Precious metals news

The World Bank's recent report paints a grim picture for the global economy, predicting the poorest half-decade growth in 30 years. Global growth is expected to slow down further in 2024 to 2.4%, marking the third consecutive year of deceleration. Although a slight increase to 2.7% is anticipated in 2025, this growth rate still falls significantly below the average of the 2010s. Geopolitical tensions, including the war in Eastern Europe and conflicts in the Middle East, are major contributing factors to this slowdown, potentially impacting energy prices, inflation, and overall economic growth. The World Bank warns of a "decade of wasted opportunity" without significant policy changes.

The credit card debt situation in the U.S. is becoming increasingly concerning, with a record $1.08 trillion in balances as reported by the Federal Reserve Bank of New York. Ted Rossman, a senior analyst at Bankrate, highlights a staggering 40% rise in credit card balances over the past two years. Notably, nearly half of all cardholders are now carrying their debt month-to-month, a significant increase from last year. This shift indicates growing financial strain, as 56 million Americans have been in credit card debt for over a year. Factors contributing to this trend include inflation, higher borrowing costs, and possibly shifts in lending practices. The Fed researchers suggest that this could be a sign of deeper economic distress.

The year 2023 proved difficult for commodities, with most experiencing lackluster returns. However, gold emerged as a notable exception, reaching an all-time high of $2,135 an ounce. This surge in gold prices was largely driven by increasing investor interest in safe-haven assets, spurred by the growing likelihood of rate cuts in 2024 and a weakening dollar. Copper, on the other hand, showed marginal gains, its performance dampened by a declining property market in China. VisualCapitalist put together a great graphic, based on U.S. Global Investors interactive research, that shows commodity returns over the last decade.

December saw a resurgence of “degrowth” advocates in the media, with two articles published by Nature garnering special attention on X (formerly Twitter).
The fallacies underlying the degrowth movement are not new in economics, but it’s worth revisiting them and their important connections to monetary policy in the age of central banking.

Real estate expert Russ Gray opens up about ‘losing it all’ during the 2008 financial crisis and the valuable lessons he learned.

As of January 8, 2024, key mortgage rates have seen an increase over the past week. The average rates for both 15-year and 30-year fixed mortgages have risen, along with a climb in the average rate for 5/1 adjustable-rate mortgages. Current rates are as follows: 7.07% for a 30-year fixed mortgage, 6.46% for a 15-year fixed mortgage, and 6.41% for a 5/1 adjustable-rate mortgage. Despite a drop from a peak of 8% in November, the most common mortgage rates are now hovering between 6% and 7%. Keith Gumbinger, vice president of HSH.com, notes that fluctuations in interest rates are typical in January. The housing market remains challenging due to high mortgage rates, elevated home prices, and limited inventory, making homebuying difficult for many. Experts advise potential homebuyers to focus on financial preparedness rather than trying to time the market.

Cam Harvey, the economist known for identifying the predictive power of the Treasury yield curve for recessions, warns of a likely downturn in 2024. His model indicates that a recession follows when yields on 3-month Treasury bills exceed those on 10-year notes for at least three months, a situation known as an official inversion. This pattern has consistently predicted the last eight recessions without any false signals and has been in place for 12 months now.

In 2024, the Federal Reserve's interest rate setting committee will see new members, leading to speculation about how this might affect the balance between hawks (who favor higher rates) and doves (who support lower rates) in setting monetary policy. The change is a result of the Fed's rotation system, where four of the 12 seats on the Federal Open Market Committee (FOMC) are annually reassigned to regional Fed presidents. This year, the new members are from the regional Fed banks in Cleveland, Richmond, Atlanta, and San Francisco. According to Gregory Daco, chief economist at Ernst & Young, these additions could potentially shift the committee towards a more dovish stance, potentially increasing openness to rate cuts to stimulate the economy.

The "Magnificent 7" stocks, including major tech and consumer giants like Microsoft, Meta Platforms, Amazon, Apple, NVIDIA, Alphabet, and Tesla, experienced a slowdown at the beginning of 2024, following an impressive 107% gain in 2023. This trend was also seen in the broader S&P 500, where mega-caps underperformed and the equal-weighted index outdid the capitalization-weighted one. Small-cap stocks, in particular, faced challenges, as seen in the Russell 2000's performance. This downturn is partly attributed to market rebalancing in the new tax year and profit-taking from previous winners. This shift suggests a growing uncertainty about the economy's ability to achieve a soft landing, impacting investor confidence and the market outlook.

The Federal Reserve will play a pivotal role in the upcoming election and aim to boost President Biden or another Democratic candidate.

Gold prices dropped in Asian markets on Monday, continuing a downward trend from the previous session. This decline is largely attributed to the stronger-than-expected U.S. labor data, which led markets to reevaluate the likelihood of early Federal Reserve rate cuts. The unexpected resilience in the U.S. labor market, indicated by the latest nonfarm payrolls data, suggests the Fed might maintain higher interest rates for a longer period. Additionally, gold experienced significant profit-taking following its strong performance in December, where it gained over 10% in 2023. As a result, spot gold decreased by 0.5% to $2,035.69 an ounce, and gold futures for February delivery dropped by 0.4% to $2,042.25 an ounce, with both instruments losing around 0.9% in the first week of 2024.

The latest Bloomberg Markets Live Pulse survey indicates that investors' expectations for blockbuster profits in 2024 might be overly optimistic. According to the survey, half of the 380 respondents believe that the current sell-side analysts' consensus, predicting record S&P 500 earnings for the year, is too high. The main concern is an economic slowdown impacting corporate bottom lines. This sentiment suggests that profits may not be the driving force behind stock market gains this year, unlike the 24% rally in the S&P 500 seen in 2023.

U.S. Mint Silver Eagle production staged an impressive recovery last year as sales increased more than 50% while Gold Eagle sales rose slightly.  This trend continues into 2024 as early demand for Silver Eagles is quite strong.  So, what's next for 2024...

The Federal Reserve's recent meeting notes reflect a change in its economic outlook, with the term "recession" notably absent in the minutes from the last three meetings between September and December. This marks a stark contrast to previous meetings, where the word appeared frequently in discussions about a potential economic downturn. In late 2022, Fed staff economists even flagged the possibility of a recession within the next year. Additionally, Wall Street respondents in the Fed's surveys consistently highlighted a high likelihood of a recession occurring by the end of 2024.

Are we heading towards a significant economic shift in 2024?

Despite recent fluctuations in yields driven by employment and service-industry data, Treasury traders are firmly betting on the Federal Reserve cutting interest rates significantly in 2024. Swap contracts linked to Fed meetings are pricing in nearly six quarter-point reductions, with over a 70% chance of a cut in March. Initially, these bets were scaled back after a strong job report, but they regained momentum due to a comprehensive analysis of the payrolls report, a major revision in November's data, and a weaker U.S. service sector performance.

In December, U.S. employers hired more workers than anticipated and increased wages significantly, raising doubts about the financial market's expectations of the Federal Reserve cutting interest rates in March. The Labor Department reported a rise of 216,000 nonfarm payrolls, adjusting November's figures down from 199,000 to 173,000. The unemployment rate remained steady at 3.7%. Following the employment report, U.S. stock futures initially dropped but then stabilized, U.S. Treasury yields increased, and the dollar index saw a slight gain. Futures contracts tied to the Fed's policy rate now indicate only a 50% chance of a rate reduction in March, a decrease from the nearly 65% likelihood expected prior to the job data release.

In India, where gold is deeply embedded in culture and tradition, the wedding season traditionally sparks a rise in demand. However, with soaring gold prices, a new trend is emerging: recycling gold. Instead of buying new gold, individuals are increasingly exchanging their existing gold jewelry for new designs. Surendra Mehta of the India Bullion and Jewelers Association highlights this shift, noting that while the desire for gold in weddings remains strong, the high costs are driving people towards recycling. This change in consumer behavior could significantly impact gold imports, reflecting an adaptation to the economic reality of higher gold prices.

In 2023, various asset classes showed diverse performances, as evidenced by data from S&P Global and Investing.com. U.S. equities, real estate, and bonds, along with Canadian, European, and emerging market equities, all reported positive returns. Gold notably maintained high values, favored as an inflation hedge and further boosted by escalating geopolitical tensions. On the other hand, oil, commodities, and Chinese equities experienced negative returns, largely attributed to the slowing Chinese economy. This comprehensive overview highlights the varied market movements of major asset classes, with gold standing out for its sustained strong performance amidst global uncertainties.

November, global central bank gold reserves increased by a net total of 44 tons, as reported by the IMF and other public sources. This increase was due to substantial gross purchases of 60 tons, significantly outstripping the 15 tons sold. The trend of robust central bank demand for gold continued, with major contributions from banks that have been consistent buyers throughout the year. Notable additions came from emerging market central banks, with the Central Bank of Turkey leading the purchases by adding 25 tons, followed by the National Bank of Poland and the People’s Bank of China.