Expenditures (PCE) index, which strips out the cost of food and energy and is closely watched by the Federal Reserve, rose 2.6% over the prior year in June; above economists’ estimate of a 2.5% increase and unchanged from the month prior. Still, the print marked the slowest annual increase for core PCE in more than three years.
Core PCE rose 0.2 % from the prior month, in line with Wall Street’s expectations for 0.2% and faster than the 0.1% increase seen in May.
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The major market averages rebounded during the first half of yesterday’s trading day on a better-than-expected GDP report for the second quarter, but the rally fizzled in the afternoon when technology stocks resumed their downtrend. The relentless selling in the sector that started the day after the Consumer Price Index (CPI) report for June was released on July 11 is probably closer to its end than just beginning. The sector was simply overbought, as the euphoria over the benefits of artificial intelligence (AI) reached a fever pitch, and the sector needed to revert to the mean.
FinvizCoincidentally, investors were also looking for a good reason to broaden the bull market rally beyond technology, which came in the form of an extremely favorable inflation report, affirming the Fed will likely begin easing policy no later than September. That opened the floodgates to the ongoing rotation. The Magnificent 7 technology stocks and many other names in the sector that have been riding the AI wave were clearly exhibiting extreme valuations, but that is not the definition of a bubble, as many disgruntled bears are trying to claim. Nor is the correction in the sector a bubble bursting. Valuation is a horrible timing tool for markets, sectors, and stocks, as all can remain overvalued or undervalued for extended periods of time. To form a bubble, you need excesses in the economy and markets beyond the valuation of one sector, but they don’t exist.
BloombergThe economy proved its resilience once again by growing 2.8% in the second quarter, according to the initial estimate by the Bureau of Economic Analysis. That was well ahead of the consensus expectation for 2% growth, but it is important to note that inventory building contributed 0.8% to the overall number. Still, when we exclude inventories, government spending, and trade, which results in “core” growth, the number was a healthy 2.6%. Most importantly, consumer spending rose 2.3% and was the largest contributor to growth. Despite some signs of fatigue, the consumer is alive and well.
BloombergThe GDP price index (inflation) increased at a 2.3% annual rate during the quarter, which should comfort the Fed as it embarks on an easing cycle, because it can ease for all the right reasons. The most important one is that the rate of inflation is gracefully falling to its target of 2% at a much faster rate than the Fed forecasted in its more recent Summary of Economic Projections.
The soft landing taking place is the primary reason that the correction in the technology sector is probably nearing its end. I surmised last week that we would see a 10% decline in the Nasdaq 100 (QQQ), which would bring the index down to approximately $450 before we found support. That support would coincide with the Relative Strength Index (top of chart) falling from an extremely overbought 80-plus into oversold territory below 30. Yesterday, the index closed at $458, and the RSI fell to 33.
StockchartsWhile I think we are close, I am not inclined to load the boat on the largest technology names, and there is no guarantee we don’t see this index fall to a more deeply oversold level that tests the 200-day moving average at $425, although I see that as a low probability. Still, these companies need to grow earnings into what are still expensive stock prices, which means we probably see churn between here and their 52-week highs in the weeks and months ahead. Meanwhile, the rest of the market continues to narrow the performance gap, which has been my expectation all year long. This improvement in breadth is a sign of strength, reinforcing the foundation of the bull market. The Russell 2000 index (IWM) has nearly closed the gap with the Nasdaq 100 on a year-to-date basis. Portfolios that have been well diversified across market caps and sectors should be enjoying outsized gains as this rotation takes place.
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J Studios/DigitalVision via Getty ImagesBy Chris Turner
Does Donald Trump really want a weaker dollar?Q: Why is the issue of weak dollar policy back in the headlines now?
A: Bloomberg Businessweek published an interview with Donald Trump on 16 July. His opening gambit focused on problems in the US manufacturing sector and the ‘big currency problem’ that the US faces today. He singled out USD/JPY and USD/CNY, focusing on the unfair competitive advantage that a company like Komatsu has over Caterpillar. These comments and his choice of JD Vance as running mate point to the focus on key mid-western swing states – with a heavy manufacturing presence – in the run-up to November.
Q: What does a weak dollar policy actually mean?
A: The US Treasury (i.e. the politicians) is in charge of FX policy and can express its views on the dollar through key G7 & G20 Communiques. Over the years, the language in those has settled on the need for flexible exchange rates which reflect underlying fundamentals and the need to avoid competitive devaluations. US Treasury Secretaries can be asked their views on dollar/dollar policy and were Donald Trump to win in November, the choice of any potential Treasury Secretary will be important for markets. So you might have, for instance, Jamie Dimon, who’s unlikely to seek a weaker dollar, versus Robert Lighthizer who’s seen as very protectionist and who could pursue a weaker dollar policy.
Q: What other tools does the US Treasury have to impact FX markets?
A: In theory, the US Treasury could intervene to sell dollars and buy unlimited FX, but that seems very unlikely. More in focus will be the use of UST’s semi-annual FX report to label China a currency manipulator and threaten/extend tariffs should China weaken its currency any further. That is what UST did in August 2019 when China gave into market pressure and allowed USD/CNY to trade higher. The chart below shows that the manipulator tag did not make much difference to FX markets, although likely created more space for US tariffs. USD/JPY is different. Tokyo wants a lower USD/JPY and is currently intervening to achieve it. The US will not be seeking particular tariffs for Tokyo over its FX rate/policy. But USD/JPY will probably be at the forefront of any adjustment were the weak dollar policy theme to gain traction.
USD/CNY versus the broad dollar trend
Source: Refinitiv, INGThe macro context is keyQ: Should we distinguish between Donald Trump wanting a stronger CNY/JPY and wanting a broadly weaker dollar?
A: Yes. Mr Trump’s focus is on the competitive advantages enjoyed by China and Japan from weak currencies. During his last Presidency, he avoided going near a weak dollar policy. Assuming he has sensible people at the US Treasury, the risk of a weak dollar policy destabilising US Treasuries, driving borrowing costs up and equities lower, would likely discourage the UST from actively pushing for such an FX policy.
Q: Will US Treasury FX policy make much of a difference anyway?
A: The macro context will be key. Were Mr Trump to win the Presidency and Congress and then extend tax cuts while broadly raising protectionism to a new level, then this would be a dollar-positive policy mix. And the ongoing threats against the alleged undervalued renminbi (while still present) would not have much impact on the FX market. Should the economy weaken for whatever reason, the pressure to seek more stimulus through a weaker dollar will grow. In reality, a newly-elected Trump cannot try to suppress China (= less CNY demand), create four years of unprecedented US prosperity (= stronger USD), and really expect USD/CNY to trade lower.
Q: If UST did try to push a weak dollar policy, how far could the dollar fall?
A: We have models that try to gauge ‘risk premia’ in pairs like EUR/USD. For example, how far could EUR/USD trade away from levels suggested by short-dated rate spreads, yield curves and global equity markets – inputs which normally work quite well in determining short-term pricing. Our chart below shows that over the last 10 years, EUR/USD has traded +/- 5-6% around its short-term fair value, which could be a way to isolate/evaluate the impact of any weak dollar policy from the UST.
EUR/USD deviation from Financial Fair Value
Source: INGContent Disclaimer
This publication has been prepared by ING solely for information purposes irrespective of a particular user’s means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.
Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
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The US economy grew at a faster than expected pace in the second quarter.
The Bureau of Economic Analysis’s advance estimate of first quarter US gross domestic product (GDP) showed the economy grew at an annualized pace of 2.8% during the period, well above the 2% growth expected by economists surveyed by Bloomberg. The reading came in higher than first quarter GDP, which was revised down to 1.4%.
Meanwhile, the “core” Personal Consumption Expenditures index, which excludes the volatile food and energy categories, grew by 2.9% in the first quarter, above estimates of 2.7% but significantly lower than 3.7% gain in the prior quarter.
The data’s release comes as investors try to gauge when the Federal Reserve will start cutting interest rates and if the central bank can achieve a soft landing, where inflation comes down to its 2% target without a significant economic downturn.
Entering Thursday, markets had priced in a 100% chance the Fed would cut rates by the end of its September meeting.
“The data today will reinforce the notion that the Fed has the benefit of time,” Renaissance Macro head of economic research Neil Dutta wrote in a note following Thursday’s release. “In the Fed’s mind, there is no need to rush with private domestic demand growing at a solid pace over the second quarter. July remains a set up meeting for September.”
Soccer Football – FIFA World Cup Qatar 2022 – Group B – Iran v United States – Al Thumama Stadium, Doha, Qatar – November 29, 2022 Fans display a United States flag in the stands before the match REUTERS/Fabrizio Bensch (REUTERS / Reuters)Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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(Bloomberg) — The assumptions that have driven this year’s global financial markets are being rapidly rethought.In bond and currency markets, investors are racing to redeploy money amid mounting doubt over the outlook for the US economy, which has led to speculation that the Federal Reserve may need to cut interest rates faster or deeper than planned. Helping to drive the shift: A weakening American consumer, which is showing up in a rash of disappointing corporate earnings.
At the same time, stockholders have suddenly grown skeptical that technology companies’ massive investments in artificial intelligence will pay off any time soon. As a result, investors have been frantically dumping shares of big winners such as Nvidia Corp. and Broadcom Inc.
Copper and other industrial metals are also reversing a recent run-up, with China’s slowdown playing a role in their decline along with the worries over the US and tech.
“It does seem that an unwinding has begun of popular trades that brought valuations to stupid levels,” Louis-Vincent Gave, chief executive officer of Gavekal Research, wrote in a note to clients Thursday.
At Apollo Global Management, chief economist Torsten Slok told clients on Thursday that “if the economy starts slowing down, the speed of the slowdown becomes essential. A faster slowdown would have negative implications for earnings and increase the probability of a selloff in stock markets and credit markets.”
Here’s a look at some of the notable market moves and the underlying assumptions that have changed:
Government Bonds
In the bond market, this bleaker global growth outlook is bolstering wagers on rate cuts. Investors are snapping up short-dated securities amid concern monetary policy is proving too tight, acting before borrowing costs come down.
At one point on Thursday, the yield on the two-year US Treasury note traded just 12 basis points above the 10-year — the closest the market has come to ending an inversion in place since the middle of 2022, and a far cry from a spread of more than 50 basis points a month ago.
While the chances of rate cut by the Fed at next week’s meeting look very slim, the market is now pricing in deeper cuts later this year.
Traders see about 30 basis points of easing by September, suggesting about a 20% chance of a supersized cut. More than 70 basis points of cuts are seen through 2024, seven basis points more than on Wednesday.
The repricing is also bolstering the yen, one of the biggest victims of tighter monetary policy in the US over the past two years. The Japanese currency has rallied around 6% from a low touched earlier this month, by far the biggest advance across the Group-of-10 peers.
Investors have liked to borrow in the low-yielding yen to fund investments in higher yielders such as Mexico’s peso or the Australian and New Zealand dollars, but now reckon change is underway with the gap between the Bank of Japan’s benchmark and its counterparts set to narrow.
Stock markets
US and European equity markets have been driven this year by a consensus that inflation was coming under control, allowing the Fed to ease monetary policy later in the year and thus avoid a recession.
By mid-May, the Stoxx Europe 600 Index was sitting at a record, giving investors a 12% return to date in 2024. The S&P 500 set a record as recently as July 16, with tech leading the charge.
Now many investors are taking the view that the Fed is falling behind the curve — not only is inflation quieting, but the economy is weakening too much. China is already easing monetary policy amid a slump in the world’s Number 2 economy.
Hence the predictions from some market watchers that the Fed could indeed act as soon as next week to lower borrowing costs or be forced to do more later if policymakers wait.
Almost a third of S&P 500 companies have reported second-quarter results so far, and the spotlight is increasingly on the sales figures, where the slowdown in economic growth is starting to become visible. Only 43% of companies have managed to beat revenue expectations, which would be the lowest reading in five years, according to data compiled by Bloomberg Intelligence.
And that AI frenzy no longer looks so positive. Investors were taken aback this week how much Google parent Alphabet Inc. is spending on the technology, with little to show for it yet in terms of revenue.
The Nasdaq 100 Index has sunk almost 8% from its July 10 record, wiping $2.3 trillion off the market value of companies in the benchmark. The index is still up 13% this year, and an investor survey by Bank of America Corp. this month showed that positioning in the so-called Magnificent Seven was the most crowded trade since exposure to growth stocks in October 2020.
“Valuations of mega-cap tech were increasingly impossible to justify with anything but the most heroic forecast for future growth, earnings and monetary policy,” said James Athey, portfolio manager at Marlborough Group. “It’s inevitable that these kinds of extremes cannot persist.”
Metals
Mounting pessimism about demand and the tech industry is also infecting the metals market.
Copper fell below the $9,000-a-ton threshold for the first time since early April and is down by about a fifth since reaching a record in mid-May.
What’s changed there is investors who previously bought the metal on concerns of tightening supply and higher usage in data centers and other areas are shifting to fretting about rising inventories and weak conditions in the Chinese spot market.
Tin and Aluminum have also fallen.
What Bloomberg’s Strategists are Saying…
“In the perennial tussle between fear and greed, the former has seized the upper hand as a raft of consensus positions have suffered losses this week. It all represents a collective trip to the pain cave, one of those periodic episodes when positioning is just about the only fundamental that matters as investment risk gets reduced across the board.”
— Cameron Crise, macro strategist
–With assistance from Sagarika Jaisinghani, Constantine Courcoulas and Mark Burton.
©2024 Bloomberg L.P.
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Balefire9/iStock via Getty ImagesGold is now in vogue among investors and mainstream financial media. The metal has captured much attention as it recently surged to a new all-time high of $2,488. It is trading at about $2,400 as of this writing, up 18% YTD. And it has gained 47% since bottoming at 1628 in October 2022. I have read many commentaries in financial media citing strong central bank buying as a key reason for gold’s surge and as a signal for more gains ahead.
However, these developments made me skeptical. In my view, none of the articles considered central bank buying in the proper context. More specifically:
- How much have central banks bought relative to the total gold tradable market cap?
- How much have they bought relative to total trading volume?
- How useful has their buy/sell behavior been as an indicator of gold’s current and future price trend? In other words, are the central banks “smart money,” as many would have us believe?
Answers to these questions took considerable research and calculations. Publicly available data are inconsistent.
The data I mined (pun intended) surprised me. I had to check the numbers several times. Surprisingly, the best data I could find shows the thesis of central bank gold buying as a reason for the rally is in doubt, if not outright wrong. There is even evidence that central bank gold buying has served as a good contrarian indicator.
Central Bank Gold Buying – The Numbers Do Not Explain the RallyLet’s begin with a look at central bank gold net purchases as a percentage of total tradable market cap. The table below depicts key metrics gleaned from the World Gold Council website, which I believe is the most authoritative publicly available source. Worldwide central banks added a net 2,229 tonnes, or 71,663,910 ounces to their gold reserves during 2022-2023 and the first five months of 2024. As an aside, Bullion Vault data shows a much lower number for net purchases, by about 50%. Therefore, the net purchase metrics below may be overstated.
Author, World Gold Council, Kitco
The data show that over the past two and a half year buying spree, central banks accumulated $172.293B, or 2.99% of the total tradable gold market cap of $5 trillion. It is hard to see how this would move the price needle much, especially given bank purchases were spread out over two and a half years.
Another gauge is total net purchases relative to the total gold market. The chart below shows the distribution of all gold assets in the world. The total is approximately $12 trillion according to the World Gold Council. The central bank share of the total is about 17%. Their buying during the period equals 1.2% of the entire gold market.
In terms of their own reserves, banks tacked on 7.4% of their total of approximately $2 trillion (at year-end 2022). That means the banks added about 3% per year to their total reserves during the past 29 months. Again, this is not a spectacular number when placed in this context.
World Gold Council
Central Bank Gold Buying Relative to World Market LiquidityNext, let’s look at central bank buying versus total trading volume. If central banks were buying large sums relative to what is available on major trading exchanges, it would drive up prices. The table below shows the relevant metrics.
Author, World Gold Council, Tradegoldtrading.comDuring the last 29 months, central banks accumulated gold at an average of about $61B per year. That compares with annual average trading volume (using 2023 data of $162.63B per day) of about $46,512B or $46.5 trillion.
Hence, central banks purchased only 0.13% of total annual liquidity. Another way to look at it is that during an average 12-months of one of the most aggressive buying sprees ever, central banks bought a little more than one-third of the daily world gold trading volume.
These numbers surprised me. After more digging, I found the chart below. It shows gold is the second most liquid asset – behind the S&P 500 and ahead of the highly liquid U.S. T-bill market. It supports the idea that central bank buying has less impact on the market than we expect.
World Gold CouncilIndeed, the World Gold Council states:
The size of the market allows it to absorb large purchases and sales from both institutional investors and central banks without resulting in price distortions. And in stark contrast to many financial markets, gold’s liquidity has not dried up, even during times of financial stress, making it a much less volatile asset.”
This further supports the idea that central bank transactions have less much impact on gold’s price than most financial media suggest.
Central Banks Are Not Smart MoneyNow let’s turn to the question of whether one should follow central bank buying and selling to inform investment decisions.
Many gold pundits frequently tell us that central banks are “smart money.” Yet, once again, the data tell a different story. The chart below shows the total world central bank net gold purchases versus the year-end gold price since 2002.
Author, SD Bullion, World Gold CouncilHere are takeaways regarding how central banks fared with their buying and selling decisions:
- From 2002 through 2008, central banks were consistent net sellers of gold while the metal more than doubled from $343 to $865. Central banks proved to be a good contrarian indicator of gold’s direction. Furthermore, their selling failed to deter gold’s strong advance.
- In 2009, banks loaded up and added a net of 676 tonnes. Gold increased to $1,104 by year-end. Central banks were smart money.
- From 2010 through 2012, central banks added a cumulative 987 tonnes while gold went to $1,664 for a gain of $471. Central banks were smart money.
- From 2013 to 2015, the banks added a whopping 1,636 tonnes. They accelerated purchases at the top during 2015, adding 913 tonnes. Yet, gold dropped that year from $1,199 to $1,062. Central banks were a good contrarian indicator. Gold declined despite strong central bank buying.
- After gold bottomed in 2015, central banks had less enthusiasm, adding less than average, or 104 tonnes in 2016. Yet, by the end of 2017 gold advanced to $1,296. The banks added 523 tonnes that year, helping to fuel the advance. Yet gold was flat again in 2018 and ended the year at $1,282. Banks were not smart money.
- Central banks added 1,475 tonnes during 2018-2020, while gold went to $1,878 for a gain of 45%. This could have been a causative factor for the gains. The banks were smart money.
- From 2021 – May 2024 central banks added a whopping 2,679 tonnes. During that time, gold rallied to its current level of about $2,400. However, as shown above, the purchase volume represented a small percentage of the market. The banks were smart money.
In the seven sub-periods we examined, central banks proved to be smart money in four cases. They were not smart money in three cases. in fact, the latter included a seven-year period and a three-year period when they were a contrarian indicator. Out of the twenty-two and half years examined, the central banks were on the correct side of the market for 12 years, neutral during one and wrong during 10. That is a little better than a coin flip, but hardly smart money. Further, the data suggests their buy and sell decisions had negligible or at least inconsistent effect on gold’s price.
Astonishment and ProblemsAdmittedly, I was astonished by these findings. I had to check my numbers several times. Almost everything I have read over many years supports the belief about central banks’ strong influence on the gold market. There is one exception. I credited Robert Prechter’s Socionomic Theory of Finance in the comments section of one of my earlier articles. Prechter called out central bank actions in the early 2000s as a contrarian indicator.
How can it be that central banks have a negligible impact on the gold market? The data above might be wrong. It is very possible central banks have bought much more gold than they have admitted to. Most believe that Russia and China have not been honest with their reporting. To be sure, Bullion Vault noted:
Many analysts believe China’s national gold bullion holdings are larger than the reported total, perhaps twice the size if you compare the country’s visible private-sector demand against its gold mining output and bullion imports. The excess supply must have gone somewhere, and the People’s Bank has in the past kept the changes in its gold holdings a secret, suddenly announcing huge increases in its gold reserves in 2009 and 2015.”
Another possibility is that options and futures traders sometimes manipulate the market. There are prominent gold experts who fervently believe this. However, gold is a vote of no confidence for fiat currencies. Its success undermines the goals of central banks who want stable currencies. Therefore, if anything, central banks would be inclined to depress gold’s price rather than fuel its advance.
It is also possible that I am missing something in my analysis. There are many smart readers on SA, so I welcome your insights!
Why I Own Gold: An Effective Component of an All-Weather PortfolioRegardless of the actual numbers, I don’t own gold because central banks are accumulating it.
Those who follow me know I utilize an all-weather portfolio approach. Gold is a core holding, with a 15% allocation in my portfolio. I have owned it for more than a decade and will continue to hold it for the long run. Previous SA articles, including my all-weather portfolio articles, provide more details. For those who want the highlights, here is a recap:
Solid long-term returns. Since 2000 gold has returned 8.7% per year, outperforming the S&P 500’s return of 7.4%, per VanEck. Since 1971, after Nixon devalued the dollar, gold has returned 8.3% per year.
Excellent portfolio diversification. Since January 2000, gold’s correlation is 0.046 and 0.447 with U.S. equities and Global Treasuries ex-US respectively, according to the World Gold Council’s calculator. An Ibbotson study regarding the benefits of precious metals diversification stated:
“Based on the forward looking resampled efficient frontiers, asset allocations that include precious metals have better risk-adjusted performance (as measured by Sharpe ratio) than asset allocations without the precious metals. Investors can potentially improve the reward-to-risk ratio in conservative, moderate, and aggressive asset allocations by including precious metals with allocations of 7.1%, 12.5%, and 15.7%, respectively. These results suggest that including precious metals in an asset allocation may increase expected returns and reduce portfolio risk.”
An effective currency and debt hedge. Over the past 30 years, the correlation between the U.S. dollar and gold was -0.65. Another study found a high correlation of 0.93 between gold and U.S. debt from 1982-2010. The Financial Times interviewed Alan Greenspan in 2014. They asked, “Do you think that gold is currently a good investment?” Greenspan replied:
Yes, remember what we are looking at. Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it.”
Long-term prospects. In 2022 with gold at $1940, I presented why gold could reach $5,000 in three to six years. I cited the monetary stock as a factor that could justify a much higher gold price. I also showed the Dow to Gold ratio, another sentiment measure that favored gold for the longer-term.
What Really Drives the Price of Gold – SentimentA final comment before wrapping up. For those who haven’t read it, I discussed the fallacies of using fundamentals to explain or predict gold’s price movements in Where is Gold Going? Watch Sentiment, Not Fundamentals. The data here on Fed gold buying further supports this thesis. As a result, I will continue to watch sentiment via the Commitment of Traders (COT) report and Elliott Wave Theory.
ConclusionCentral bank gold buying doesn’t appear to be as impactful nor relevant as many believe. But there are other very good reasons to own gold as part of a well-diversified portfolio. But it has experienced long periods of stagnation and at times can be volatile. As such, patience is required.
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LilliDayIt’s a human shortcoming to favor simple explanations for the business cycle. The notion that reliability and timeliness can be forged in one indicator endures, but recent history has hammered this approach, reminds a new commentary from Axios.
“Recession indicators don’t work like they used to,” the news site reports. “Many of them have been tripped, yet no big downturn has materialized. The quirks of the pandemic business cycle – driven by a rolling series of disruptions to supply and demand – are the likely culprit.”
Among the indicators that have failed to provide timely signals of an approaching recession: the yield curve, the Leading Economic Index, and temporary help employment, which Axios notes “was big tell” in the past but has stumbled recently.
It’s tempting to blame the after-effects of the pandemic for the false signals. To be fair, much has changed for the business cycle since covid upended the usual routine, and it would be naive to minimize this factor. But it’s also fair to observe that no one business-cycle indicator has ever been flawless. That’s always been true, and always will be. Forecasting, as the saying goes, is hard, especially about the future.
Fortunately, there are techniques to minimize the noise, maximize the signal and boost the timeliness and reliability of recession analytics. It starts with a basic premise that’s been documented for decades in empirical analytics: combining modeling analytics enhances results.
Regular readers of CapitalSpectator.com know that your editor is a big fan of ensemble methodologies for estimating real-time recession risk. As I wrote in 2016, “we should be wary of relying on market signals alone for estimating recession risk.”
Eight years later, the same principle applies, and for a good reason: it works. Or, to be more accurate, it fails less often than the usual suspects. Granted, it’s impossible to develop a genuinely flawless methodology. Indeed, there’s a crucial tradeoff that must be recognized in recession analytics: timeliness vs. reliability. The two are in conflict with one another. Although there’s no one perfect answer for calibrating this relationship in modeling, ignoring this hard fact by relying on one, even a handful of indicators, is asking for trouble.
In fact, one could argue that building a multi-factor recession model is more relevant and practical than ever. All the more reason that this core principle has long informed the methodology of weekly updates of The US Business Cycle Risk Report (now in its 10th year), a sister publication of CapitalSpectator.com. At a high level, the main focus is carefully curating a diversified set of indicators to estimate the current state of the economy. Using that foundation, a near-term forecast is updated weekly. The key principle: the estimates reflect a wide variety of indicators and models. The reasoning: it’s never clear which indicator or model will fail in real time–and, yes, something’s always failing. It’s the aviation equivalent of recognizing that if you’re flying across the Pacific, it’s well-advised not to rely on one engine.
On that basis, the current state of the economy continues to favor expansion, based on the main indicator that aggregates a variety of signaling for The US Business Cycle Risk Report. In the current issue of the newsletter, the probability that an NBER-defined recession has started or is imminent is roughly 9%.
Using a multi-factor set of proprietary business-cycle indicators to forecast the near-term outlook suggests that economic activity is stabilizing through August, albeit at a slow/sluggish pace. Note: the tipping points that separate expansion from recession for the indexes in the chart below are 50% (ETI) and 0% (EMI).
Why limit the forward estimates to a month or two? Because looking out much further is guessing. It’s deeply flawed/naive to assume that it’s possible to model how the complexity of the US economy will involve much beyond the very near future. Indeed, the only thing more deeply flawed than relying on one indicator in recession analysis is forecasting six-month, a year, or longer.
The post The Case Against Lone Recession Indicators Is Stronger Than Ever appeared first on Golden State Mint Blog.
Alphabet (GOOG, GOOGL) stock slipped more than 4% on Wednesday as investors kept a close on the company’s increased AI spending while disappointing YouTube advertising revenue was also a pain point for investors after the Google parent’s latest quarterly release.
Yahoo Finance’s Dan Howley reports:
Google parent Alphabet (GOOG, GOOGL) reported its fiscal second quarter earnings after the bell on Tuesday, beating analysts’ estimates on the top and bottom lines as its cloud businesses continue to pick up steam, topping the $1 billion mark for operating profit for the first time.
For the quarter, the company saw earnings per share of $1.89 on revenue of $84.7 billion. Analysts were anticipating earnings per share of $1.85 on revenue of $84.3 billion, according to data compiled by Bloomberg. That’s a jump from the same period last year of 31% and 14%, respectively, when the company reported earnings per share of $1.44 on revenue of $74.6 billion.
Advertising revenue topped $64.6 billion versus analysts’ expectations of $64.5 billion, and up from $58.1 billion last year. YouTube ad revenue, however, fell short, with the segment bringing in $8.66 billion versus expectations of $8.95 billion.
Google saw cloud revenue of $10.35 billion and operating income of $1.17 billion. That’s better than analyst expectations of $10.1 billion and operating income of $982.2 million and higher than the $8 billion in revenue and $395 million in operating income the company reported in Q2 2023.
Alphabet shares are up 30% year to date. Shares of rivals Microsoft (MSFT) and Amazon (AMZN) are up 18% and 22% year to date, respectively. All three companies are pouring money into building out their generative AI capabilities, spending lavishly on data centers capable of powering the AI models they offer via their cloud service platforms.
In the second quarter, Alphabet reported spending $2.2 billion building AI models across its DeepMind and Google Research organizations. That’s up from $1.1 billion in Q2 2023. When exactly AI starts to generate revenue for Google’s Cloud business, let alone its ad segment, is still up in the air.
“It is still too early to count on AI benefits as most [companies] remain in pilot mode, and material AI [revenue] is more likely a 2025-26 event,” Jefferies analyst Brent Thill wrote in a recent client note ahead of Alphabet’s earnings announcement.
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By Indradip GhoshBENGALURU (Reuters) – The Federal Reserve will cut interest rates just twice this year, in September and December, as resilient U.S. consumer demand warrants a cautious approach despite easing inflation, according to a growing majority of economists in a Reuters poll.
Declining price pressures over the past few months and recent signs of labor market weakness gave several members of the policy-setting Federal Open Market Committee (FOMC) “greater confidence” inflation will return to the U.S. central bank’s 2% goal without a significant economic slowdown.
Markets grabbed that opportunity to price in two to three rate reductions this year, lifting stocks by around 2% and pushing down yields on the 10-year Treasury note by more than 25 basis points this month. But economists have held on to expectations for just two cuts for the last four months, and are more convinced now.
Stronger-than-expected retail sales in June suggest consumer spending remains resilient and, along with a consensus view from the poll that the jobless rate won’t rise much from the current 4.1%, argues for patience.
While all 100 economists in the July 17-23 Reuters poll said the Fed will keep rates unchanged on July 31, more than 80% – 82 of 100 – forecast the first 25-basis-point cut would come in September, pushing the federal funds rate to the 5.00%-5.25% range. That was a stronger majority compared to the nearly two-thirds who said so last month.
While 15 expected the first rate reduction to happen in November or December, only three said the Fed would wait until next year.
“We expect a 25-basis-point reduction in the target range at the September and December FOMC meetings, barring a meaningful upside surprise in the inflation data,” wrote Jonathan Pingle, chief U.S. economist at UBS.
“We suspect unexpectedly quite weak employment data would be needed to create the urgency to lower rates more than that this year.”
Nearly three-quarters of economists – 73 of 100 – predicted two 25-basis-point cuts this year, more than the roughly 60% who took that view in the June survey. Seventy of the economists in the latest poll said the cuts would happen in September and December.
While 16 expected one or no cut this year, 11 predicted more than two. Among 21 primary dealers polled, nearly 60%, or 12, expected the Fed to reduce rates twice in 2024.
Much of the outlook will hinge on key data releases this week, including a reading of second-quarter gross domestic product (GDP) and personal consumption expenditures (PCE) price index data for June.
While the U.S. economy is expected to have expanded at an annualized rate of 2.0% last quarter, faster than the 1.4% in the first quarter, PCE inflation – which the Fed targets at 2% – is expected to have declined only slightly to an annual 2.5% in June from 2.6% in May, a separate Reuters survey predicted.
None of the measures of inflation – the consumer price index (CPI), core CPI, PCE and core PCE – were expected to reach 2% until at least 2026, according to median forecasts in the latest poll.
Just over half of economists – 17 of 30 – said inflation for the rest of the year was more likely to be higher than what they forecasted rather than lower.
“Inflation has been very difficult to forecast this year and has behaved unpredictably. Rents, for example, have been far more persistent than anyone expected,” said Chris Low, chief economist at FHN Financial.
“As long as we have moderate growth, the Fed can be patient,” he said.
The Fed will cut rates once in each quarter through 2025, taking the federal funds rate to the 3.75%-4.00% range by the end of 2025, according to median forecasts in the survey.
The U.S. economy was forecast to expand 2.3% this year, faster than what Fed officials currently see as the non-inflationary growth rate of 1.8%. It will grow 1.7% and 2.0% in 2025 and 2026, respectively, according to the poll.
(Other stories from the Reuters global economic poll)
(Reporting by Indradip Ghosh; Polling by Milounee Purohit, Vijayalakshmi Srinivasan and Mumal Rathore; Editing by Ross Finley and Paul Simao)
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(Bloomberg) — Chinese stocks suffered their biggest decline in six months as a lack of major policy support following the Third Plenum reinforced bearish sentiment.The onshore benchmark CSI 300 Index closed 2.1% lower, following a 0.7% drop in the previous session. The declines have now erased gains seen last week, when signs of purchases by the “national team” of state funds amid the twice-a-decade political gathering propped up equity gauges.
The steep losses are likely to be a taste of what may come without state support in a market that has lost momentum amid China’s economic troubles and geopolitical risks. Investors had looked to the Third Plenum for a clearer policy roadmap to end the property crisis and revive consumption, but the details released so far have fallen short of expectations.
The equity decline “may be driven by fading national team support that propped up CSI 300 during the Plenum,” said Bloomberg Intelligence strategist Marvin Chen.
Combined turnover in eight exchange-traded funds known to be favored by the national team was lower than the past year’s daily average on Tuesday, suggesting that state funds likely remained on the sidelines for the day. The aggregate turnover in the cohort was 9.5 billion yuan, compared to nearly 40 billion yuan on Friday.
China increased support for the economy with surprise interest-rate cus Monday, but analysts say the impact will likely be limited to meaningfully bolster the economy. Data earlier this month showed China’s growth unexpectedly slowed to the worst pace in five quarters as consumer spending faltered.
“Investors tend to wait until there is a clear improvement,” said Steven Leung, executive director at UOB Kay Hian Hong Kong. “There has been no negative news in the market these two days, just investors believe such 10-basis point cut is not enough to trigger a turnaround in sentiment.”
In Hong Kong, the Hang Seng China Enterprises Index fell 1%.
–With assistance from Winnie Hsu and April Ma.
©2024 Bloomberg L.P.
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cemagraphicsS&P 500 (SPX) investors were rattled in the trading week ending Friday, 19 July 2024. The index dropped two percent to close the week at 5,505.00.
That decline was triggered by the Biden-Harris administration’s announcement on Wednesday, 17 July 2024 that it was planning to expand its anti-free trade restrictions against China. The new sanctions would negatively affect U.S. advanced computer chip manufacturers, as well as Japanese and Dutch chipmakers that do large volumes of business with China.
The announcement sent the stock prices of U.S. chipmakers plunging, as the tech-heavy Nasdaq 100 index experienced its worst day since 2022, going on to lose 4.3% by the end of the week. The third-largest company in the S&P 500, AI chipmaker Nvidia (NVDA), lost $244 billion (8.75%) of its total value from the previous week as it dropped to a market capitalization of $2.9 trillion. Coincidentally, the size of that loss is about $1 billion less than the entire market cap of Advanced Micro Devices (AMD) after it shrank by 16.5% from its previous week’s market valuation.
The dividend futures-based model’s alternative future chart shows what appears to be a new Lévy flight event, in which investors have shifted their investment time horizon from the current quarter of 2024-Q3 to the more distant future quarter of 2025-Q2, which may coincide with the timing of when the new export rules may take effect.
Trading during the week showed little sign of any impact from the Saturday, 13 July 2024 assassination attempt against former U.S. President Donald Trump. The change in stock prices for the S&P 500 on Monday, 15 July 2024 fell well below the threshold of a 2% change from the previous trading day’s close that would qualify as interesting.
With corporate earnings season getting underway, it’s quite possible that the random onset of new information it provides may soon prompt investors to shift their focus back to the current quarter. Or not. It depends on what new information comes out in the weeks ahead.
Speaking of which, here are the week’s market-moving headlines.
Monday, 15 July 2024
- Signs and portents for the U.S. economy:
- Fed officials say U.S. inflation is heading lower to their 2% target:
- Bigger trouble, stimulus, bailouts developing in China:
- Nasdaq, S&P, Dow end higher on first trading day since assassination attempt on Trump
Tuesday, 16 July 2024
- Signs and portents for the U.S. economy:
- IMF says Fed officials shouldn’t rush to cut U.S. short term interest rates:
- Bigger stimulus, bailouts developing in China:
- BOJ, JapanGov officials secretly involved in propping up Japan’s currency, letting failing businesses finally go under:
- Possible growth signs developing in Eurozone:
- Dow jumps more than 700 points on UnitedHealth boost; rotation into small-caps continue
Wednesday, 17 July 2024
- Signs and portents for the U.S. economy:
- Fed officials “optimistic” inflation will drop to their 2% target, thinking about cutting rates:
- Bigger trouble, stimulus developing in China:
- Global chip sell-off slams Nasdaq, which notches worst day since 2022; Dow tops 41K
Thursday, 18 July 2024
- Signs and portents for the U.S. economy:
- Fed officials say they’re not okay yet with inflation, pitch new way for banks to tap into bailout money:
- Bigger trouble, stimulus developing in China:
- BOJ officials seeking ways to keep stimulus alive:
- ECB officials choose to sit on hands, will think about cutting rates later:
- Nasdaq, S&P slip, Dow sheds 500 points as tech rotation intensifies; Netflix in focus
Friday, 19 July 2024
- Signs and portents for the U.S. economy:
- Fed officials looking forward to getting inconclusive data:
- Bigger trouble, stimulus developing in China:
- BOJ officials to hold rates steady despite inflation pressure:
- ECB officials thinking about cutting Eurozone interest rates after passing on cuts this month:
- Wall Street posts worst week in three months; focus turns to upcoming earnings deluge
The CME Group’s FedWatch Tool forecast is mostly unchanged this week. It continues to anticipate the Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% until 18 September (2024-Q3), at which time, the Fed is expected to start a series of 0.25% rate cuts that will occur at 6- to-12-week intervals at least into mid-2025.
The Atlanta Fed’s GDPNow tool’s forecast of the annualized real GDP growth rate during 2024-Q2 continued rising to +2.7% from the +2.0% growth projected a week earlier. When the BEA’s official first estimate of GDP in 2024-Q2 is released near the near of July 2024, the GDPNow tool will shift to start forecasting 2024-Q3’s real GDP growth rate.
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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(Reuters) – U.S. stock index futures climbed on Monday as investors assessed the chances of a win by candidate Donald Trump in the November elections after President Joe Biden opted out of the race.
Biden announced he was exiting the race on Sunday, and endorsed Vice President Kamala Harris for the Democratic ticket.
Megacap stocks were up premarket, with Meta Platforms, Alphabet and Apple up between 0.5% and 0.8%, boosting the Nasdaq and S&P 500 futures.
At 4:17 a.m. ET, Dow e-minis were up 54 points, or 0.13%, S&P 500 e-minis were up 18 points, or 0.32%, and Nasdaq 100 e-minis were up 102.5 points, or 0.52%.
Shares of Trump-linked stocks such as Trump Media & Technology Group and software firm Phunware rose 2.8% and 1.4%, respectively.
Most U.S. Treasury yields, including the 10-year one, were down as Biden ended his reelection campaign after pressure from fellow Democrats who lost faith in his mental acuity and ability to beat Trump.
Biden’s exit from the presidential race could prompt investors to unwind trades betting that a Republican victory would increase U.S. fiscal and inflationary pressures, while some analysts said markets could benefit from an increased chance of divided government under the next administration.
“Donald Trump is still the solid favorite to win the presidential election, but betting markets suggest he has a slightly lower probability of beating Harris rather than Biden,” said Paul Ashworth, chief North America economist at Capital Economics.
“Harris will have a real chance to sell herself to the American public in the second presidential debate, currently scheduled for Sept. 10, although the Trump campaign could withdraw, not wanting to go toe-to-toe with the ex-attorney.”
Investors are bracing for high volatility this week, with a deluge of quarterly earnings on deck, including from two of the so-called Magnificent Seven – Google parent Alphabet and Tesla – to gauge the sustainability of the recent run-up in the top-tier high-momentum stocks.
Focus will also be on major data throughout the week including Personal Consumption Expenditures (PCE) price index data – the Federal Reserve’s preferred inflation gauge, durable goods and second-quarter GDP for clues on the U.S. central bank’s monetary policy trajectory.
Traders have broadly priced in a 25-basis-point rate cut by September and two cuts by the year-end, as per LSEG and CME’s FedWatch data.
Both the Nasdaq and the S&P 500 logged their steepest weekly declines since mid-April, with investors rotating out of expensive tech stocks to underperforming areas in the market, helping the small-cap Russell 2000 index post its second straight weekly gain.
Among other single movers, Nvidia rose 1.3% after Reuters reported the AI chip leader is working on a version of its new flagship AI chips for the China market that would be compatible with current U.S. export controls.
Shares of Bank of America lost 1.5% after Berkshire Hathaway sold about 33.9 million shares of the lender for around $1.48 billion over multiple transactions last week.
(Reporting by Shubham Batra and Ankika Biswas in Bengaluru; Editing by Sherry Jacob-Phillips)
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New residential construction picked up in June as builders focused on scaling up multifamily projects.
Housing starts rose 3% to a seasonally adjusted annual pace of 1.35 million units, according to data from the Census Bureau released Wednesday. Multi-family construction contributed to the gain last month. New construction of five or more units climbed to a seasonally adjusted annual pace of 360,000, up from 295,000 the month prior.
“The rise in housing starts and building permits in June is not as good as it seems at first glance, as it was driven by gains in the volatile multi-family sector, which we think will prove temporary,” Thomas Ryan, an economist at Capital Economics, wrote after the release.
Single-family starts and permits, though, falling 2.2% and 2.3% month over month, respectively. It was the fifth consecutive monthly drop in single-family permits, signaling further weakness ahead.
The drop reflects the “argument that homebuilders are hesitant to start new projects given the large build up of new homes for sale, which represents 9.3 months of supply at the current sales rate — the highest since November 2022,” Ryan added.
Homebuilder stocks lost steam Wednesday on the heels of the fresh government data. The SPDR S&P Homebuilders ETF (XHB) fell 0.66%. D.R. Horton, Inc. (DHI), the biggest US homebuilder, slipped 0.6%, while Lennar (LEN) and Toll Brothers (TOL) dropped 0.6% and 0.5%, respectively, during morning trading.
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Gold is one of the most reliable and accurate financial measures one can use. Historically, the Dow/gold ratio has provided a very good signal for silver bear and bull market cycles.
Here is a long-term silver chart compared to a long-term Dow/gold ratio chart:
On the silver chart (the top chart), I’ve highlighted the significant Dow/gold ratio peaks with a blue line. In every case, silver made a significant bottom some years after the Dow/gold ratio peak. These were signals for the (then coming) silver bull market.
Once in the bull market, significant silver peaks occurred within 8.5 years, as measured from the Dow/gold ratio peak (marked in red), with the Great Depression silver peak occurring the soonest (6 to 7 years after).
In October of this year, it will be 6 years since the Dow/gold ratio peak. That’s when we’ll be entering a phase where an interim peak becomes probable, but not before some big rallies manifest.
The takeaway from this should be that we are close to a period where massive (sustained) silver rallies will likely occur, seeing that the best rallies are often near the peaks and that silver actually rallied on a sustained basis for at least 2 years before each of those peaks.
Each of the silver peaks (indicated) was nearer the bottom of the Dow/gold ratio. The current level of the ratio is still closer to the 2018 peak, so it still has some way to go. Again, this means that the best rallies are still ahead.
This is even more interesting (not always in a good way) when considering that we are probably very close to monetary reform:
By Hubert Moolman
The post Silver is Very Close to a Sustained Multi-Year Rally appeared first on Golden State Mint Blog.
An employee handles one kilogram gold bullions at the YLG Bullion International Co. headquarters in Bangkok, Thailand, on Friday, Dec. 22, 2023.Chalinee Thirasupa | Bloomberg | Getty ImagesGold prices advanced Tuesday, on track for a record close as rising expectations of a September interest rate cut bolstered demand for bullion.
Spot gold gained 0.7% to $2,438.83 per ounce. Gold futures advanced 0.6% to $2,443.80. Earlier in the day, futures hit a high of $2,448.2, the best level since May 20 when it traded for as much as $2,454.20.
Gold prices hit all-time highs earlier this year before pulling back as the prospect of higher-for-longer interest rates dampened investor enthusiasm for the precious metal.
But interest in the asset has grown after June’s softer inflation data and some recently dovish comments from Federal Reserve Chair Jerome Powell combined to raise the odds of rate cuts coming this year. Markets are pricing in three quarter-percentage point cut coming this year, with the first slated for September, according to the CME FedWatch Tool, which uses 30-day fed funds futures to find probabilities.
A weakening dollar has also supported demand for bullion. On Tuesday, the U.S. greenback rebounded after falling to a five-week low.
“Interest to ‘buy-the-dip’ remained prevalent among investors amid strong sentiment towards gold, which is likely why the market was quick to rally on soft U.S. data prints and dovish Fed expectations,” UBS’ strategist Joni Teves said in a note on Friday.
“With the market sitting just above the psychological $2400 level, we think risks are skewed to the upside,” Teves continued. “We think positioning remains lean and there’s space for investors to build gold exposure.”
Gold rallied to record highs in the first half of 2024 on the back of a multi-year spike in demand from central banks around the world, as mounting global geopolitical risks boosted interest in the safe haven asset. According to UBS, central bank buying of bullion is the highest it’s been since the late 1960s.
“With some central banks now questioning the safety of holding USD- and EUR-denominated assets (following the financial and debt crises and more recently the war in Ukraine), many are choosing to instead fill their reserves with gold,” read a note last month from UBS.
On the flip side, gold has also come under pressure from lackluster Chinese demand. In a recent note, Citi said China central bank and retail consumption of gold is expected to remain weak over the summer, but noted “underlying strength” in demand amid a slow recovery in the China real estate market.
Gold mining stocks also advanced on Tuesday. The VanEck Gold Miners ETF gained 1.2% in the premarket, on pace for a fifth winning day in six. The U.S.-listed shares of Harmony Gold and Gold Fields rose 6% and 4%, respectively. The U.S. listed shares of DRDGold popped more than 5%.
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Former President Trump officially won the GOP nomination with his vice presidential pick, Sen. JD Vance, in tow.
The Republican senator from Ohio, a former Marine, private equity alum and author of a bestseller-turned-Netflix special, received the nod on Monday, two days after the former president narrowly escaped an assassination attempt during a rally in Pennsylvania.
“Prior to this horrific event, the markets were already sniffing out, subsequent to the debate, a Trump victory. Now, investors are sniffing out a what? A ‘red sweep,'” said Jason Katz, UBS managing director and senior portfolio manager, on “Varney & Co.,” predicting what could unfold should the GOP ticket win the White House. “The tax laws of 2017 become permanent, maybe you get additional tax cuts. You will have much less erroneous regulations; we could see a very big pickup in M&A activity,” he detailed.
ELON MUSK HAILS JD VANCE, TRUMP’S VP PICK
Sen. JD Vance and wife Usha Chilukuri Vance celebrate as he is nominated to be Donald Trump’s vice president on the first day of the Republican National Convention at Fiserv Forum in Milwaukee on July 15, 2024.FED’S POWELL CONDEMNS TRUMP ASSASSINATION ATTEMPT: A ‘SAD DAY FOR OUR COUNTRY’
The Dow Jones Industrial Average closed firmly above 40,000 on Monday, a new record high, up 6.7% this year, with the S&P 500 just shy of its all-time high, up 18% this year. The tech-heavy Nasdaq Composite has gained 23%, closing just below its record high reached this month.
READ ON THE FOX BUSINESS APP
With the Republican National Convention underway, investors will be listening for details on whether the GOP’s policy platform can keep the momentum for equities going.
LIVE UPDATES FROM THE RNC
At a recent “How will the Election Impact the Markets?” Ameriprise virtual roundtable in late June, attended by FOX Business, Anthony Saglimbene, chief market strategist at Ameriprise Financial, said investors may be subject to more volatility through November.
“As the markets start to discount not only who sits in the White House but where control of Congress lies, that could create a period of volatility. But what we generally see historically is that no matter how the results shake out, volatility ebbs back to more normalized levels post-election day,” he noted, and then investors turn back to fundamentals. “The level of interest rates, growth and corporate profits, and obviously the trajectory for monetary policy, these are the four things that generally drive the markets,” he said.
Republican presidential candidate Donald Trump is rushed offstage during a rally on July 13, 2024, in Butler, Pennsylvania.The team was not available to comment on whether there will be any market or election impact after the assassination attempt on Trump over the weekend.
FED DOESN’T NEED TO WAIT ON RATE CUTS
Outside the upcoming election, tailwinds for the economy are emerging. On Monday, Federal Reserve Chair Jerome Powell said policymakers are seeing positive inflation data and don’t necessarily need to sit idle for inflation to hit their preferred target rate.
Federal Reserve Bank Chair Jerome Powell“The implication of that is that if you wait until inflation gets all the way down to 2%, you’ve probably waited too long because the tightening that you’re doing, or the level of tightness that you have, is still having effects, which will probably drive inflation below 2%,” Powell told attendees at the Economic Club of Washington, D.C.
The consumer price index fell 0.1% in June vs. May, the first monthly drop since May 2020. Still, year-over-year prices remain elevated at 3%.
Currently, 89% of market participants are pricing in a September rate cut, according to the CME’s FedWatch Tool, which gauges rate moves. No action is predicted at the July meeting.
Russell Price, chief economist at Ameriprise, expects one rate cut in September and another in December but says the health of the U.S. consumer is a bigger driver of the economy.
“What’s really most important is consumers. Consumer spending has eased a little bit. In my mind, consumers are still doing just fine. But they have gone a little bit long in the tooth when it comes to the amount of spending they did on goods a few years ago and more recently on services, particularly on travel and vacations and the like. But generally, consumers, though, are [in] good financial shape,” he noted.
The post Trump, JD Vance and stock market momentum: Here’s why appeared first on Golden State Mint Blog.
LilliDay
IntroAnalysts have been expecting a recession for years now, but the S&P 500 (NYSEARCA:SPY) does not care and continues to rise. During 2024 it recorded new all-time highs several times, and those who waited for a crash to invest in it probably regretted not doing so earlier. Those who sold in panic I hope have realized that it always pays to stay invested, even if everyone expects a new 1929 soon.
At the end of 2023 I wrote an article on the 2024 of S&P 500 where I showed my optimism for the first half of the year, thanks to the AI hype, but I underestimated the magnitude of this trend. I expected a new all-time high but not that it would touch $5,600; never did I think Meta would grow an additional 50% in a few months and Nvidia by 160%. It was a pleasant surprise for my portfolio, but I think it is time to question the sustainability of this growth.
Obviously, I will continue with my buy & hold strategy no matter what, but the concerns I had at the end of 2023 are gradually materializing and may halt the growth of the S&P 500. In the second half of 2024, I expect there will be many more challenges to overcome than in the first 6 months, as interest rates are only now really hitting the economy. Empirically, the consequences of a rate hike have been shown to have a lagging effect of about 12 to 18 months on the economy, and we are only now experiencing them in full.
My S&P 500 price target for late 2024 was only $3,600, a highly improbable figure after such a strong rise in big tech companies. In any case, I would not rule out a good portion of the gains made so far being wiped out. In my opinion, it is necessary for the Fed to start cutting rates as early as the next meeting, otherwise an economic slowdown/recession at the end of the year is inevitable, which is something I already anticipated in my previous article.
I would like to emphasize again that this article is not intended to spread panic and entice you to take profits on the best performing companies; just take it as food for thought. As I have previously mentioned, my view about the investment world is totally different from doing market timing. I think it is always worth staying invested and taking advantage of slumps to invest more, as long as you have chosen the right companies, of course.
The economy is beginning to creakHigh interest rates are beginning to hurt the economy, particularly the labor market. No one doubts its current resilience. In fact, the unemployment rate is only 4.10%, but there are signs that do not bode well for the coming months.
Investing.com
First of all, from April onward there has been a slow but steady deterioration. Among other things, for three months in a row, analysts’ estimates have been too optimistic.
In general, we cannot criticize the current level of unemployment, but at the same time we cannot base our analysis of the labor market solely on it. First of all, because it is a lagging indicator, so it does not give us any information about the future, and secondly, its volatility can change drastically depending on the macroeconomic environment we are in. Let me give you a real-life example to make my point.
In June 2008, the unemployment rate was 5.60%, and no one expected it to rise much higher, not even the FOMC.
Federal Reserve
The expected range for the 2008 unemployment rate was between 5.50% and 5.80%, in 2009 between 5.20% and 6.10%. At the end of 2008, the unemployment rate rose to 7.30%, yet the estimates had been made a few months earlier. In just 6 months, the situation changed dramatically, but the biggest error concerns the estimate for 2009: the unemployment rate at the end of the year reached 9.90%.
In light of these considerations, it seems clear that the unemployment rate is not suitable for understanding the future of the labor market, and therefore not useful in our investment theses. It gives us information about the past, but we are interested in the future.
What can help us instead is the Sahm Rule Recession Indicator, created by the macroeconomist of the same name, Claudia Sahm. Often, to predict a recession, we look at the inversion of the yield curve, but this other indicator has also proven flawless at predicting all recessions since the 1970s. But how does it work?
The rule is very simple and involves relating the value of the current three-month moving average unemployment rate to the value of the lowest three-month moving average unemployment rate over the past 12 months. In other words, it seeks to show an abnormal increase in the unemployment rate compared with what has been recorded over the past year. Its purpose is thus to predict whether the unemployment rate is about to shoot up, much more than the market might expect.
Federal Reserve Bank of St. Louis
Every time the indicator has exceeded the 0.50 threshold there has been a recession; today we are at 0.43 and the figure is rather worrying since it is steadily worsening. Of course, the Sahm Rule is not law, so it could be wrong, but I, personally, rely on it a lot. After all, I have no reason to think that this time is different. It is not certain that we will touch 0.50 in a few months, but at the same time I wonder why there has to be an improvement.
Interest rates are still very high, and the Fed, unlike other central banks, remains quite reluctant to reduce them. It wants to make sure 100% that inflation has been defeated, which is agreeable, but economics is not a certain science and historically, the timing of central banks has never been perfect.
I would like to point out that I don’t think it is their fault, recessions are part of the business cycle and will always be there. An economy cannot grow all the time, and surely a mild recession is better than out-of-control inflation. The point is that the magnitude of the recession cannot be known in advance, and keeping rates high even though inflation is falling may prove to be the wrong choice.
Right now, no one knows for sure what the right choice is; my view is that rates should be cut by 25 basis points as early as the next meeting, so one cut in 2024 is not enough. Only in a few years will we know whether the Fed has made the right choice, and at that point it will be very easy to judge.
Returning to the analysis of the labor market, there are other signs that puzzle me.
Federal Reserve Bank of St. Louis
Federal Reserve Bank of St. Louis
Since the pandemic, both full-time and part-time jobs have achieved significant increases, however, since January 2023, full-time jobs have halted their run. They are even declining from the end of 2023.
In other words, employers are beginning to prefer part-time rather than full-time hires. This could be due to less demand for their products/services, and therefore it is no longer necessary to have as many full-time employees.
In addition, another interesting data point is that of continued claims.
Federal Reserve Bank of St. Louis
More and more people are struggling to find new employment, and while the current figure is not alarming, there has been a rather rapid deterioration since late April 2024. This is something that needs to be monitored, not least because as long as rates remain high, I see no reason why continued claims should improve.
Overall, the labor market data are not positive, and for the first time in several years (with the exception of the pandemic) we can see the first cracks. In any case, I would like to emphasize that I do not think we are facing a new 2008, it would not make sense to make this kind of analogy. Every recession is different, although there are common features. The motivations behind the 2008 crisis are different from those that might trigger a recession in late 2024-early 2025.
To some extent, one aspect that perhaps can connect them might be people’s inability to meet their loans on credit cards.
Federal Reserve Bank of St. Louis
Until 2021, delinquency rates were at historic lows, but since rates were raised, there has been a rather steep increase. While current levels are not too different from the historical average, what is worrying is that this upward trend has never stopped.
In other aspects, such as the inability of households to pay their mortgages, we are on two totally different tracks.
Federal Reserve Bank of St. Louis
U.S. households have never shown a sign of weakness in recent years and delinquency rates have declined quarter by quarter.
Finally, to conclude the topic on the impact of high interest rates on the economy, I must mention the GDP growth estimates for Q2 2024.
Federal Reserve Bank of Atlanta
Real GDP is expected to grow by 2% in Q2 2024, a positive figure but halved from just a few months ago. In a very short time frame, expectations have deteriorated radically, but we still cannot call it an economic contraction.
Basically, the economy remains solid, but high interest rates are hurting the expectations for future growth, yet the S&P 500 is not discounting any of this.
TradingView
The index continues to record new all-time highs, driven mainly by the most influential tech companies active in artificial intelligence. As much as this pleases me (Meta is the top position in my portfolio), I believe that sooner or later, investors will have to do a reality check, since this upward trend cannot be sustainable.
The market is just waiting for the first-rate cut to feed the bull market, which is quite controversial since a recession has always followed the pivot in the past decades. If we based on what has happened in the past, we should hope that it will never happen.
@kurtsaltrichter X profile
In any case, it should be made clear that it is not the first-rate cut that triggers a recession, but the wrong timing with which it occurs. Theoretically, rates should be cut gradually, but it almost always ends up with panic cutting, as happened both during the early 2000s and during the Great Financial Crisis.
TradingView
To date, the market is discounting only one cut of about 25 basis points by the end of 2024, too little in my view to curb the continued deterioration of the labor market. Moreover, with the S&P 500 making all-time highs every week, it is clear that much of the investor base is discounting a future scenario in which the Fed will succeed in fighting inflation without triggering a recession. As much as I might hope that this is the case, the track record of the past few decades tells an entirely different story. In other words, I think the market is not considering at all the option that something could go wrong, and that is what worries me.
What has sustained the U.S. economy to dateSince the Fed raised rates, the word recession was in many more articles/journals. High rates coupled with the end of QE looked as if it might deal the death blow to the S&P 500’s climb, but actually, it did not. Excluding a brief pessimistic interlude that ended in late 2022, and the flash crash of March 2020, investors have not experienced a real bear market since 2008. Yet, the conditions for it to happen were there.
The reason the most anticipated recession of all time never happened is because expansionary fiscal policy was able to offset the Fed’s restrictive moves.
Federal Reserve Bank of St. Louis
Thus, even though the Fed Funds Rate has exceeded 5%, when the fiscal deficit/ GDP greatly exceeds the historical average, the economy is being held up artificially. In 2023, this figure was -6.19%, in 2022 -5.34%, in 2021 -11.76% and in 2020 -14.69%. I mean, I can understand that in 2020-2021, we were facing an unprecedented global pandemic, but the deficit in the next two years is still much higher than it was historically. The large fiscal stimulus has fueled a sharp rise in the stock market, regardless of the Fed’s actions. This is probably why rates have not yet been lowered, because the fiscal deficit is still too high. Something might change after the presidential election.
What is worrying is that this kind of deficit is becoming the norm, which will lead to negative consequences in the long run.
CBO’s Budget Projections
Total deficit estimates do not seem to be improving in the next few years, quite the contrary. Even if the United States is the world’s leading power, it does not mean that it can borrow as much as it wants, because this process involves a gradual distrust of the quality of its debt. In particular, if there is no reversal of the trend, the cost of net interest will become a burden that will limit economic growth.
Today, we are close to reaching the trillion mark in net interest, and according to estimates, it will be worse in the future. Its weight compared to GDP could reach 3.90% in 2034.
In other words, the large deficit may have postponed the recession, but long-term economic growth will suffer. Of course, the rating agencies are aware of all this, which is why both Fitch and S&P no longer consider U.S. debt AAA. This does not mean that the United States is at risk of default, it simply needs to avoid running deficits as if we were in the middle of a world war. Once the deficit is contained, there will no longer be the driver that is offsetting the negative effects of restrictive monetary policy.
Moreover, the deficit issue may also be of interest to investors concerned about the re-inversion of the yield curve. Let me explain further.
Federal Reserve Bank of St. Louis
We all know that yield curve inversion has predicted all past recessions, and the main trigger is its re-inversion. In any case, re-inversion does not always happen in the same way.
- In the first case, it can occur because T-bills are bought more than T-bonds, so it is called bull steepening.
- In the second case, the exact opposite can happen, that is, T-Bonds are sold more than T-Bills, so it is called bear steepening.
The second case is the one we are most interested in at the moment, because short rates will probably remain high for a long time to come, while long-term rates may see an increase due to the problems addressed earlier regarding the huge fiscal deficit. To put it another way, many expect re-inversions at the time when rates will be cut several times (this is many quarters from now) but actually, it could happen before that time. Certainly, worse-than-expected inflation data could speed up this process, as T-bond yields would surge upward.
The Budget and Economic Outlook: 2024 to 2034.
EUR/USD exchange rate and AI bubbleMy bearish thesis on the second half of 2024 is mainly based on what has been discussed so far, but there are other factors to consider that I will dwell on a bit.
The first is the EUR/USD exchange rate, as it is affected by the monetary policy of the Fed and ECB. The latter has already started to cut rates, while the Fed may not even cut rates in 2024, although this is an unlikely scenario. Regardless, it is evident that the ECB is more inclined than the Fed regarding a more expansionary monetary policy, and this could depreciate the euro against the dollar. While part of this assumption is already discounted in the current exchange rate, in my view there may be a case for a weaker euro than expected.
ECB inflation dashboard
Taking a look at the HICP in detail, we can see that there are some countries where there is a risk of deflation rather than high inflation. Italy’s HICP is only 0.80%, for Finland and Latvia 0.40% and 0% respectively. At the same time, others such as Belgium and Croatia are well above 4%, Portugal and Spain slightly below. There is a great diversity in Europe in terms of inflation rate, and keeping the main refinancing operations rate at 4.25% can be detrimental to countries with inflation below 1%.
In short, I think there are conditions for the ECB to cut rates faster than expected in 2024, resulting in an appreciation of the dollar against the euro. If it does not, some countries may experience a severe recession. This is important for any U.S. company that sells in Europe, as imports will be hurt.
Finally, one last aspect I would like to address is the issue of artificial intelligence. You have been hearing about the famous AI bubble for months now, so I will not dwell on it too much.
In my opinion, it is pointless to make comparisons with the tech bubble of early 2000; we are in a totally different situation. The tech companies that are fueling the bubble today are giants that generate tens of billions of dollars in free cash flow every year, as well as having negative net debt: the companies in vogue in 2000 were not even generating profits.
Bubble or no bubble, justified valuation or not, what is certain is that these giants cannot grow that much every single year and have a huge weight on the S&P 500.
TradingView
Historically, consumer staples (XLP) have never experienced such a divergence in returns compared to the tech sector (XLK). I do not doubt that today’s tech companies are even sounder than many consumer staples, but such a divergence is too marked not to expect a return to the mean. Simply put, I think it makes more sense at the moment to add to the portfolio those businesses that we consider boring rather than those that are recently in the spotlight.
ConclusionEveryone was pleased with this huge bull run, but like every good thing, sooner or later, there is an end. No one can know when, but based on the data analyzed in this article, I would say that a crucial time will be the end of the year. The outcome of the presidential election will have a major impact on the issue of the fiscal deficit, and by that time the Sahm Indicator may have already crossed the 0.50 threshold. At the same time, the yield curve may also have re-inverted due to bear steepening.
In my view, the deterioration of the labor market can only be stopped (if it is not already too late) if the Fed starts cutting rates as early as the next meeting; otherwise it risks getting the timing wrong, as it almost always did.
My strong sell rating refers to a second half of the year far more disappointing than the first, whose difficulties could perpetuate into 2025. We will see what happens, I certainly will not sell everything in a panic even in the event of a 15-20% collapse from current levels. Having a long-term approach allows you to see recessions as an opportunity to be exploited and not as something negative.
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BrianAJacksonChinese central bank gold bullion purchases lagged in June, contributing to flat prices for the month. Agnico Eagle’s Ontario, Canada mine may emerge as a promising prospect for the gold industry.
Monthly gold market and economic insights from Imaru Casanova, Portfolio Manager, featuring her unique views on mining and gold’s portfolio benefits.
Mixed News Drives Flat Prices in MayAfter reaching a new all-time high in May, offsetting forces kept gold unchanged during the month of June. Gold traded as high as $2,376 per ounce on June 6. On June 7, gold closed at its monthly low of $2,294 following news that the Central Bank of China did not buy any gold bullion in May. Global central bank gold buying has been one of the main drivers of this year’s gold rally, with the Chinese central bank behind a large percentage of those purchases. The People’s Bank of China has been reporting bullion purchases since November 2022, 18 consecutive months of buying. The pause in buying likely raised concern among gold market participants that this important driver of gold demand could weaken. In contrast, gold investment demand has been in decline since April 2022, but in June, global holdings of gold bullion-backed exchange traded products finally registered inflows, albeit small, after 12 consecutive months of net outflows. Is Western investment demand, the main driver of gold rallies historically, staging a comeback?
Gold also gathered some support from inflation readings (May CPI and PCE) that were interpreted by the market as increasing the likelihood of interest rate cuts by the U.S. Federal Reserve (Fed). At the end of June, the market was pricing in two 25 basis point cuts in 2024, compared to only one 25 basis point cut being priced in at the end of May. Lower real interest rates have historically been supportive of higher gold prices. Gold closed at $2,326.75 per ounce on June 28, essentially unchanged from its May 31 close of $2,327.33.
Rally in Miners Stalls (Despite Positive Outlook)Gold stocks did not fare quite as well as the metal in June; NYSE Arca Gold Miners Index (GDMNTR)1 and the MVIS Global Juniors Gold Miners Index (MVGDXJTR)2 were down 3.71% and -6.33%, respectively. We are disappointed with this outcome. The lack of investor interest in gold as an asset class in recent years has frequently led to gold stocks underperforming the metal, not only in a declining gold price environment, which is justified but also in periods of flat or sideways gold price action. There were no sector-wide results, updates, or any major events that could explain the generally widespread underperformance across the sector. Quite the opposite, in fact. Many companies provided project updates during the month of June that, in aggregate, we viewed as largely positive.
We took the time to catalogue the announcements, news, and updates released by the companies in our gold mining universe during the month of June. We logged approximately 45 company releases including drilling results; completion of debt and equity financing; completion of mergers and acquisitions; new economic studies, as well as maiden resource estimates, and permits and regulatory approvals for several projects; construction updates, including declaration of first gold pour, from several new mines approaching production; mine specific news and production guidance revisions; comprehensive reviews of companies and assets via investor days; and a new life of mine plan for one of the largest gold mines in the world.
Our original assessment, deeming the news flow broadly positive, was supported by our classification of each release as having the potential of being positive/neutral or negative to the outlook of the company. We classified over 40 of the updates as potentially positive/neutral and only 4 as potentially negative. For reference, the negative news included short-term production guidance downgrades due to weather/geotechnical-related disruptions, and a serious incident at a single asset, junior company (not held by the Strategy) that halted its operations. Fundamentally, in our opinion, any signs of trouble or weakness were significantly outweighed by signs of strength and health of the sector.
A Closer Look at Agnico Eagle’s Detour LakeWe had the opportunity to visit Agnico Eagle’s (5.01% of Strategy net assets) Detour Lake mine in Ontario. The mine and its potential can certainly be highlighted as a bright spot for the gold industry. We toured the open pit, the processing plant, the tailings dam, the site where the underground exploration ramp portal will be constructed, the maintenance shop and the training center (fleet operating simulator). Overall, our impressions were positive. The mine, the plant and the team showed well. The site visit followed the release of a new life of mine plan and underground project for the asset. The company also hosted a two-hour technical session to review the details of the new plan and project ahead of the site visit. The 2024 plan updates the existing open pit mine production profile and incorporates updated costing. The company has also completed a preliminary economic assessment for a proposed underground mining and mill throughput optimization project, demonstrating the potential to increase the Detour Lake mine’s overall production to an average of approximately one million ounces of gold per year over a 14-year period, starting in 2030.
Portfolio Manager Imaru Casanova visiting Agnico Eagle’s (AEM, AEM:CA) Detour Lake mine in Ontario.
Interested in digital assets? Receive the latest updatesAnnual production is expected to increase to approximately one million ounces per year from 2030 to 2043. This is an increase of approximately 43% or 300,000 ounces of gold annually, when compared to average annual production from 2024 to 2029. From 2044 until 2054, the mine is planned to process stockpile material, producing an average of about 300 thousand ounces of gold per year. Additional exploration has the potential to add ounces to the mine plan in future years and extend the life of the mine beyond 2054. With costs declining as production increases over the next twenty years, the cash flow generation of Detour Lake expands significantly (see chart below). With a pathway to one million ounces, Detour Lake has the potential to move from being one of the 10 largest gold mines in the world to being one of the top 5 gold mines in the world, in one of the most attractive mining jurisdictions. There is a lot for Agnico Eagle investors to be excited about, providing a great opportunity for Agnico to demonstrate why they are the highest quality gold mining company in the world, and solidify the case behind its historical valuation premium relative to its peers.
Agnico Eagle’s “Pathway to One Million Ounce Producer”
1 Higher Cash Cost in stockpile reclaim period reflects drawdown of long-term low-grade stockpiles, lower head grade, and re-handling costs. Open Pit feed offset by Underground to Stockpile Reclaim period is 52Mt at 0.5g/t. 2 Free cash flow ((FCF)) represents the cash that a company generates after accounting for cash outflows to support operations and maintain its capital assets, and is non-GAAP measure. Source: Agnico Eagle. Data as of June 2024. Free cash flow ((FCF)) represents the cash that a company generates after accounting for cash outflows to support operations and maintain its capital assets.
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All company, sector, and sub-industry weightings as of June 30, 2024, unless otherwise noted.
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1 NYSE Arca Gold Miners Index (GDMNTR) is a modified market capitalization-weighted index comprised of publicly traded companies involved primarily in the mining for gold.2 MVIS Global Junior Gold Miners Index (MVGDXJTR) is a rules-based, modified market capitalization-weighted, float-adjusted index comprised of a global universe of publicly traded small- and medium-capitalization companies that generate at least 50% of their revenues from gold and/or silver mining, hold real property that has the potential to produce at least 50% of the company’s revenue from gold or silver mining when developed, or primarily invest in gold or silver.
Personal consumption expenditures (PCE) is the primary measure of consumer spending on goods and services in the U.S. economy.
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Gold investments are subject to the risks associated with concentrating its assets in the gold industry, which can be significantly affected by international economic, monetary and political developments. Investments in gold may decline in value due to developments specific to the gold industry. Foreign gold security investments involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, or political, economic or social instability. Gold investments are subject to risks associated with investments in U.S. and non-U.S. issuers, commodities and commodity-linked derivatives, commodities and commodity-linked derivatives tax, gold-mining industry, derivatives, emerging market securities, foreign currency transactions, foreign securities, other investment companies, management, market, non-diversification, operational, regulatory, small- and medium-capitalization companies and subsidiary risks.
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WASHINGTON (Reuters) – U.S. producer prices increased moderately in June, further confirmation that inflation had resumed its downward trend and strengthening the case for a September interest rate cut.
The producer price index for final demand rose 0.2% last month after being unchanged in May, the Labor Department’s Bureau of Labor Statistics said on Friday. Economists polled by Reuters had forecast the PPI nudging up 0.1%.
In the 12 months through June, the PPI increased 2.6% after advancing 2.4% in May.
The government reported on Thursday that consumer prices fell for the first time in four years in June amid cheaper gasoline and a broad deceleration in the costs of goods and services, including rents.
The tame inflation data followed news last week of a rise in the unemployment rate to a 2-1/2 year high of 4.1%.
With the Federal Reserve now wary of labor market weakness, economists and financial markets are increasingly betting on a rate cut in September, with another reduction in borrowing costs expected in December.
Fed Chair Jerome Powell acknowledged the improving inflation environment during his testimony before lawmakers this week, but also highlighted the risks to the labor market saying “we have seen considerable softening.”
The U.S. central bank has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range since last July. It has hiked its policy rate by 525 basis points since 2022.
(Reporting By Lucia Mutikani; Editing by Andrea Ricci)
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Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., July 3, 2024. REUTERS/Brendan McDermid/File Photo(Reuters) – Futures tied to the S&P 500 and the Nasdaq 100 indexes paused near record levels on Friday ahead of results from JPMorgan, Citigroup and Wells Fargo that will throw second-quarter earnings season into high gear.
JPMorgan Chase, the largest U.S. lender, is expected to report a decline in quarterly profit, with analysts expecting large lenders to set aside more money to cover deteriorating loans.
Shares of both JPMorgan and Citigroup were marginally down ahead of results.
As the S&P 500 and Nasdaq scale new peaks, investors are hoping for strong profit growth from companies beyond the heavyweight tech names such as Nvidia so that the U.S. stocks rally can broaden out.
A rotation out of high-flying large cap stocks in favor of small-cap shares knocked back the tech-laden Nasdaq by nearly 2% on Thursday after a surprise fall in U.S. consumer prices solidified bets of a September interest rate cut.
Traders now see an 86% chance of a rate cut in September, up from 72% a week ago, according to CME Group’s FedWatch Tool.
For further evidence of cooling inflation, investors will look to producer prices data for June and the University of Michigan’s consumer survey data later in the day.
At 04:46 a.m., Nasdaq 100 E-minis fell 9.25 points, or 0.05%, and S&P 500 E-minis rose 4.75 points, or 0.08%. The Dow E-minis gained 39 points, or 0.1%.
Tesla dipped 1.4% as UBS downgraded the electric vehicle maker to “sell”.
U.S. regional lender Bank of New York Mellon and industrial supplies maker Fastenal are also scheduled to report.
(Reporting by Medha Singh in Bengaluru; Editing by Saumyadeb Chakrabarty)
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A closely-watched report on US inflation showed consumer price increases cooled further during the month of June, according to the latest data from the Bureau of Labor Statistics released Thursday morning.
The Consumer Price Index (CPI) declined 0.1% over the previous month and increased just 3.0% over the prior year in June — a deceleration from May’s flat month-over-month increase and 3.3% annual gain in prices. Both measures beat economist expectations of a 0.1% monthly increase and a 3.1% annual gain.
Notably, this is the first time since May 2020 that monthly headline CPI came in below 0%. It’s also the slowest annual gain in prices since March 2021.
On a “core” basis, which strips out the more volatile costs of food and gas, prices in June climbed 0.1% over the prior month and 3.3% over last year — cooler than May’s data. Economists had expected a 0.2% monthly uptick in core prices and a 3.4% year-over-year increase.
It was the smallest month over month increase in core prices since August 2021.
Markets jumped on the heels of the report, with the 10-year Treasury yield (^TNX) falling about 9 basis points to trade around 4.2%.
Inflation has remained stubbornly above the Federal Reserve’s 2% target on an annual basis. But recent economic data has helped fuel a narrative that the central bank should cut rates sooner than later.
Immediately following Thursday’s encouraging inflation data, markets were pricing in a roughly 87% chance the Federal Reserve begins to cut rates at its September meeting, up from 75% a day prior, according to data from the CME Group.
The data adds onto other rate cut signals across the labor market and economy.
On Friday, the Bureau of Labor Statistics showed the labor market added 206,000 nonfarm payroll jobs last month, ahead of the 190,000-plus expected by economists. However, the unemployment rate unexpectedly rose to 4.1%, up from 4% in the month prior. It was the highest reading in almost three years.
Notably, the Fed’s preferred inflation gauge, the so-called core PCE price index, showed inflation eased in May. The year-over-year change in core PCE came in at 2.6% over the prior year in May, in line with estimates and the slowest annual gain in more than three years.
Federal Reserve Board Chair Jerome Powell speaks at a news conference at the Federal Reserve in Washington, June 12, 2024. Powell testifies to the Senate Banking Committee on Tuesday, July 9, 2024. (AP Photo/Susan Walsh, File) (ASSOCIATED PRESS)Shelter prices cool, energy index fallsNotable call-outs from the inflation print include the shelter index, which rose 5.2% on an unadjusted, annual basis, a slowdown from May. The index rose 0.2% month over month.
Sticky shelter inflation has largely been blamed for higher core inflation readings, according to economists, but June’s print showed more signs of cooling.
The index for rent and owners’ equivalent rent (OER) each rose 0.3% on a monthly basis, slightly cooler than May’s rise and the smallest increases in these indexes since August 2021. Owners’ equivalent rent is the hypothetical rent a homeowner would pay for the same property.
Meanwhile, lodging away from home decreased 2% percent in June, after falling 0.1% in May.
Energy prices also fell again in June, driven by a significant drop in gas prices. The index declined another 2% over the prior month. On a yearly basis, the index was up 1%.
Gas prices fell 3.8% from May to June after falling 3.6% the previous month.
The food index increased 2.2% in June over the last year, with food prices rising 0.2% from May to June — proving to be a sticky category for inflation. The index for food at home rose 0.1% month over month while food away from home increased another 0.4%.
Other indexes that increased in June included motor vehicle insurance, household furnishings and operations, medical care, and personal care.
The indexes for airline fares, used cars and trucks, and communication were among those that decreased over the month, according to the BLS.
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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Inflation has remained stubbornly above the Federal Reserve’s 2% target on an annual basis. But recent economic data has helped fuel a narrative that the central bank should cut rates sooner than later.
Immediately following Thursday’s encouraging inflation data, which showed headline inflation falling month over month for the first time since May 2020, markets were pricing in a roughly 89% chance the Federal Reserve begins to cut rates at its September meeting, up from 75% a day prior, according to data from the CME Group.
The data is the latest to build the case for Fed rate cuts.
On Friday, the Bureau of Labor Statistics showed the labor market added 206,000 nonfarm payroll jobs last month, ahead of the 190,000-plus expected by economists. However, the unemployment rate unexpectedly rose to 4.1%, up from 4% in the month prior. It was the highest reading in almost three years.
Notably, the Fed’s preferred inflation gauge, the so-called core PCE price index, showed inflation eased in May. The year-over-year change in core PCE came in at 2.6% over the prior year in May, in line with estimates and the slowest annual gain in more than three years.
“The decline in the consumer price index between May and June won’t stick but it strengthens the case for the Federal Reserve to begin cutting interest rates in September, particularly as the labor market has softened,” wrote Oxford Economics chief US Economist Ryan Sweet.
Still, the economist warned, “We caution about reading too much into the decline in the CPI in June and don’t believe that this is the new trend.”
Seema Shah, chief global stratgiest at Principal Asset Management, agreed the latest numbers “put us firmly on the path for a September Fed rate cut” but that “a July policy cut is still off the table.”
“Not only would it spark questions of ‘what do they know about the economy that we don’t know?’ but the Fed still needs to gather additional evidence of waning price pressures to be absolutely certain of the inflation path.”
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(Kitco News) Zimbabwe's plan to sell gold coins to tame inflation is a missed opportunity to build better gold reserves, according to the International Monetary Fund (IMF).
Over the summer, Zimbabwe's central bank started selling gold coins to fight inflation. The idea was that gold coins would provide a store of value to the country's plunging currency and give the population an alternative to the U.S. dollar.
The one troy-ounce 22-carat gold coins named 'Mosi-Oa-Tunya,' meaning "Smoke that Thunders" in reference to Victoria falls, have been very popular. After the first week of being launched, which was at the end of July, the country's central bank sold 1,500 gold coins.
Each gold coin has a serial number and can be bought with local currency, the U.S. dollar, and other foreign currencies. The price is set based on the international price of gold and production costs. As of this week, each gold coin was going for $1,755, according to the central bank's website.
The owners of the coins can convert them into cash or make a trade-in whenever needed. The gold coins could also be used as legal tender to transact in or as a security for loans.
The goal is to lower the demand for U.S. dollars following the collapse of the Zimbabwe dollar. Earlier, Zimbabwe revealed plans to adopt the U.S. dollar as legal tender for the next five years to stabilize the country's exchange rate. This is the second time in more than a decade that Zimbabwe is legalizing the greenback as legal tender.
Surging inflation and currency devaluation have made things difficult for Zimbabwe's population. The country's annual inflation accelerated by 285% in August. In response to the crisis, Zimbabwe's central bank has more than doubled its policy rate from 80% to 200%, a new record.
But the IMF sees this as a missed opportunity on the gold reserves side. "The sale of gold coins has contributed to withdrawing Zimbabwe dollar liquidity from the market, though it represents an opportunity cost in terms of foregone reserves for the Reserve Bank of Zimbabwe," Bloomberg quoted an IMF spokesperson as saying Thursday.
Earlier in the week, the IMF noted that Zimbabwe’s monetary policy moves were helping with currency devaluation. “The recent tightening of monetary policy and the contained budget deficits are policies in the right direction and have contributed to the narrowing of the parallel market exchange rate gap,” the IMF said Monday.
Due to the popularity of one-ounce gold coins, the country's central bank is also working on releasing a tenth of an ounce coins.
The gold coin idea also inspired the country to try incentivizing the nation's biggest gold miners to produce above the state-planned targets.
Large miners are being encouraged by the government to produce more gold. And those who exceed their targets can receive 80% of the payment for the additional output in foreign currency. The current payment plan is a 60-40 split between foreign and local currency payments.
Zimbabwe's gold output is already up 47% this year, with the government looking for gold mining to account for a third of 2023's overall mining industry targeted $12 billion in revenue. Continue reading →
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(Bloomberg) -- The price of copper — used in everything from computer chips and toasters to power systems and air conditioners — has fallen by nearly a third since March. Investors are selling on fears that a global recession will stunt demand for a metal that's synonymous with growth and expansion.Most Read from BloombergYou wouldn't know it from looking at the market today, but some of the largest miners and metals traders are warning that in just a couple of years' time, a massive shortfall will emerge for the world's most critical metal — one that could itself hold back global growth, stoke inflation by raising manufacturing costs and throw global climate goals off course. The recent downturn and the under-investment that ensues only threatens to make it worse.“We'll look back at 2022 and think, ‘Oops,’” said John LaForge, head of real asset strategy at Wells Fargo. “The market is just reflecting the immediate concerns. But if you really thought about the future, you can see the world is clearly changing. It's going to be electrified, and it's going to need a lot of copper.”Inventories tracked by trading exchanges are near historical lows. And the latest price volatility means that new mine output — already projected to start petering out in 2024 — could become even tighter in the near future. Just days ago, mining giant Newmont Corp. shelved plans for a $2 billion gold and copper project in Peru. Freeport-McMoRan Inc., the world's biggest publicly traded copper supplier, has warned that prices are now “insufficient” to support new investments.Commodities experts have been warning of a potential copper crunch for months, if not years. And the latest market downturn stands to exacerbate future supply problems — by offering a false sense of security, choking off cash flow and chilling investments. It takes at least 10 years to develop a new mine and get it running, which means that the decisions producers are making today will help determine supplies for at least a decade.“Significant investment in copper does require a good price, or at least a good perceived longer-term copper price,” Rio Tinto Group Chief Executive Officer Jakob Stausholm said in an interview this week in New York.Why Is Copper Important?Copper is essential to modern life. There’s about 65 pounds (30 kilograms) in the average car, and more than 400 pounds go into a single-family home.The metal, considered the benchmark for conducting electricity, is also key to a greener world. While much of the attention has been focused on lithium — a key component in today’s batteries — the energy transition will be powered by a variety of raw materials, including nickel, cobalt and steel. When it comes to copper, millions of feet of copper wiring will be crucial to strengthening the world’s power grids, and tons upon tons will be needed to build wind and solar farms. Electric vehicles use more than twice as much copper as gasoline-powered cars, according to the Copper Alliance.How Big Will the Shortage Get?As the world goes electric, net-zero emission goals will double demand for the metal to 50 million metric tons annually by 2035, according to an industry-funded study from S&P Global. While that forecast is largely hypothetical given all that copper can't be consumed if it isn't available, other analyses also point to the potential for a surge. BloombergNEF estimates that demand will increase by more than 50% from 2022 to 2040.Meanwhile, mine supply growth will peak by around 2024, with a dearth of new projects in the works and as existing sources dry up. That’s setting up a scenario where the world could see a historic deficit of as much as 10 million tons in 2035, according to the S&P Global research. Goldman Sachs Group Inc. estimates that miners need to spend about $150 billion in the next decade to solve an 8 million-ton deficit, according to a report published this month. BloombergNEF predicts that by 2040 the mined-output gap could reach 14 million tons, which would have to be filled by recycling metal.To put in perspective just how massive that shortage would be, consider that in 2021 the global deficit came in at 441,000 tons, equivalent to less than 2% of demand for the refined metal, according to the International Copper Study Group. That was enough to send prices jumping about 25% that year. Current worst-case projections from S&P Global show that 2035’s shortfall will be equivalent to about 20% of consumption.As for what that means for prices?“It’s going to get extreme,” said Mike Jones, who has spent more than three decades in the metal industry and is now the CEO of Los Andes Copper, a mining exploration and development company.Where Are Prices Heading?Goldman Sachs forecasts that the benchmark London Metal Exchange price will almost double to an annual average of $15,000 a ton in 2025. On Wednesday, copper settled at $7,690 a ton on the LME.“All the signs on supply are pointing to a fairly rocky road if producers don’t start building mines,” said Piotr Kulas, a senior base metals analysts at CRU Group, a research firm.Of course, all those mega-demand forecasts are predicated on the idea that governments will keep pushing forward with the net-zero targets desperately needed to combat climate change. But the political landscape could change, and that would mean a very different scenario for metals use (and the planet).And there’s also a common adage in commodity markets that could come into play: high prices are the cure for high prices. While copper has dropped from the March record, it’s still trading about 15% above its 10-year average. If prices keep climbing, that will eventually push clean-energy industries to engineer ways to reduce metals consumption or even seek alternatives, according to Ken Hoffman, the co-head of the EV battery materials research group at McKinsey & Co.Scrap supply can help fill mine-production gaps, especially as prices rise, which will “drive more recycled metals to appear in the market,” said Sung Choi, an analyst at BloombergNEF. S&P Global points to the fact that as more copper is used in the energy transition, that will also open more “opportunities for recycling,” such as when EVs are scrapped. Recycled production will come to represent about 22% of the total refined copper market by 2035, up from about 16% in 2021, S&P Global estimates.The current global economic malaise also underscores why the chief economist for BHP Group, the world’s biggest miner, just this month said copper has a “bumpy” path ahead because of demand concerns. Citigroup Inc. sees copper falling in the coming months on a recession, particularly driven by Europe. The bank has a forecast for $6,600 in the first quarter of 2023.And the outlook for demand from China, the world’s biggest metals consumer, will also be a key driver.If China’s property sector shrinks significantly, “that's structurally less copper demand,” said Timna Tanners, an analyst at Wolfe Research. “To me, that's just an important offset” to the consumption forecasts based on net-zero goals, she said.But even a recession will only mean a “delay” for demand, and it won’t “significantly dent” the consumption projections going into 2040, according to a presentation from BloombergNEF dated Aug. 31. That’s because so much of future demand is being “legislated in,” through governments’ focus on green goals, which makes copper less dependent on the broader global economy than it used to be, said LaForge of Wells Fargo.Plus, there’s little wiggle room on the supply side of the equation. The physical copper market is already so tight that despite the slump in futures prices, the premiums paid for immediately delivery of the metal have been moving higher.What’s Holding Back Supplies?Just take a look at what’s happening in Chile, the legendary mining nation that’s long been the world’s largest supplier of the metal. Revenue from copper exports is falling because of production struggles.At mature mines, the quality of ore is deteriorating, meaning output either slips or more rock has to be processed to produce the same amount. And meanwhile the industry’s pipeline of committed projects is running dry. New deposits are getting trickier and pricier to both find and develop. In Peru and Chile, which together account for more than a third of global output, some mining investments have stalled, partly amid regulatory uncertainty as politicians seek a greater portion of profits to resolve economic inequalities.Soaring inflation is also driving up the cost of production. That means the average incentive price, or the value needed to make mining attractive, is now roughly 30% higher than it was 2018 at about $9,000 a ton, according to Goldman Sachs.Globally, supplies are already so tight that producers are trying to squeeze tiny nuggets out of junky waste rocks. In the US, companies are running into permitting roadblocks. While in the Congo, weak infrastructure is limiting growth potential for major deposits.Read More: Biggest US Copper Mine Stalled Over Sacred Ground DisputeAnd then there’s this great contradiction when it comes to copper: The metal is essential to a greener world, but digging it out of the earth can be a pretty dirty process. At a time when everyone from local communities to global supply chain managers are heightening their scrutiny of environmental and social issues, getting approvals for new projects is getting much harder.The cyclical nature of commodity industries also means producers are facing pressure to keep their balance sheet strong and reward investors rather than aggressively embark on growth.“The incentive to use cash flows for capital returns rather than for investment in new mines is a key factor leading to a shortage of the raw materials that the world needs to decarbonize,” analysts at Jefferies Group LLC said in a report this month.Even if producers switch gears and suddenly start pouring money into new projects, the long lead time for mines means that the supply outlook is pretty much locked in for the next decade.“The short-term situation is contributing to the stronger outlook longer term because it's having an impact on supply development,” Richard Adkerson, CEO of Freeport-McMoRan, said in an interview. And in the meantime, “the world is becoming more electrified everywhere you look,” he said, which inevitably brings “a new era of demand.”Most Read from Bloomberg Businessweek©2022 Bloomberg L.P. Continue reading →
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September 20, 2022 by SchiffGold 0 0This analysis focuses on gold and silver within the Comex/CME futures exchange. See the article What is the Comex? for more detail. The charts and tables below specifically analyze the physical stock/inventory data at the Comex to show the physical movement of metal into and out of Comex vaults.Registered = Warrant assigned and can be used for Comex delivery, Eligible = No warrant attached – owner has not made it available for delivery.Current TrendsGoldIt’s been four months of a relentless decrease in gold holdings at the Comex. This was highlighted last month and the momentum has continued into September. Since May, almost $9M ounces of gold have left Comex vaults.Figure: 1 Recent Monthly Stock ChangeOver the last 30 days, Registered has seen a fall of 1.47M ounces with Eligible losing 170k. As shown below, nearly every day shows a net loss in metal.Figure: 2 Recent Monthly Stock ChangeSilverSilver is slightly different than gold. The action has been focused primarily on Registered metal (metal available for delivery). Only one month (March) has seen an increase in Registered since December of last year. In fact, since March of last year, Registered has only seen a meaningful increase in inventory in two months.Figure: 3 Recent Monthly Stock ChangeThe bleed-out of Registered can be seen below with consistent movement out throughout the last 30 days. Nearly 11M ounces have left Registered during this time.Figure: 4 Recent Monthly Stock ChangeThe table below summarizes the movement activity over several time periods to better demonstrate the magnitude of the current move.GoldOver the last month, gold has seen Registered fall by 10.2%, or 1.4M ouncesCombined with the outflow in Eligible, total inventories dropped 5.7% or 1.6MIn the last week, the action has been Registered moving to EligibleInventory is down over the past year by 20%Eligible is down 11% and Registered down almost 30%!SilverSilver Registered is down by almost 20% in the last monthRegistered silver is down an incredible 56% in the last year and 69% over three yearsEligible is nearly flat over the month, with a fall of 1.2%Combined, inventory has dropped 4% in the last month, but the fall in Registered is clearly acceleratingAt the current pace, Registered silver could be fully depleted by January!Figure: 5 Stock Change SummaryThe next table shows the activity by bank/Holder. It details the numbers above to see the movement specific to vaults.GoldEvery vault has seen inventories fall over the last year with 5 vaults seeing supply fall by more than 30%Over the last month, 5 of 8 vaults lost gold with only meager gains seen in Delaware Depository and HSBCSilverSilver has seen massive outflows MoM with 3 vaults seeing almost 10% or more reduction. 2 other vaults saw 5%+ reductions.Over the last year, only Delaware and Malca have seen increases in silver, with 7 vaults seeing sizable reductions (+10%)Figure: 6 Stock Change DetailHistorical PerspectiveZooming out and looking at the inventory for gold and silver shows just how massive the current move has been. The decline has been swift and steep, with losses seen in both Eligible and Registered.Figure: 7 Historical Eligible and RegisteredSilver has seen a massive move down in Registered as a % of the total (black line). In September 2020, Registered made up 40% of total Comex inventories. The number has crashed to 13.8%, which is now the lowest level since at least Jan 2015.Figure: 8 Historical Eligible and RegisteredThe chart below focuses just on Registered to show the steepness of the current fall. In Feb 2021, there were 152M ounces of Registered. That number now sits at 44M, which is a net fall of 108M ounces. Considering the recent acceleration, total holdings could fall below 2016 levels within a few months.Figure: 9 Historical RegisteredComex is not the only vault seeing big moves out of silver. Below shows the LBMA holdings of silver. It should be noted that much of the holdings shown below are allocated to ETFs. Regardless, total inventories have fallen every single month since November. Holdings fell below 1B ounces in June and now sit just above 900M as of August.Figure: 10 LBMA Holdings of SilverAvailable supply for potential demandThese falls in inventory have had a major impact on the coverage of Comex against the paper contracts held. There are now 3.4 paper contracts for each ounce of Registered gold within the Comex vaults. The coverage would actually be far worse if the total open interest had not plummeted in recent weeks.Figure: 11 Open Interest/Stock RatioCoverage in silver is far weaker than gold with 15 paper contracts for each ounce of Registered silver. This is the worst coverage since June of 2018 when total open interest was almost 61% higher.Figure: 12 Open Interest/Stock RatioWrapping UpThe physical demand for gold and silver has been voracious. While the price is still being controlled by the paper market, it’s clear that something in the physical market could trigger a major shift. As supplies continue to dwindle, it’s only a matter of time before shorts will get stuck without being able to deliver. At the current pace, this is not something that will happen in a few years. It could be a few months!The price action in gold and silver does not suggest that supplies are starting to run thin, but the data is ringing the alarm bell for anyone who wants to listen. Physical is in demand and investors want it now! Prices will catch-up. Make sure you are positioned before they do.Data Source: https://www.cmegroup.com/Data Updated: Daily around 3PM EasternLast Updated: Sep 19, 2022Gold and Silver interactive charts and graphs can always be found on the Exploring Finance dashboard: https://exploringfinance.shinyapps.io/goldsilver/Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today! Continue reading →
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(Bloomberg) -- Economist Nouriel Roubini, who correctly predicted the 2008 financial crisis, sees a “long and ugly” recession in the US and globally occurring at the end of 2022 that could last all of 2023 and a sharp correction in the S&P 500.Most Read from Bloomberg“Even in a plain vanilla recession, the S&P 500 can fall by 30%,” said Roubini, chairman and chief executive officer of Roubini Macro Associates, in an interview Monday. In “a real hard landing,” which he expects, it could fall 40%.Roubini whose prescience on the housing bubble crash of 2007 to 2008 earned him the nickname Dr. Doom, said that those expecting a shallow US recession should be looking at the large debt ratios of corporations and governments. As rates rise and debt servicing costs increase, “many zombie institutions, zombie households, corporates, banks, shadow banks and zombie countries are going to die,” he said. “So we’ll see who’s swimming naked.”Roubini, who has warned through bull and bear markets that global debt levels will drag down stocks, said that achieving a 2% inflation rate without a hard landing is going to be “mission impossible” for the Federal Reserve. He expects a 75 basis points rate hike at the current meeting and 50 basis points in both November and December. That would lead the Fed funds rate by year’s end to be between 4% and 4.25%.However persistent inflation, especially in wages and the service sector, will mean the Fed will “probably have no choice” but to hike more, he said, with funds rates going toward 5%. On top of that, negative supply shocks coming from the pandemic, Russia-Ukraine conflict and China’s zero Covid tolerance policy will bring higher costs and lower economic growth. This will make the Fed’s current “growth recession” goal -- a protracted period of meager growth and rising unemployment to stem inflation -- difficult.Once the world is in recession, Roubini doesn’t expect fiscal stimulus remedies as governments with too much debt are “running out of fiscal bullets.” High inflation would also mean that “if you do fiscal stimulus, you’re overheating the aggregate demand.”As a result, Roubini sees a stagflation like in the 1970s and massive debt distress as in the global financial crisis.“It’s not going to be a short and shallow recession, it’s going to be severe, long and ugly,” he said.Roubini expects the US and global recession to last all of 2023, depending on how severe the supply shocks and financial distress will be. During the 2008 crisis, households and banks took the hardest hits. This time around, he said corporations, and shadow banks, such as hedge funds, private equity and credit funds, “are going to implode”In Roubini’s new book, “Megathreats,” he identifies 11 medium-term negative supply shocks that reduce potential growth by increasing the cost of production. Those include deglobalization and protectionism, relocating of manufacturing from China and Asia to Europe and the US, aging of population in advanced economies and emerging markets, migration restrictions, decoupling between the US and China, global climate change and recurring pandemics. “It’s only a matter of time until we’re going to get the next nasty pandemic,” he said.His advice for investors: “You have to be light on equities and have more cash.” Though cash is eroded by inflation, its nominal value stays at zero, “while equities and other assets can fall by 10%, 20%, 30%.” In fixed income, he recommends staying away from long duration bonds and adding inflation protection from short-term treasuries or inflation index bonds like TIPS.(Adds previous Roubini debt warnings in fourth paragraph)Most Read from Bloomberg Businessweek©2022 Bloomberg L.P. Continue reading →
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September 15, 2022 by SchiffGold 0 0The CPI data for August came in hotter than expected, sparking the biggest market crash since the 2020 COVID lockdowns. The price of gold also dropped on the news in anticipation of the Federal Reserve taking interest rates higher. Peter Schiff talked about the inflation news on his podcast and said investors need to get gold now before the entry point rises a lot higher. Because at some point the markets are going to figure the Fed can’t bend this inflation curve.After the CPI data came out, stocks plunged. The Dow Jones fell by over 1,276 points. It was the seventh-biggest drop (based on points) in history. Other stock market indices charted similar declines. The NASDAQ fell 5.16%.As Peter noted, gold also fell, but not nearly as much as stocks. The yellow metal was off about 1.3%. But gold did manage to close above $1,700, although it traded below that level interday.The dollar index charted a huge swing, moving from 107.68 prior to the CPI data and then rallying to close at 109.9. Peter said it was one of the biggest moves in the dollar he’s seen.The markets were preparing for a softer CPI. Everybody was under the impression that inflation had peaked and that it was coming down, and that when we got validation that inflation was coming down by the August CPI, that would take a lot of pressure off the Fed — that it wouldn’t have to raise rates as much because the inflation problem was solved. That’s one of the reasons the dollar sold off. It’s one of the reasons gold and silver rallied. In fact, it’s one of the reasons the stock market had been rallying, because the Fed was going to be taken out of the game. Maybe not completely sidelined, but at least it was going to tone down its rhetoric and maybe not raise rates as much as people thought. But now that we got this hotter than expected number, people think the Fed is going to raise rates more than they thought.”Peter said the markets still don’t understand that even if the Fed hikes by 100 basis points at the September meeting, it will not bend the inflation curve.I don’t know why everybody continues to be surprised when the inflation numbers come out worse than expected. They assume that what the Fed is doing is going to work. It’s not going to work. The people who think it is don’t understand the nature of the problem.”The numbers indicate that Fed can’t win this inflation fight. Part of the solution is positive real interest rates. If you look at all of the Fed tightening cycles since 1973, the central bank has never stopped tightening before the Fed funds rate was higher than the CPI.As long as we have interest rates below the inflation rate, even if they’re higher, they’re still negative, and negative interest rates put upward pressure on inflation. You can’t fight inflation with negative interest rates. It’s like saying, ‘I’m going to fight this fire by pouring gasoline on it. It’s just that I’m only going to pour a little bit of gasoline, not as much gasoline as I was pouring on before.'”Clearly, the fire will keep getting bigger.But the markets don’t seem to get this. Otherwise, they wouldn’t be selling gold into rising inflation.After all, gold is an inflation hedge. And if investors expect more inflation, they’re going to hedge with gold. And if you expect inflation to continue, gold is going to discount that future inflation into the present, and it’s going to be reflected in the current price of gold.”The question is when will those expectations change?How many more months can the CPI come out hotter than expected and investors still believe that inflation is going to go away? How many more rate hikes do we need that are ineffective at reducing inflation before investors figure out that it’s not going to work? And of course, how many rate hikes will the Fed be able to get away with without crashing the stock market? Without crashing the real estate market? Without causing a financial crisis?”And if the Fed keeps pushing that envelope until it rips, will the Fed continue to hike rates? Or will the Fed pivot when it anticipates or acknowledges the next crisis?As long as it pivots at all, that means inflation is going to run out of control. And if it is, the dollar needs to go way down and gold needs to go way up.”Peter said he doesn’t personally think the Fed will get away with very many more rate hikes.He pointed out that gold didn’t fall all that much given the plunge in stocks. In fact, gold didn’t even close on the lows.Maybe that’s some indication that investors are beginning to question that narrative. They haven’t completely figured it out yet, but some of the selling may in fact have been exhausted.”Peter said at some point there will be divergence and gold will start rising when inflation is worse than expected. The dollar will fall. And the long end of the bond market will start getting beat up.If you’re waiting for a sign, some indication that everything is about to blow up, that’s what you should look for. You should look for a reaction in the bond market and the currency market and the precious metals market that is opposite of the reaction that we’ve been having.”Peter said you shouldn’t wait for that signal to position yourself.I think it’s possible that by the time we get that signal, it could be a much worse entry position than the one we have right now. Because the markets can start anticipating that signal before we actually get it. I know it’s going to happen eventually. But when it does happen, that’s when you’ll know the end has finally begun. But before it does, take advantage of other investors’ misunderstanding of what’s going on by increasing your exposure to both gold and silver, and gold and silver mining stocks.”Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today! Continue reading →
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OseloteBy Craig Hemke It has been a very challenging year for almost all asset classes, and the precious metals haven't had it easy either. Though the Fed seems intent upon further rate hikes in the months ahead, one day soon will bring a bottom and trend change for COMEX gold and silver. Could that bottom and trend change have already occurred? Maybe. As with all trend changes, this one will only be seen in hindsight. But in the COMEX precious metals, there are always some signs you can look for, and a few of them are currently in place. Let's start with short interest in the big silver ETF, the SLV. Growing short interest in this fund reflects a retail and institutional demand to bet on lower silver prices in the months ahead, and it is almost always a good contrarian indicator. Why? Because this type of shorting reflects hot money chasing a dying trend. Where was all this shorting back when silver was $28? There wasn't any, and all the hot money was on the long side instead. Now it's short, and that alone should tell you something. SRSrocco Report Next we should look at the latest Commitment of Traders report in order to assess where things stand with the "big boy" money. Let's start with the Legacy Report, which simply places traders into the Commercial and Large Speculator categories. On this report, the Commercials are almost always net short while the Speculators are net long—but not currently, as you can see on this table provided by GoldSeek: GoldSeek As you can see, as of the COMEX close on September 6—and with COMEX silver at $18.14—the Large Speculators were actually NET SHORT 12,784 contracts and GROSS short 64,498 contracts. At 5,000 ounces/contract, that's 64,000,000 ounces net short and 322,500,000 gross short. And those are all ounces these "Speculators" DO NOT HAVE. They are simply short the COMEX paper. This means that, at some point, they will be forced to buy back and cover those short positions because they do not have the metal to deliver to any “long” standing for potential delivery. For historical context, other Large Speculator short positions peaked at 22,409 net short on May 28, 2019, and the all-time high of 28,974 net short on September 4, 2018. See the chart below: Barchart Further, on the disaggregated report where the CoT data is broken into smaller categories, be sure to note which entities hold these net short and net long positions. Below you can see the breakdown where "Hedge Funds" are currently net short 24,742 COMEX silver contracts for about 124,000,000 ounces. That's about 15% of annual global mine supply and, again, metal they do not have. On the other side are the "Swap Dealers". What's a swap? A futures or options contract. And who "deals" them? The bullion banks. And who are the bullion banks? Think JPMorgan and Bank of America. And these "Swap Dealers" are now NET LONG 21,787 contracts. Which side do you think comes out ahead in the long run? Author And finally, let's have a look at the short-term chart, where price is once again trying to gain a toehold above its 50-day moving average. Since price has been in a pattern of lower lows, the key in recognizing a bottom will be a higher high. In this case, a move above the $21 highs of mid-August. Once above that level—and then above $22 for further confirmation—we'll be able to state that the chart has officially reversed. For now, just keep watch on that pattern of lower lows and lower highs and watch for it to shift. Barchart So keep an eye on things in the days and weeks to come. Silver will soon bottom, of that you can be certain. It's just a matter of when. This has been a difficult year, but it can all change pretty quickly and that next Fed-loosening-induced rally is going to be significant. Original Post Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors. Continue reading →
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(Kitco News) The London Metal Exchange (LME), the world's oldest and largest market for industrial metals, announced that it would remain open on September 19, the day of Queen Elizabeth's funeral.
"Reflecting the international nature of the LME's market and taking into account the potential impact of the short notice from an operational risk perspective, the Bank Holiday will constitute a Business Day for the purposes of the LME and LME Clear Rules, and the markets themselves will remain open," the LME said in a press release Tuesday.
Whether to close or remain open was a difficult decision for the LME because the Queen's funeral falls on an important calendar date - when monthly valuations for September are established. This is why it is choosing to keep operations running.
"A full market closure of trading, with only a few days' notice, would create undue operational risk. This is particularly the case because September 19 represents the key trading day to establish September monthly valuations," the 145-year-old exchange said. "The LME has carefully considered how best to balance the interests of the market, our operational considerations and our desire to pay our respects."
However, despite the market staying open, there will be some changes. For example, the first open-outcry session will be canceled since it coincides with the timing of the funeral service.
Also, LME offices will be closed on September 19 out of respect for the Queen. And the exchange will be donating all trading fees from September 19 to the Queen's charities.
The decision contradicts the nation's declared public holiday. Over the weekend, Buckingham Palace announced the date for the funeral, with the UK observing a national holiday on that date.
Most UK commodity markets, including gold and soft commodities, will be closed for the funeral, including the London Bullion Market Association (LBMA).
"The London market will be closed and there will be no metal settlements in the UK on that day … ICE Benchmark Administration has confirmed that on Monday, September 19, 2022, there will be no AM or PM auctions for LBMA Gold and LBMA Silver prices," the LBMA said. "The London Metal Exchange has also confirmed that on Monday, September 19, 2022, there will be no AM or PM auctions for LBMA Platinum and LBMA Palladium prices."
One exception will be Brent crude oil, with ICE Futures Europe stating that the contract would operate as usual. Continue reading →
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(Kitco News) - A kitchen renovation in a historic home in an English village led to the discovery of a trove of antique gold coins that could be worth up to $290,000.
According to the auction house Spink & Son, which will be auctioning off the coins next month, the 260 gold coins were found when residents unearthed an earthenware cup when they renovated their kitchen in July 2019. The cup, about the size of a soda can, was found buried beneath the original wooden floorboard.
The treasure trove of coins is named the Ellerby hoard, for the village where the house is located. Spink & Son said that this was the biggest hoard of 18th-century coins found in Britain.
"It is a wonderful and truly unexpected discovery from so unassuming a find location," said Gregory Edmund, an auctioneer with Spink & Son, in a press release. "Why they never recovered the coins when they were really easy to find just beneath original 18th-century floorboards is an even bigger mystery, but it is one hell of a piggy bank."
Edmund described the coins, some of them handmade, as "workhorses" that were heavily used as currency during the 1700s.
Historians have traced the coins to their original owners, Joseph and Sarah Fernley-Maisters, who were married in 1694. According to the press release, the Maisters were an influential mercantile family between the 16th century and 18th century. The family traded iron ore, timber and coal from the Baltic before the line died out after Sarah Maisters' death.
"Joseph and Sarah clearly distrusted the newly-formed Bank of England, the 'banknote' and even the gold coinage of their day because they (chose) to hold onto so many coins dating to the English Civil War and beforehand. Perhaps these wily owners preferred gold and were happy to accept century-old and even Brazilian coins before paper," said Edmund. "The number of coins and method of burial presents an extraordinary opportunity to appreciate the complicated English economy in the first decades of the Bank of England and significant distrust of its new-fangled invention, the 'banknote.'"
Each of the coins will go up for auction on Oct. 7; however, a rare Portuguese coin, a contemporary 1721 4000-Reis, struck during the reign of Jõaõ V of Portugal and known as a moidore, will be going to the British Museum.
"The contextualised discovery of [the moidore] coin is exceedingly rare for England, with only the Merton College Chapel trove of 1903 presenting a comparable profile," said Edmund. Continue reading →
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alexslOverview: The US dollar remains offered ahead of today’s CPI report. Most European currencies are outperforming the dollar bloc, and the greenback is holding inside yesterday’s range against the yen. Most emerging market currencies are firmer, as well. China’s markets re-opened from the long-holiday weekend and the yuan is a touch softer. After the strong close to US equities yesterday, and some mild follow-through buying today in the futures, equities in the Asia Pacific and Europe are also extending their recent gains. Hong Kong was a notable exception in Asia and reports that regulators asked state-owned entities to report their exposure to Fosun, one of the largest non-state conglomerates, weighed on the Hang Seng. Europe’s STOXX 600 is rising for the fourth consecutive session and is at its best level in about three weeks. The 10-year US Treasury yield is a few basis points lower near 3.32%, while European benchmark yields are narrowly mixed. Gold is a little firmer at the upper end of yesterday’s range. December WTI is also in the upper end of yesterday’s range, a little below $88, ahead the OPEC+ report. US natgas is firmer for the fourth consecutive session, while the European benchmark is off 2.3%, its third decline in a row. It is now at its lowest level since late July. Iron ore recovered from yesterday’s 0.9% pullback and rose 1.4% today. It is at its best level this month. December copper is firm and is also at its best level here in September. If today’s gains are sustained, it would be the fifth advance in the past six sessions. December wheat has come back bid after yesterday’s 1.25% pullback. The USDA boosted its estimate of the wheat harvest, while reporting tighter supplies of soybeans. November beans rallied nearly 5.4% yesterday and are up a bit more today. They are at the highest level since late June. Asia Pacific The threats by Japanese officials have spurred more talk of intervention. There has been an evolution in official thinking about intervention. The Plaza Agreement (1985) and the Louvre Accord (1987) marked the high point of G7 foreign exchange coordination and intervention. However, consider that the Great Financial Crisis and the Covid pandemic passed without intervention in the major currencies. Officials recognized that the key problem was not foreign exchange rates per se but access to the dollar. Hence the swaps lines offered by the Federal Reserve during the GFC, some of which were converted into permanent standby arrangement, and again during the pandemic. Under this framework, there is no compelling need for unilateral intervention. Japan is the only G7 central bank that is still pursuing quantitative easing and is the only G7 country that is projected to record a larger fiscal deficit than in 2021. Europe is unlikely to be any more sympathetic to Japan's plight than the US. The weakness for the yen has not affected the conduct of Japanese monetary policy. Japan's inflation is among the lowest for high-income countries, and the Japanese economy will likely outperform Europe's for the next several quarters. The yen reached is at its weakest level since 1998, while sterling fell to its lowest level since 1985. The euro traded at its lowest level since 2000. According to the OECD's purchasing power parity model, the euro is undervalued by about 41.5% and the yen is undervalued by a little less than 42%, an insignificant difference. Japan's verbal intervention coincided with the dollar's pullback more generally. Today is the fourth consecutive session that the greenback is recording lower highs. The pre-weekend low was JPY141.50, but yesterday and today, support has been found slightly above JPY142, where options for $670 mln expire today. In addition to the lower dollar, today's range, about 0.8 yen, is the smallest since last Monday when the US and Canada were on holiday. The greenback is also in a narrow range against the Australian dollar. It is consolidating in a narrow range below $0.6910. A move above $0.6920 could spur another half-cent gain. Initial support is seen around $0.6860. The Chinese yuan is a little softer today as the mainland market re-opens from the long holiday weekend. The US dollar initially eased to about CNY6.9165, slightly below the pre-weekend low, but rebounded above CNY6.9300. As it has done for nearly three weeks, the PBOC set the dollar's reference rate above where the median in Bloomberg's survey projected (CNY6.8928 vs. CNY6.9125). Europe Before the weekend, the (swaps) market was nearly 100% convinced the ECB would hike 75 bp at next month's meeting. The confidence has waned a bit and now is around 60%. This is despite the hawkish comments over the weekend by Bundesbank President Nagel. Other ECB officials have confirmed intentions to lift rates at the coming meetings, but not necessarily in such large steps. The neutral is seen around 1.5%-2.0%. The swaps market sees the deposit rate within that range before year end. After last week's high, the deposit rate is at 0.75%. Separately, the ZEW survey was weaker than expected. The current situation measure fell to -60.5 from -47.6. It is the worst reading since March 2021. The expectations component was even worse, dropping to -61.9 from -55.3. This level of pessimism was not seen even during the initial stages of the pandemic, when expectations bottomed at -49.5. Even during the sovereign debt crisis (2011), it did not fall this low. One has to go back to October 2008 to see such a low reading. That said, the euro barely wobbled on the news. The International Labor Organization says that UK unemployment unexpectedly fell to 3.6% in the three months through July from 3.8%. However, the government's data shows this was driven by a 194k decline in the workforce - seemingly reflecting sickness and return to school. The claimant count rose by 6.3k, bringing the number of unemployed to 1.22 mln (compared to 1.28 mln job openings, which fell by 34k over the three-month period). Employment rose by 40k in the three months through July, which is about a third of the median forecast in Bloomberg's survey. Average weekly earnings rose 5.5% in three month through July compared to a year ago. It was the first increase since March when it peaked at 7%. The swaps market still favors a 75 bp hike next week with almost 69% confidence, which is where it was at the end of last week. Lastly, note that the dockworkers at Felixstowe rejected the pay deal and are preparing to strike. Separately, the dockworkers in Liverpool are also preparing to strike. In the US, the White House is said to be involved in trying to settle the railroad dispute that could lead to a strike at the end of the week. The EC is expected to propose a mandatory program to cut power use. This is going to prove as controversial as it was when first aired earlier this year. The push back then resulted in voluntary cuts, and between May and August, gas demand in northwest Europe fell by 18% year-over-year. Some countries have introduced light rationing already in the form of temperature and light use in public buildings. The EC's proposal, leaked to the press, has two goals in terms of conservation. First, a cut in overall consumption. Second, a mandatory goal of lowering demand during peak hours or when electricity generation from renewables is expected to be low. The EC also will propose a minimum "exceptional and temporary" tax on "extra" (in excess of pre-tax profits reported for the past three years) made by oil, gas, coal, and refinery industries. The EC wants to cap the extra revenue for other energy companies though limiting the price of electricity generated from renewables and nuclear. The challenge is to find a solution that is agreeable throughout the EU, which, like other issues, has proved quite difficult. The issues are thorny , and earlier this year, tensions between Germany and the periphery were evident. In any event, it seems unreasonable to expect a quick solution. Instead, following von der Leyen's annual State of the Union address to the European parliament on Wednesday, look for the heads of state summit (informal meeting on October 6-7 and a summit October 20-21) to try to hammer out an agreement. Still, the idea that Europe is on the verge of an energy union seems to be more a case of wishful thinking. Sure, like the EU's joint bond issuance, it could prove to be the scaffolding, but more likely is one-off emergency measures. The euro is trading with a firmer bias but holding below yesterday's high (almost $1.02). It seems to be sandwiched between two sets of expiring options today. One set is struck at $1.01 for about 725 mln euros. The other is for nearly 1.05 bln euros at $1.0175. After yesterday's advance, some, if not all, of the upper strike has likely been neutralized. The session highs were recorded in the European morning a little above $1.0165, and again, North American dealers will start their session with the intraday momentum indicators stretched. The session low, slightly below $1.0120, was set in early Asia. Yesterday, sterling stalled near its 20-day moving average (~$1.1715), but today has edged through $1.1730. This is just shy of the (38.2%) retracement of the losses since the August 10 high near $1.2275. The next retracement (50%) is closer to $1.1840. Support is seen in the $1.1660-80 area. Our broad view anticipated the dollar to weaken through the US inflation report and then find better bids ahead of next week's FOMC meeting. America Today's US CPI report and the University of Michigan's preliminary September consumer confidence and inflation expectations are seen as the last two important data points before the FOMC meeting next week. Barring a surprise, another tame monthly CPI print is expected. The month-over-month reading in July was zero, and the median forecast in Bloomberg's survey is for a 0.1% decline in August. The August core rate is expected to match July's 0.3% increase. The year-over-year headline rate may ease to 8%, while the core may tick up back above 6% for the first time since April. Given the Fed's assessment that the labor market remains strong and prices elevated, few really think that today's CPI report will spur a change in the official stance. Moreover, in a bit of "what came first, the chicken or the egg", the market is giving the Fed a free option to hike 75 bp. Given the Fed's belated start and misunderstanding of the persistence of inflation, it may not want to under-deliver on market expectations. That said, look at the evolution of inflation expectations. First, we note that NY Fed's August survey was out yesterday. It showed the one-year inflation expectation easing to 5.7% from 6.2%, and the three-year expectation at 2.8% from 3.2%. Second are the market-based measures. The two-year breakeven (the difference between the two-year inflation protected security and the conventional note) has fallen from almost 5% in late March (peak was almost two weeks after the Fed's first hike) to less than 2.2% last week. The 10-year breakeven peaked in late April, a little over 3%, and fell to 2.30% in July and has bounced around a bit this summer, reaching nearly 2.65% in late August, and now is around 2.42%, roughly the lowest it has traded since late July. Rightly or wrongly, the breakeven measure of inflation expectations seems heavily influenced by the price of oil. The generic WTI futures contract peaked in early March slightly above $130. It had a secondary peak in mid-June around $123.70. Last week, it fell to nearly $81, the lowest level since mid-January, before the Russian invasion of Ukraine, when many, including Ukrainians, did not believe the invasion was going to materialize. There is an old rule of thumb about three gaps exhausting a move. Some interpretations of Japanese candlesticks also have a rule like that. It is relevant because the S&P 500 and NASDAQ gapped higher both Friday and yesterday, and the gaps are unfilled. The Canadian dollar, among the most sensitive of the major currencies to US equity fluctuations, has rallied sharply over the past of four sessions, which have been the best for US stocks here in Q3. The US dollar has fallen from a little above CAD1.3200 to below CAD1.3000. So far today, the greenback is trading in a tight range (~CAD1.2970-CAD1.2995). It is hovering a little above yesterday's low near CAD1.2965, which is roughly a (50%) retracement of the US dollar gains since the August 11 low (~CAD1.2730). A convincing break targets the next retracement (61.8%) a little above CAD1.2900. The US dollar fell to its lowest level since mid-June against the Mexican peso yesterday (~MXN19.7535) but closed back above the MXN19.80 floor. The greenback is under pressure today, and there is little chart support ahead of MXN19.60. The JP Morgan Emerging Market Currency Index is extending yesterday's gains. If sustained, it would be the fourth gain in five sessions, and it is trading near its best level since mid-August. Original Post Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors. Continue reading →
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(Kitco News) - A new trend could be emerging in the physical bullion marketplace as coin sales from the U.S. Mint were weaker than its counterpart in Australia.
In its monthly sales report, the Perth Mint said that it sold 84,976 ounces of minted gold products in August, an increase of 7% from July. At the same time, sales are up 57% compared to August 2021.
Meanwhile, data from the U.S. Mint shows that it sold 51,500 ounces in various denominations of American Eagle Gold bullion coins. Sales are down 20% from July and 62% from last year.
Meanwhile, the U.S. mint sold 850,000 one-ounce America Eagle silver bullion, unchanged from July. However, sales are down 78% from the more than 3 million coins sold last year.
In Australia, the Perth Mint said it sold 1.656 million ounces in silver minted products last month, down 33% from July but up 13% from August 2021.
Some market analysts have said that the Perth Mint's strong sales could be due to more aggressive marketing, especially in Europe.
Everett Millman, precious metals expert at Gainesville Coins, said the Perth Mint could also be benefiting from growing Asian demand as lockdowns in China have started to ease.
"From a logistics perspective, it is probably easy and cheaper to ship gold and silver coins from Australia to India and Asia," he said.
Millman said another factor that could be disrupting U.S. mint sales is that premiums for those coins are higher than other bullion like Kangaroos from the Perth Mint or Austria's Vienna Philharmonic gold coins.
"Consumers are becoming a little more cost-conscious, and they are turning to other coins with lower premiums," he said.
Premiums for U.S. Mint products, especially America Eagle Silver coins, have even attracted the ire of Congress. Last month, Rep. Alex Mooney (R-WV) sent a letter to U.S. Treasury Secretary Janet Yellen, calling her and U.S. Mint Director Ventris Gibson out for production issues for America Eagle Silver coins.
Mooney noted that the U.S. Mint has only made 11.6 million ounces of the silver bullion coin available to the public through July 2022 – barely half of what has been supplied through the first seven months of prior years when demand has been similarly strong.
"This shortage in U.S. Mint production has apparently led to extremely high market-based premiums on Silver Eagles (as high as 70% over the silver melt value) – even as comparable items produced by other sovereign mints and private mints were not beset by such shortages or historically high premiums," Mooney wrote in the letter.
"The high costs resulting from the U.S. Mint production shortage directly harm U.S. citizens wishing to avail themselves of a U.S. legal tender means of protecting their financial security from the effects of inflation."
Millman also noted that market factors are prompting investors to avoid gold and silver bullion. He added that gold prices have struggled as the Federal Reserve aggressively tightens its monetary policy. Rising interest rates have pushed the U.S. dollar to its highest level in 20 years and bond yields above 3%, two significant headwinds for precious metals.
However, Millman said he doesn't expect the current environment to be sustainable. He said that although the Fed continues to hold its hawkish stance regarding interest rates, that position could quickly change as economic conditions deteriorate.
Millman noted that markets continue to see the Federal Reserve pivoting on interest rates, even if expectations have been pushed back until the second half of 2023.
Analysts have noted that gold and silver bullion should pick up as recession fears continue to grow.
"If you are looking for a safe-haven asset, there are not a lot of choices out there. Every other currency has been battered by the U.S. dollar, so gold remains an attractive monetary metal," said Millman.
Phillip Streible, chief market strategist at Blue Line Futures, said that he expects bullion demand to pick up as investors start to realize the value in the marketplace.
He noted that the gold/silver ratio is trading near its highest level in roughly two years, holding around 95 points.
"You have never gone wrong buying silver when the ratio is above 95 points," he said. "That trend goes all the way back to the 1980s." Continue reading →
The post Perth Mint outpaces U.S. Mint in gold sales last Month appeared first on Golden State Mint Blog.
How The Mint Ratio Has Changed Over Time | Seeking Alpha Continue reading →
The post How The Mint Ratio Has Changed Over Time appeared first on Golden State Mint Blog.
August 31, 2022 by SchiffGold 0 0As we round out August in the COMEX, gold delivery was strong and silver was dominated by the odd mechanizations of Bank of America.Gold: Current Delivery MonthDelivery volume in the August gold contract started strong and then continued to see net new contracts delivered throughout the month with house accounts setting a record in net delivery inflows.September gold has also shown promise with First Notice showing the third highest open interest in a minor month going back to November 2020. Actual deliveries have started out slow with only 404 contracts delivered on the first day, but this could be more signs of strain in the physical market (more on this below).Figure: 1 Recent like-month delivery volumeThe countdown chart below shows the activity in September gold leading up to First Notice. After a dip mid-month, open interest recovered and stayed elevated into First Notice with a slight uptick on the final day.Figure: 2 Open Interest CountdownThe slight uptick can be seen more clearly in the chart below as the difference between the green bar and blue bar. Also noticeable, is the large amount of open interest still outstanding.Figure: 3 24-month delivery and first noticeThe chart below shows the percentage of contracts delivered on the very first day of delivery. As shown, only 15% of contracts were delivered on the first day which is the smallest amount going back to at least November 2019. Short contract holders dictate the delivery timing which means the shorts have delayed delivery at the outset.Figure: 4 Delivery Volume After First NoticeAre the shorts delaying delivery due to a lack of physical available? Pressure has been mounting in the physical market with massive physical withdraws from the Comex vaults. This can be seen below as 7.3M ounces of gold have left the Comex system since May 1. Inventory stood near 36M ounces on May 1, so the gold exiting represents almost 21% of total inventory in 4 months.Figure: 5 Recent Monthly Stock ChangeGold: Next Delivery MonthOctober gold is an odd month. It is ten times larger than the typical open interest seen in minor months (38k vs 3k) but is also one-tenth the size of major months which tend to be near 400k. Current open interest is almost exactly at the same spot as October 2021.Figure: 6 Open Interest CountdownMajor months have been seeing strong delivery volume in recent months with a strong trend upwards starting in October last year.Figure: 7 Historical DeliveriesFinally, the October to December spread is showing the strongest contango since at least April 2021. Contango generally signals a market that anticipates higher prices in the future.Figure: 8 SpreadsSilver: Recent Delivery MonthSeptember silver has shown a rebound from the very disappointing July. Major months have been on a steady decline since the peak in July 2020. Aside from December 2021 and March 2022, delivery volume has been on a downward trend.Figure: 9 Recent like-month delivery volumeThat being said, the countdown into close showed a very modest decline versus what is typically seen. September went from the bottom of the pack to the middle of the pack on the final day.Figure: 10 Open Interest CountdownThe final day drop can be seen as the difference between the blue and green bars below. This was the smallest drop seen going into First Notice since at least July 2020.Figure: 11 24-month delivery and first noticeUnlike gold, nearly all the open interest was delivered on the first day with only 632 contracts remaining open. Almost 90% of contracts were delivered on the first day, which towers above the second highest month in March 2020 with 73% on the first day.Figure: 12 Delivery Volume After First NoticeLooking at the bank house accounts shows that BofA is the biggest net loser of metal by far. They have delivered out 5,199 of the 5,244 (99.1%) of the contracts delivered thus far! On the flip side, the remaining house accounts have been net receivers of 3,276 ounces which is their largest inflow ever! This was driven primarily by Citigroup (2607) and Morgan Stanley (579).What is going on here? BofA has been a horrendous trader of silver over the last 9 months, accumulating when the price is high and delivering out when the price is low. BofA delivery out exceeds the final amount from December, but they also spent most of December opening net new contracts to recover the metal they delivered out on the first day and continued that activity in January.Figure: 13 House Account ActivityThe chart below shows BofA’s accumulation of silver since November 2020. As shown, they have accumulated during higher prices and sold out during lower prices. Furthermore, the current contract has wiped out nearly 85% of the total BofA house accumulation over almost two years.Figure: 14 BofA Cumulative DeliveryAdding to the murky story is the continued outflow of Registered silver. Current Registered silver represents a total of 10,130 contracts. This means that 58% of total Registered has just stood for delivery! If that metal starts to get pulled out of Registered, the stock will fall dramatically.If BofA repeats December and starts buying back metal mid-month, it’s very possible total delivery volume for September could exceed total Registered.Figure: 15 Recent Monthly Stock ChangeSilver: Next Delivery MonthOctober silver is starting off sluggish with current open interest well below average.Figure: 16 Open Interest CountdownSimilar to major months, minor months have seen a pretty steady decline downwards.Figure: 17 Historical DeliveriesAll of this is happening while the silver spot market stays in strong backwardation, indicating that the current spot metal is being valued more highly than futures contracts.Figure: 18 Spot vs FuturesWrapping upGold and silver are both showing strength this month but in different ways. Gold has seen strong open interest into the close but with a very small fraction being delivered so far. Silver showed a very small decline of open interest into First Notice, but then saw a record percentage of contracts delivered on the first day, almost entirely from BofA. The activity in BofA is potentially the biggest outlier of all the data points. It looks like they are trying to contain the market during big delivery volumes and are willing to take a loss to do so.Inventory data is also different between the two metals with gold seeing steady depletion in both Registered and Eligible where the activity in silver is concentrated in Registered falling. In both metals, Registered is falling rapidly which leads to less metal available for delivery in future months.There is no doubt that futures contracts are not capturing this movement going on under the surface. The technical picture in the paper market has been looking weak, while the physical market is showing record strength. Eventually, these two markets will converge, or else the paper market could break down. Likely, the paper market will eventually catch up to the futures market as the shorts struggle to find metal to deliver. When this happens, the movement in price could be extremely fast.Figure: 19 Annual DeliveriesData Source: https://www.cmegroup.com/Data Updated: Nightly around 11PM EasternLast Updated: Aug 30, 2022Gold and Silver interactive charts and graphs can be found on the Exploring Finance dashboard: https://exploringfinance.shinyapps.io/goldsilver/Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today! Continue reading →
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(Kitco News) China has significantly stepped up its gold purchases from Russia amid a Western ban on Russian gold following its invasion of Ukraine.
China imported $108.8 million worth of Russian gold in July. That is a 750% jump from the previous month’s total of $12.7 million and an increase of 4,800% from $2.2 million reported during the same month a year ago, Russian media RBC reported citing Chinese customs data. The data listed included raw and semi-finished forms of gold.
More buying from China comes after the U.S., Britain, Canada, Japan, the EU, and Switzerland banned Russian gold exports following Russia’s invasion of Ukraine.
Earlier in August, it was reported that Russia is looking into its own international standard for precious metals after getting banned by the London Bullion Market Association (LBMA). And it could have a fixed price in national currencies.
The country’s Finance Ministry said it was “critical” to create the new Moscow World Standard (MWS) to “normalize the functioning of the precious metals industry” and have an alternative to the LBMA.
Following Russia’s invasion of Ukraine, the LBMA also suspended its accreditation of Russian precious metals refiners, barring them from selling new products in London. The suspension was made official on March 7.
According to the Finance Ministry, Russia was the second highest gold producer by volume in 2021, with gold output rising by 9% to 343 tons. The precious metals industry in Russia accounts for around $25 billion a year. Continue reading →
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Physical silver bars continue to drain from COMEX and London warehouse stockpiles. Lower spot prices are contributing to this.
Larger investors who hold deliverable bars aren’t throwing in the towel and dumping them back into the market. Instead, they continue to stack, much like retail investors buying the smaller coins, rounds and bars.
An attempt by Reddit users to create a “silver squeeze” in early 2021 marked the beginning of the year-and-a-half long trend of steadily declining bar inventories. The grassroots movement was an attempt to break the crooked price discovery scheme in silver.
Buyers were encouraged to purchase silver and take possession. The hope was that the tiny inventory supporting a mountain of paper derivative metal would disappear. Shorts would have to bid more and more for available bars in order to exit their positions and end the pain.
The buzz around the “silver squeeze” faded from the headlines over a year ago, but the draining of inventory continues.
As available stocks decline, the prices paid for deliverable bars in the cash market keep getting higher versus paper silver futures.
The mismatch in prices between the two markets is way outside of normal and should serve as a warning.
Buyers are paying up to get physical metal, and they are bearing the cost of storing large bars.
So far, traders on the short side don’t seem bothered by these troubling underlying fundamentals.
The past few months have been profitable for those making leveraged bets on lower prices.
What makes this setup interesting is that it is the speculators, not the commercial banks, who are heavily short. (Perhaps traders went to the Hamptons this summer and the trading algorithms they left on autopilot aren’t programmed to watch inventory levels.)
Futures market speculators are also not too quick on the uptake -- generally speaking. Bullion bankers have a long history of total domination against them in futures trading.
Normally it is bankers and commercial hedgers who are short and specs who are long. The current positioning may be backward, but you can expect the winners will be the same people – those classified as the large commercial traders.
Commercial traders tend to position themselves correctly ahead of the next trend – and right now they are positioned for the silver market to turn up. Continue reading →
The post Large Commercial Traders Are Positioned for Higher Metals Prices appeared first on Golden State Mint Blog.
The price of silver hit a peak over $26.50 on March 8. It spent about a month and a half breaking down, and then the bottom fell out. It’s currently down from that peak almost 8 bucks.
Breaking Down Fundamental Silver Prices
However, the opposite has been happening to silver’s scarcity. First, let’s look at a chart of the silver market price and the silver fundamental price.
The market price is down a lot since that peak, but the fundamental price has moved sideways (ignoring the two spurious drops) and is now the same as on March 8.
Now let’s look at what the silver basis and silver cobasis are showing.
There has been a big run up in the cobasis (i.e. the measure of scarcity), since August 8. It has hit almost zero, which is the line of demarcation of backwardation.
This chart, by the way, shows the continuous basis and cobasis. This is not the near contract (i.e. December, which hit a cobasis near 1% on Thursday). The continuous basis is a smooth 6-month average duration synthetic contract, not subject to the volatility caused by contract expiry, which often manifests as temporary backwardation.
Our remarks? We haven’t seen a cobasis like this, in at least 7 years.
LIBOR Rates and Silver
But it’s bigger than that. Much bigger. That’s because the interest rate is higher now, than it has been since November 2008. Now, LIBOR is on a tear. Then, it was collapsing.
Source: securitybenefit.com (who uses data from the Federal Reserve System)
To carry metal, a bank’s first step is to borrows dollars. Then it buys the metal and sells it forward. So, the basis is closely tied to the interest rate (we are still using LIBOR as an indicative rate).
When the interest rate is moving, we may find it more useful or more revealing to look at a chart which takes interest rates into account. It turns out that we do have such a chart. It is the lease rate*, which is LIBOR – forward rate (forward rate is a different way of looking at the basis).
*Note: Not to be confused with Monetary Metals’ true gold and silver lease rates, which are the rates investors earn when they lease gold and silver with us.
Here is the silver lease rate graph.
The lease rate, which is another way of looking at scarcity, is higher than at any time since the thick of the global financial crisis, in October 2008.
At that point, silver was trading under $10. And 2 ½ years later, its price quintupled to about $50.
The lease rate, LIBOR – GOFO, is based on arbitrage in the commercial bullion markets, again it has nothing to do with the interest rate Monetary Metals pays silver owners on their silver.
Silver Scarcity and the Future
Will that happen again soon? We don’t know (and neither does anyone else). But we can say with certainty that its scarcity has become serious.
This could be resolved two different ways. One, there could be selling of physical metal combined with a let up in buying. Two, the price could shoot up.
We think this is a good time to place a bet on silver.
Bet or no bet though, you can always earn interest on silver, (and gold) by opening a Monetary Metals account.
We will continue to keep a close eye on silver as the current situation unfolds.
© Monetary Metals 2022 Continue reading →
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August 25, 2022 by SchiffGold 0 0Gold: Recent Delivery MonthGold has seen the largest delivery volume in 2022 with 33,593 contracts delivered so far and 244 remaining in open interest. Since 2020, only December and February last year recorded larger volumes.Figure: 1 Recent like-month delivery volumeUnlike past months, the large volume was not really driven by mid-month net new contracts. Activity was well below recent months with only 1,935 contracts opened for immediate delivery. It should be noted that this figure was negative up to 8 days past first notice so there was definitely still strength mid-month.Figure: 2 Cumulative Net New ContractsFrom a dollar volume perspective, this month was more than $1.1B larger than last August but still well below the records from summer 2020.Figure: 3 Notional DeliveriesAnother major event this month was the record net delivery of contracts from the banks. The previous record was set in April in the wake of the Ukraine/Russia conflict. This month is nearly 30% higher with 8,340 contracts in net delivery volume. BofA is still a big player as they buy back about half of the metal they delivered out last month.Figure: 4 House Account ActivityIt’s very possible that banks are becoming more active as their inventory dwindles. As noted in the stock report, gold has been leaving Comex vaults at an unprecedented pace. While the last few days have seen inflows into Eligible, the removal from Registered is striking. Since May 1st, 4.17M ounces have left Registered. Nearly 13% of that occurred in the last two days alone as 540k ounces left (see below).Figure: 5 Recent Monthly Stock ChangeGold: Next Delivery MonthJumping ahead to September shows elevated open interest. It is currently below both March and May of this year, but those months showed exceptionally high open interest at this point in the contract. Furthermore, both March and May were influenced by the conflict in Ukraine. The elevated open interest this month does not (yet) have a clear driver.Figure: 6 Open Interest CountdownThe chart below shows deliveries for the last several minor months. Delivery volume has been quite elevated. The action in minor months can be heavily influenced by mid-month activity. Thus, regardless of the open interest at First Notice next week, it will be a few weeks before the full delivery volume will be known.Figure: 7 Historical DeliveriesSpreadsJumping out to the October contract shows the market in strong Contango, higher even than the August contract at a similar point. The current spread between October and December is nearly $10.Figure: 8 Futures SpreadsThe strong contango in the futures curve is one reason the spot market flipped from backwardation to contango at the beginning of the month (shown below). The analysis last month highlighted the market in strong backwardation for an extended period. Once August went into delivery, the futures contract went from August to October. The spot market flipped but the spread is already coming down quickly. The backwardation last month could be one reason for the heavy physical activity noted above. It will be interesting to see if the spread for October drops into negative territory over the next few weeks.Figure: 9 Spot vs FuturesSilver: Recent Delivery MonthSilver is still not seeing the same strength as gold. Delivery volume in August is the smallest for a minor month going back to January 2021. With only 74 contracts open, August will finish well below average.Figure: 10 Recent like-month delivery volumeLower mid-month activity is one reason for this drop. As shown below, only about 330 contracts were opened for immediate delivery. This is about 25% of the volume seen in February contract of this year.Figure: 11 Cumulative Net New ContractsThe banks are also not nearly as active. BofA restocked its delivery volume out last month (606 vs 600), but the other banks combined are only delivering 235 contracts this month.Figure: 12 House Account ActivityThis August will be the weakest dollar volume since August 2018 with only $105M delivered, less than half the amount from last August.Figure: 13 Notional DeliveriesOne area where silver continues to impress is the drain on Registered. Outflows continue from Registered with 2.77M ounces out on the most recent day. Registered is down more than 65% since the all-time peak in December 2020. At the current pace, Registered will be empty within a year!Figure: 14 Recent Monthly Stock ChangeSilver: Next Delivery MonthSeptember silver is starting to show signs of life! With 4 days to go, September has at least entered the pack. A lot will still happen in the next few days, but recent activity could be a good sign given where the contract stood a few weeks ago.Figure: 15 Open Interest CountdownLast month finished quite weak so it would be good to see a turnaround.Figure: 16 Historical DeliveriesThe market is still in strong contango but has been dipping down as the contract approaches First Notice.Figure: 17 Roll CostWhile the futures market remains in contango, the spot market is in solid backwardation. The market is in the strongest backwardation since silver first saw its massive price spike back in summer 2020.Figure: 18 Spot vs FuturesWrapping upThe gold price clearly does not reflect all the activity going on under the surface. The demand for physical is really starting to materialize with no clear catalyst (e.g., Covid lockdowns or Ukraine/Russia war). The Comex data is important because it will likely be the first place to show stress in the gold/silver market.The price is currently contained by an unlimited paper supply that can always be created to meet paper demand. The COTs report shows that this isn’t even needed as Managed Money has gone cold on gold. Things start to change when physical supply cannot be found to meet physical demand. The data is pointing to this as a real possibility in both gold and silver. The outflow of metal combined with the increased delivery volume in gold points to something happening underneath the surface while the paper futures market still plays the same old game. Buckle up! Things could get very interesting in the months ahead!Figure: 19 Annual DeliveriesData Source: https://www.cmegroup.com/Data Updated: Nightly around 11PM EasternLast Updated: Aug 24, 2022Gold and Silver interactive charts and graphs can be found on the Exploring Finance dashboard: https://exploringfinance.shinyapps.io/goldsilver/Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today! Continue reading →
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(Kitco News) The U.S. dollar has been the main culprit holding gold back this summer, but Wells Fargo still projects the precious metal to end the year above $2,000 an ounce.
Despite this week's gains, gold is still trading below $1,800 an ounce as markets await Federal Reserve Chair Jerome Powell's keynote speech at the Jackson Hole symposium on Friday. At the time of writing, spot gold was trading just above the $1,752 an ounce level, up 0.22% on the day.
If not for the U.S. dollar index at 20-year highs, gold would be around $150 higher than its current trading levels, Wells Fargo's real asset strategy head John LaForge told Kitco News.
"I'm still shocked that gold doesn't want to move. The U.S. dollar is what's holding gold back. Gold would have been closer to $1,900 if not for the move in the dollar," LaForge said on Wednesday. "Gold is still that chameleon asset. For six months, it's moving with real rates. And just when you figured that out, it's moving with the dollar. And just when you figure that out, it's moving with some crisis. For something so muted, it's amazing how often it switches teams."
Wells Fargo's year-end target remains $2,000- $2,100 an ounce, but if the U.S. dollar keeps surprising on the upside, that target could be unachievable.
Over the summer, the dollar has become the popular safe-haven play as other economies struggle with more problematic inflation and growth concerns. And the U.S. dollar could hold on to its strength for the next six months, according to LaForge.
"Our base case is that the U.S. will enter a recession somewhere in October or November, which will last until the middle of next year. Typically the dollar loses strength when signals say we are coming out of recession. So, if our base case is correct, you could see the dollar start acting weaker in Q1 of next year in anticipation of that," he described.
Until then, the dollar will keep acting as that defensive asset.
For gold, a recession doesn't necessarily mean a bad thing. But it all depends on the kind of recession the U.S. will see. A mild one could be beneficial for the gold price, LaForge noted.
On the inflation side, Wells Fargo does not see price pressures falling back to the Federal Reserve's 2% target. Longer-term inflation looks closer to 3%-4%.
Following Jackson Hole and the Fed's September meeting, the U.S. central bank will stick to much more measured rate hikes of around 50 basis points, following a set of 75-basis-point jumps. But its overall priority will remain with battling inflation, LaForge said.
"They are not going to change much. You might hear a word or two at Jackson Hole. But no doubt that the number one concern will be inflation. We only had one print that showed that maybe we peaked," he stated.
Another asset play on LaForge's radar is the crypto space after its fourth bear market. "I'd argue we reached the point with crypto where it has matured enough to prove there is value there," he said.
The last major speed bump for this market is regulation. And that could clear up within the next year, which will impact the price. "At this juncture, regulation is the number one thing. There are systems that the government wants to control. And money is a big one. There's a bit of a fight going on," LaForge said.
Regulation needs to be light enough to allow critical characteristics like independence and decentralization to remain at the core of crypto.
"What's looming in the next couple of years is the government coming in and regulating. The question is, how much? Do they take a light-glove approach as they did with the internet or a heavy-handed one? You have the example of the internet being regulated lightly. But that was with information and communications, which is important, but arguably not as important as money," LaForge highlighted. "If regulation is light-gloved, this is a whole new asset class. And we'll know that within the next year, and we'll start seeing it in the price." Continue reading →
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The euro has dived to its lowest level against the dollar in 20 years, underlining the sense of foreboding in the 19 European countries that use it. (Michael Probst / Associated Press)The euro has fallen below parity with the dollar, diving to its lowest level in 20 years and ending a one-to-one exchange rate with the U.S. currency.It's a psychological barrier in the markets, and the slide in values underlines the sense of foreboding in the 19 European countries that use the euro as they struggle with an energy crisis caused by Russia's war in Ukraine.Here's why the euro's slide is happening and what impact it could have:What does euro and dollar parity mean?It means the European and U.S. currencies are worth the same amount. While constantly changing, the euro has dropped just below a value of $1 this week.A currency's exchange rate can be seen as a judgment on economic prospects, and Europe's have been fading. Expectations that the economy would see a rebound after turning the corner from the COVID-19 pandemic have been replaced by recession predictions.More than anything, high energy prices and record inflation are to blame. Europe is far more dependent on Russian oil and natural gas than the United States to keep industry humming and generate electricity. Fears that the war in Ukraine will lead to a loss of Russian oil on global markets have pushed oil prices higher. And Russia has been cutting back natural gas supplies to the European Union, which EU leaders describe as retaliation for sanctions on Russia and weapons deliveries to Ukraine.Energy prices have driven inflation in the Eurozone to a record 8.9% in July, making everything from groceries to utility bills more expensive. They also have raised fears about governments needing to ration natural gas to industries such as steel, glassmaking and agriculture if Russia further reduces or shuts off the gas taps completely.The sense of doom increased as Russia reduced the flows through the Nord Stream 1 pipeline to Germany to 20% of capacity and said it would shut it down for three days next week for “routine maintenance” at a compressor station.Natural gas prices on Europe’s TTF benchmark have soared to record highs amid dwindling supplies, fears of further cutoffs and strong demand.“If you think Euro at parity is cheap, think again," Robin Brooks, chief economist at the Institute of International Finance banking trade group, tweeted Monday. “German manufacturing lost access to cheap Russian energy & thus its competitive edge."“Global recession is coming," he said in a second tweet.When was the last time a euro was worth less than a dollar?The euro was last valued below $1 on July 15, 2002.The European currency hit its all-time high of $1.18 shortly after its launch on Jan. 1, 1999, but then began a long slide, falling through the $1 mark in February 2000 and hitting a record low of 82.3 cents in October 2000. It rose above parity in 2002 as large trade deficits and accounting scandals on Wall Street weighed on the dollar.Then as now, what appears to be a euro story is also in many ways a dollar story. That’s because the U.S. dollar is still the world’s dominant currency for trade and central bank reserves. And the dollar has been hitting 20-year highs against the currencies of its major trading partners, not just the euro.The dollar is also benefiting from its status as a haven for investors in times of uncertainty.Why is the euro falling?Many analysts attribute the euro's slide to expectations of rapid interest rate increases by the U.S. Federal Reserve to combat inflation at close to 40-year highs.As the Fed raises interest rates, the rates on interest-bearing investments tend to rise as well. If the Fed raises rates more than the European Central Bank, higher interest returns will attract investor money from euros into dollar-denominated investments. Those investors will have to sell euros and buy dollars to buy those holdings. That drives the euro down and the dollar up.Last month, the European Central Bank raised interest rates for the first time in 11 years by a larger-than-expected half-percentage point. It is expected to add another increase in September. But if the economy sinks into recession, that could halt the European Central Bank's series of rate increases.Meanwhile, the U.S. economy looks more robust, meaning the Fed could go on tightening — and widen the rate gap.Who wins?American tourists in Europe will find cheaper hotel and restaurant bills and admission tickets. The weaker euro could make European export goods more competitive on price in the United States. The U.S. and the EU are major trade partners, so the exchange rate shift will get noticed.In the U.S., a stronger dollar means lower prices on imported goods — from cars and computers to toys and medical equipment — which could help moderate inflation.Who loses?American companies that do a lot of business in Europe will see the revenue from those businesses shrink when and if they bring those earnings back to the United States. If euro earnings remain in Europe to cover costs there, the exchange rate becomes less of an issue.A key worry for the United States is that a stronger dollar makes U.S.-made products more expensive in overseas markets, widening the trade deficit and reducing economic output, while giving foreign products a price edge in the United States.A weaker euro can be a headache for the European Central Bank because it can mean higher prices for imported goods, particularly oil, which is priced in dollars. The ECB is already being pulled in different directions: It is raising interest rates, the typical medicine for inflation, but higher rates also can slow economic growth.This story originally appeared in Los Angeles Times. Continue reading →
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(Kitco News) With all eyes set on Federal Reserve Chair Jerome Powell's speech at the Jackson Hole symposium on Friday, JPMorgan expects the next rate increase to be the last big hike of the tightening cycle. JPMorgan CEO Jamie Dimon also warns that "something worse" than a recession could be coming.
The last time the Fed could surprise markets with an oversized rate hike would be at its upcoming September meeting, JPMorgan Chase & Co. strategists said in a note Monday.
"We expect another outsized Fed hike in September, but post that, we would look for the Fed not to surprise the markets on the hawkish side again," they wrote strategists.
The end of the aggressive tightening pace could help risk-on assets recover during the second half of the year.
In the meantime, Dimon shared his outlook on the economy in a client call earlier in August. And it was quite uncertain.
"What is out there? There are storm clouds. Rates, QT, oil, Ukraine, war, China. If I had to put odds: soft landing 10%. Harder landing, mild recession, 20%, 30%. Harder recession, 20%, 30%. And maybe something worse at 20% to 30%," Dimon explained. "It is a bad mistake to say 'here is my single point forecast.'"
Goldman Sachs also shared its take on the impact of global monetary policy tightening in a note Monday, stating that major economies won't experience recessions over the next 12 months.
"Their resilience supports our forecast that no major economy will enter a monetary policy-driven recession over the next year," economists led by Jan Hatzius wrote in the note. "Coupled with the persistence in inflation and its drivers, this resilience suggests some upside risk to terminal rates among the later hikers relative to current market pricing."
One of the reasons behind the forecast is the state of the labor markets, which are still going strong.
This week's big catalyst is Fed Chair Powell's keynote at the Jackson Hole titled 'Economic Outlook,' which is scheduled for Friday.
Markets remain divided on whether the Fed will hike rates by 50 or 75 basis points at its September meeting. The CME's FedWatch Tool shows a 56.5% probability of a 50bps hike and a 43.5% chance of a 75bps increase.
The FOMC meeting minutes from July showed that Fed officials agree on the need to slow down the tightening cycle eventually. Still, they believe the Fed needs to see how its rate hikes impact inflation. Continue reading →
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Silver supplies will be depleted and industrial demand will “suck up all the silver that’s available,” over the next ten years, causing silver prices to rise, and making it the best investment in decades, according to David Morgan, Founder and Author of The Morgan Report.
“If you’ve got a long time horizon, like ten years or more, I can’t think of something that would be better than a silver investment,” he said. “Silver will shine at some point… but it’s probably going to take a natural corner… a natural corner is when industry alone sucks up all the silver that’s available and there isn’t any left.”
Morgan told David Lin, Anchor and Producer at Kitco News, that the silver supply could run out within a few decades.
“The [U.S. Geological Survey] said that silver would be the first element on the periodic table that would be in such short supply, and that was a few years back,” he said. “Just the industrial side alone is probably going to take all the silver available at some point in time.”
Supply Crunch
Commodities like base metals have fallen in price over the year, with copper down 18.4 percent and lead down 8.3 percent. Morgan suggested that silver, which is often a biproduct of base metal mining, will suffer supply-wise from a fall in the price of base metals, since there would be less incentive to mine.
“Seventy-percent of silver is a result of base metal mining,” he explained. “If that is down, and down noticeably, then that takes a great deal of silver supply off the market.”
Morgan stated that rising energy costs would limit silver mining as the world’s oil reserves are depleted.
“We are at, or maybe just past, the energy cliff,” he said. “I’m a big believer in the peak oil situation. What we’re seeing is inefficiencies in the fracking sector. There are very few places that fracking makes sense from an economic standpoint. And then you’re seeing depletion that’s taking place rapidly throughout different parts of the world… that means higher oil prices.”
Demand Surge
Pointing to growing industrial usage of silver, in areas from photovoltaics to semiconductors, Morgan said that applications of silver in industry will continue to grow, squeezing the available stock.
“The Silver Institute put on their pie chart that the solar uses in 2019 was about 9 percent of the silver industry, and now it’s probably around twelve, and that’s going to continue to increase,” he said. “You may recall that there was a statement made by the U.S. Mint that there was a worldwide silver shortage, and that came from the Mint Master of the U.S. Mint. He quickly retracted that statement. I don’t think there is a worldwide silver shortage. It’s just that if you look at what the mint is producing now, they’re not able to keep up with demand whatsoever.”
Morgan added that there are no good industrial substitutes for silver.
“Nothing reflects light as well as silver, and nothing conducts electricity as well as silver,” he said. “Most silver applications are absolutely essential and irreplaceable. There is no substitute.”
To find out Morgan’s short-term price target for silver, watch the video above.
Follow David Lin on Twitter: @davidlin_TV
Follow Kitco News on Twitter: @KitcoNewsNOW Continue reading →
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