Precious metals news

ChatGPT Growing support in Washington for a commission to address the U.S.'s $34 trillion debt faces skepticism amid congressional divisions. The proposed fiscal commission would explore debt reduction, but its effectiveness is uncertain, echoing past efforts like the 2010 Simpson-Bowles commission. Key lawmakers question the proposal's feasibility, citing political disagreements, especially regarding spending cuts and revenue. Despite these doubts, public surveys show strong bipartisan support for the commission, aimed at finding long-term fiscal solutions and addressing mandatory spending programs.

The aggressive monetary tightening has severely impacted US high-risk borrowers who previously depended on low-interest rates. With rates now around 5%, companies with leveraged loans linked to floating rates are struggling with liquidity issues. The LSTA Leveraged Loan index shows a steep drop in earnings growth and a significant decline in the average EBITDA to interest expense ratio. This scenario suggests heightened risk, especially for businesses heavily reliant on floating rate-leveraged loans, as they now face severe challenges in the current high-rate environment. A potential downturn could exacerbate these risks significantly.

The Biden administration's request for over $105 billion in supplemental security spending, mainly for Israel and Ukraine, is raising fears of global conflict incentivization, with the burden falling on U.S. taxpayers. Critics, including Robert Kennedy Jr., argue that this focus on defense diverts resources from vital domestic issues. The plan, potentially benefiting defense contractors significantly, stokes concerns about war profiteering and the influence of the defense sector on U.S. foreign policy. The final decision rests with Congress, where the defense lobby's sway is a contentious issue.

October CPI coming in cooler than expected ramped up expectations that the Federal Reserve is at the end of its inflation fight. In fact, many analysts now expect the Fed to begin cutting interest rates in 2024.
Looking at the bigger picture, inflation's apparent retreat boosted mainstream belief that the economy will glide to a "soft landing." With a lot of economic data weakening, the markets anticipate that the Fed will proactively cut rates to preempt a recession and prevent a crash landing. The thinking is as soon as it sees the economy coming in for a landing, it’s going to cut rates to ensure that landing is soft.

Holiday shoppers plan on cutting back on spending and piling on even more debt this year, and nearly a quarter of Americans still haven't paid off their debt from last year's holiday spending spree.
These were just a few revelations in a recent WalletHub survey that indicates American consumers aren't quite as "resilient" as pundits and government people would have you believe.

Gold prices surged on Tuesday, reaching $2,038.45, driven by a weakening US Dollar and dovish comments from Federal Reserve Governor Christopher Waller. Waller indicated that a continued decline in inflation could lead to a reduction in the policy rate. Chicago Fed President Austan Goolsbee also acknowledged significant progress in lowering inflation. Despite this, Fed Governor Michelle Bowman maintained a possibility of further rate hikes. These developments, reflecting a shift from the Fed's typically hawkish stance, led to a decrease in Treasury yields, with the 10-year and 2-year notes yielding 4.36% and 4.80%, respectively.

Chief Investment Strategist Michael Hartnett foresees a promising outlook for 2024, highlighting the potential for growth in what he terms the "3Bs": Bonds, Bullion (Gold), and Breadth (diverse investments). Hartnett's anticipation of a robust market is based on his expectation of a dynamic economic landscape. He is strategically waiting for the perfect alignment of factors - bearish investor positioning, a rebound in corporate profits post-recession, and a shift towards easing policy (the "3Ps").

Gold prices are expected to remain high due to several factors, even if inflation eases. Central banks, particularly China's, are buying gold to diversify and stabilize their reserve assets, partly influenced by geopolitical tensions like Russia's invasion of Ukraine. Additionally, in China, gold's demand as a wealth store is increasing due to economic challenges and property market issues. This trend, coupled with gold's status as a safe haven in uncertain times, suggests that its demand will stay elevated, especially with the approaching 2024 U.S. election year adding to market volatility.

The United States is at risk of a debt spiral and fiscal crisis, with the national debt surpassing $33 trillion in 2023. Economists warn that the government's deficit spending and the Federal Reserve's strategies to manage debt are increasingly ineffective. Investor confidence in U.S. Treasurys is declining, as evidenced by downgraded ratings and growing skepticism over the U.S.'s ability to manage its debt without causing inflation or default. Restoring investor trust in U.S. financial stability is becoming a critical challenge.

The Federal Reserve's extensive bailouts of major banks, as shown by FRED's data, highlight the precarious state of the U.S. financial system. Since the 2008 crisis, these banks have fluctuated wildly in cash assets, indicating a shift from stable to chaotic financial operations. The Fed's actions, aimed at preventing bank runs and panic, have led to repeated, massive injections of emergency funds, underlining the banks' dependency on Fed support rather than robust regulatory oversight. This situation, further exposed by the recent major bank failures, calls into question the Fed's effectiveness as a regulator and the need for a more competent and independent supervisory body.

The November Conference Board Consumer Confidence index improved to 102.0 after a significant downward revision of October's data to 99.1, marking the lowest since July 2022. The Present Situation Index dropped to 138.2, the lowest since April 2021. Consumer expectations, remaining below the recession-indicative level of 80 for the third month in a row, signal growing concerns about an impending economic downturn. Around two-thirds of consumers anticipate a recession within the next year, and labor market indicators continue to worsen.

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Gold prices are surging, recently surpassing $2,013 per ounce and reaching a six-month high. Analysts are optimistic, predicting that gold might exceed its 2020 record high of $2,074.88. Key indicators suggest a breakout around $2,050 could lead to further gains, with targets around $2,500/oz. The rally is driven by falling real rates, geopolitical uncertainties, and speculation of the Federal Reserve pausing interest rate hikes. Gold's status as a safe-haven asset is reinforced by increased purchases from central banks like China, Poland, and Singapore, underscoring its positive momentum.

Market expectations of Federal Reserve rate cuts in early 2024 are at odds with the Fed's own signals of possible rate hikes to fight inflation. Monetary aggregates like M1 and M2 are decreasing, but total borrowings from the Fed are increasing, indicating that money printing is mainly aiding the banking sector, not the broader economy. This suggests that inflation may not drop as quickly as some anticipate. If the Fed does cut rates, it might be due to a decline in private sector demand, rather than a positive economic sign. Such rate cuts, driven by economic downturns, are unlikely to boost the markets as some expect, pointing to ongoing inflation and economic challenges.

The Federal Reserve has lost well over $100 billion dollars, and even when it returns to "profitability," it will likely take over four years before the central bank is completely in the black.
And you're going to foot the bill.

The Bank of Japan is grappling with a substantial financial challenge, recording a massive paper loss of ¥10.5 trillion ($70.7 billion) on its assets as of the end of September. This is the largest loss since fiscal 2004, significantly impacting the bank's balance sheet. The loss is attributed to the rise in yields, which has reduced the value of the bank's extensive bond holdings. This situation poses a serious concern for the bank's financial health, despite Governor Ueda's assurances that it won't impede monetary policy.

Deutsche Bank economists say the Federal Reserve will create more inflation in 2024.
OK, that's not exactly what they said. But that is the implication of their latest forecast.

China's banking sector is under severe stress, tasked with propping up its faltering $57 trillion property industry. Banks like ICBC face the prospect of issuing risky, unsecured loans to financially unstable developers. This move could dramatically spike their bad debt provisions, with an estimated additional $89 billion needed in 2024, severely impacting their profits. The situation is dire, forcing banks to contemplate drastic measures like reducing growth targets and cutting jobs, while juggling government demands and business sustainability. This predicament poses a significant threat to the overall stability and profitability of China's major banks.

Eurozone credit to non-financial corporations shrank by 0.3% in October, marking the first decline since 2015 and signaling the negative impact of the European Central Bank's aggressive rate hikes. This contraction in lending reflects a broader economic slowdown in the region, exacerbated by tighter monetary policy. Banks' rapid repayment of ECB loans is contributing to a significant reduction in the central bank's assets. The decrease in the broad money supply, M3, further indicates a shift away from credit and an increasing preference for savings. These trends, reflecting a worsening economic environment, are likely to persist into 2024.

Javier Milei faces significant challenges in Argentina, where many politicians have grown powerful and wealthy through policies that have led to economic decline. To restore prosperity, Argentina needs a stable macroeconomic and monetary system. This requires recognizing the failure of its currency and the bankruptcy of its central bank, and implementing urgent, market-friendly reforms. Despite the difficulties, the potential for Argentina's economy is vast. The country, once wealthy, has been impoverished by socialism. To regain its prosperity, Argentina must move away from socialist policies and embrace a more market-oriented approach.