Precious metals news

Despite silver's recent underperformance, it presents an attractive entry point. The gold-silver ratio, historically between 50 and 60, now exceeds 80, suggesting silver's undervaluation. As demand for silver grows in sectors like solar and EVs, and supply challenges loom, prices are expected to rise significantly. The current market dynamics make a compelling case for silver investment.

Jeff Gundlach, CEO of DoubleLine Capital, anticipates the U.S. Federal Reserve to reduce benchmark rates in early 2024. After a rigorous rate increase to address persistent inflation, Gundlach believes the U.S. economy's fragility might prompt the Fed to halt these hikes. He mentioned that for the Fed to stop the rate increases, the U.S. core PCE should drop below 4%.

Rep. Tom Emmer reintroduced the "CBDC Anti-Surveillance State Act" to the U.S. House, aiming to block the Federal Reserve from issuing a surveillance-focused digital currency. Emmer asserts this could endanger Americans' financial privacy. The bill restricts the Fed from giving a CBDC to individuals and using it in monetary policy. Critics, including Robert F. Kennedy Jr., warn of potential financial control over dissenters.

The Federal Reserve posted a staggering $57 billion loss for the first half of 2023, forecasting losses beyond $100 billion by year's end. Their strategy? They print money to purchase Treasury bonds but then borrowed short-term and lent long-term at dismal interest rates, plunging them into this deficit. With their assets now devalued by over $1 trillion, the Fed, by standard accounting, seems technically insolvent, raising grave concerns about its financial prowess.

In August, small business optimism declined, as highlighted by the NFIB, due to concerns about sustained inflation and hiring challenges. Despite the U.S. economy's growth, higher interest rates intensified these worries. With U.S. households bracing for economic challenges, inflation remains a significant concern.

Major corporations are rapidly entering the bond market this September, anticipating even higher interest rates. These companies are not waiting for potential Federal rate cuts, suggesting a belief in sustained inflation and rising long-term interest rates. There's a significant increase in debt issuance this September compared to last year. As inflationary signals mount, businesses are racing to secure the current rates. Market experts predict further inflation surprises in the coming months, intensifying the urgency.

The lag effect looms like an impending storm. Every day, more borrowers grapple with the repercussions of escalating interest rates. The financial strain is subtle yet progressively intensifying. Couple that with the swift withdrawal of pandemic-related stimuli, and the economy faces turbulence. As we strive for normalcy, this growing lag effect may steer us towards a recession. The economy's heavy reliance on leverage means that sustained high rates are unsustainable without causing significant disruptions.

The consequences of the Fed's decision to raise rates in March 2022 have been devastating for many. Auto loan delinquency rates have soared alarmingly, nearly doubling in a short span. By Q2 2023, the situation worsened, with the US auto loan delinquency rate escalating to a troubling 7.3%, surpassing even pre-pandemic figures. The forecast from Moody’s paints an even grimmer picture, predicting that by 2024, a staggering 10% of auto loans will be delinquent.

The liquidity crisis is looming large. JP Morgan's data indicates a concerning trend: current excess household liquidity is at a dwindling $1.4 trillion. Alarmingly, this reserve is projected to hit rock bottom by May 2024. With household savings vanishing at a staggering rate of $100 billion monthly, they're on track to be drained entirely within this quarter. This dire state of finances is clearly reflected in the surging household debt levels.

The surge in elderly homelessness is being significantly impacted by the Baby Boomers, amplifying a public-policy crisis and burdening taxpayers. Increasingly, aging individuals face homelessness due to the combined factors of high housing costs, insufficient low-cost assisted living centers, and the socio-economic challenges faced by the latter half of the Baby Boomer generation. The severity of the situation, with rising numbers of elderly on the streets, is reminiscent of challenges not witnessed since the Great Depression.

About that disinflation...
It was transitory.
As we predicted, a jump in gasoline prices helped drive the August Consumer Price Index (CPI) higher, throwing cold water on the disinflation narrative.

Inequality is a topic that has gotten less attention in the years since the onset of the pandemic but signs suggest it may soon be thrust back into the center of the national conversation. Because the pandemic did little to counteract the self-reinforcing dynamics further entrenching inequalities in both wealth and political power. In fact, pandemic-induced dynamics in the housing market have only made things worse, with elevated prices and interest rates leading to record low affordability.

The estimate comes as federal deficits have exploded in recent years, sharply elevating the trajectory of US debt. The Treasury Department has already auctioned $1 trillion in bonds just within this quarter. Meanwhile, borrowing costs have soared in the last year and a half as the Federal Reserve embarked on an aggressive tightening campaign, raising the government's debt-servicing costs.

Following July's rebound in headline CPI, August was expected to see that accelerate further (driven by surging energy prices and healthcare methodology changes). Headline CPI rose 0.6% MoM (as expected), but pushed the YoY change to +3.7% (up from 3.2% prior and hotter than the 3.6% exp). That is the biggest MoM since June 2022...

The Federal Reserve is losing money.
That means the American taxpayer is losing money.
In most instances, a business bleeding red ink has a big problem and could ultimately go under. Not so for the Fed. In fact, losing money isn’t a problem for the central bank at all. But it is a big problem for the US government.

A commenter on the SchiffGold Facebook page recently asserted that silver coins are "junk." Why? Because as he put it, "silver is not rare," and, "The silver/gold ratio investment premise is obsolete in this industrial, computerized and AI world."
What should we make of these assertions?

The federal government charted a surprising budget surplus in August.
But don't be fooled. The feds didn't miraculously fix their deficit problem.
The Biden administration continued to spend money at an unsustainable pace last month. The surplus was merely a function of the reversal of student loan forgiveness.

With the silver price now at a critical technical level, where do we go from here?  That depends on what happens with the broader markets and the U.S. Dollar.  The metals may trend lower unless we experience another major geopolitical or banking event...

Gold may perform favorably in the coming quarters due to its historically positive average return during recessions. Stagnating global economic growth, ongoing inflation, volatile equity markets, and devalued currency fluctuations are factors contributing to gold's attractiveness for investors and consumers. The World Bank and IMF foresee a potential recession and financial crises in emerging markets, further bolstering gold's potential performance.

China is facing a severe crisis with its wasted investment, leading to a debt trap and a lack of transition to consumption-driven growth. New challenges, including financial panic and corporate failures, could trigger a global financial contagion. The collapse of shadow bank Zhongrong International Trust is one example, and regulators are struggling to respond. China's stock markets may plummet, leading to a potential collapse that will affect global markets, including the United States. Investors should prepare for a U.S. stock market crash, bank failures, and mounting bad debts.