Precious metals news

The U.S., the globe's most advantaged nation, consistently escapes repercussions for incompetence or misdeeds. This impunity allows politicians to recklessly toy with national finances, amassing dangerous debt. Financial markets, shielded by the dollar's status as a global reserve currency, facilitate this behavior. This privilege, alongside the Fed's unprecedented power, permits deplorable mismanagement by U.S. fiscal authorities, unthinkable in the corporate world. They frequently risk default by resisting additional borrowing, a dereliction underlined by Fitch.

The US government is set to borrow $1.007 trillion in Q3, a considerable rise from the previous estimate of $733 billion, due to increasing fiscal deficit and dwindling cash reserves. The federal deficit has surged by 170% to $1.39 trillion in the nine months through June. Spending outstripped income, with $4.80 trillion spent against $3.413 trillion in generated revenues. The US pays 2.76% interest on its debt, the highest in over 11 years. Despite these, Fitch retains the US's AAA rating, but places it on negative watch due to fiscal and debt trajectories.

Under the Federal Reserve's watch since 1913, US inflation has skyrocketed to an extraordinary 3,000% as of June 2023. This is a stark contrast to the era before the Federal Reserve, when the dollar's purchasing power was tied to the supply and demand of gold, resulting in a notably stable purchasing power for over 130 years. Regardless of the measures used, the rise in the US price level under the Fed's management has been substantial and unparalleled, signifying a departure from the gold standard stability of the past.

The ECB, led by Christine Lagarde, is currently struggling with a credibility issue. While Fed Chair Jerome Powell needed almost a year to convince markets of his seriousness about rate hikes. Lagarde has tried to impose her intentions onto the market, resulting in policy inconsistencies. The ECB's Transmission Protection Instrument (TPI), designed to manage German/Italian credit spreads, has not been enough to stabilize the situation. In short, both the US and ECB are dealing with economic uncertainties due to their conflicting monetary policies.

The July jobs report displayed disappointing numbers with a payroll increase of only 187K, missing the expected 200K, marking the second consecutive miss in nearly two years. Both May and June figures were revised lower, continuing a trend of monthly payrolls for 2023 being downwardly adjusted. The unemployment rate's unexpected drop to 3.5% from 3.6% confounds the Fed's year-end 4% unemployment rate expectation.The wage numbers also present a mixed picture, with average hourly earnings coming in hotter than expected, but creating more confusion for policy decisions.

The US's credit downgrade by Fitch Ratings, following a similar move by S&P in 2011, leaves it behind countries like Germany, Denmark, Netherlands, Sweden, Norway, Switzerland, Luxembourg, Singapore, and Australia that maintain top-tier credit ratings. The cut reflects anticipated fiscal degradation and escalating government debt due to consistent debt-limit conflicts. Although Moody's is the only major rating company still holding the US at top-tier, the downgrade exposes the over-reliance on US securities globally, potentially prompting a shift towards other countries' assets.

In this special episode of the Friday Gold Wrap podcast, host Mike Maharrey answers listeners' questions. He covers topics including the precious metals markets, investment strategies, the trajectory of the economy, the future of the US dollar, central bank digital currencies (CBDCs), and more.

Australia's silver production took a major hit in the first quarter of 2023, falling 21% compared to the previous period.  While wet weather may be partially the cause for the decline, Australia's silver production has been falling considerably over the past 10-15 years...

Over 40 nations under the BRICS+ coalition are discussing the feasibility of a gold-based financial institution at their Johannesburg meeting, symbolizing a slow global shift away from U.S. dollar dependency. This "de-dollarization" doesn't spell doom for the U.S. dollar but rather emphasizes the need for alternative currencies in critical situations. This trend coupled with growing investments in gold sectors globally, central banks buying gold at record rates, and emerging gold-based systems indicate a gradual re-monetization of gold that may influence global central bank reforms.

According to the Congressional Budget Office, the climbing national debt is projected to seriously hinder income growth in the US, reducing it by up to 69% and average income by 25% by 2053. This "crowding out" effect would detract from more productive investments. Policymakers are thus advised to work towards slowing the debt's growth to preserve economic stability and the standard of living.

For decades, the US has been witnessing a worrying decline of industrial and manufacturing jobs, with corporations offshoring roles for cheaper labor. Despite economists' promises, better jobs for displaced workers haven't materialized, exacerbating economic decline. The longstanding status of the US dollar as a reserve currency is at risk due to Washington's policies, raising inflation risks and threatening reduced living standards. A one-party rule are undermining US power and foundational principles, setting the stage for potential economic decline.

Despite low unemployment rates and increased private sector net worth in recent years, governments worldwide have plunged deeper into debt due to significant budget deficits and aggressive bond buying by central banks. Investor Ray Dalio predicts a near-term future of mild stagflation—slow growth and high inflation. He warns of a self-reinforcing debt spiral in the long term, as governments will have to sell more debt to cover increasing deficits and debt service costs, leading to market-imposed debt limits and further monetary easing by central banks, exacerbating their balance sheet issues.

U.S. service sector indicators fell in July, raising concerns of a slowdown. ISM Services dropped to a six-month low, and PMI Services also decreased. Rising living costs, higher interest rates, and decreased domestic demand are causing businesses to pull back on hiring. Coupled with stubbornly high inflation and increased wages, this downturn signals a risk of stagflation in the U.S. economy.

Prominent billionaire investor William Ackman warned of increasing risks in the U.S. economy as he revealed his hedge fund's significant short position on U.S. 30-year Treasuries. He views this as a necessary protection against potential spikes in long-term rates that could harm the stock market. He fears a potential surge in 30-year Treasury yield to 5.5% in the near future, given the 4.16% climb on Wednesday - the highest of the year. Ackman points to escalating defense costs, energy transitions, and increasing labor power as factors fueling inflation, despite the Fed's aggressive rate hikes.

JPMorgan Chase & Co. is forecasting gold prices to exceed $2,000 an ounce by the end of this year and reach new highs in 2024 as interest rates begin to decline.

With escalating political instability and a worsening fiscal situation, the U.S. credit rating has been downgraded from AAA to AA+ by Fitch. Global markets are rattled as this downgrade reflects a potential economic crisis. Elliot Hentov of State Street Global Advisors implies that one doesn't need to be a genius to see the poor fiscal profile and the deficient governance of U.S. public debt. Moreover, when queried about the likelihood of the U.S. regaining its AAA status with Fitch in the near future, Hentov emphatically answered, "no."

American credit card debt has hit crisis levels. With average balances at a record $7,300 and median savings at only $5,300, delinquency rates are escalating for the sixth consecutive quarter, last seen in 2008. Total credit card debt has surged past $986 billion, with some states nearing $10,000 in average debt. Interest rates have peaked at 25% and may soon cross 30%. As living costs rise, Americans are increasingly borrowing, exacerbating this worrying debt situation.

The year-on-year percentage fall is at a historical second-worst, surpassed only by the Great Financial Crisis. Alarmingly, federal tax receipts continue their downward trend, nearing an unsettling -10% on a year-on-year basis - a warning signal of the ongoing economic downturn. There is a stark contradiction between these indicators and the overvalued state of financial assets, highlighting an underlying and worsening economic situation.

The U.S. federal deficit is ballooning to a shocking $2.25 trillion run rate, far surpassing the $1.3 trillion of fiscal 2022. Skyrocketing interest costs, accelerated by the Fed's rate hikes, and an imminent need to roll over $9 trillion in maturing notes over the next two years, pose severe funding challenges. Amid dwindling foreign investment, political wrangling over the debt ceiling, and comparisons to third world economies, the fiscal situation in the U.S. is deteriorating rapidly.

Former U.S. Treasury chiefs Hank Paulson and Timothy Geithner have voiced concern over the U.S.'s escalating fiscal trajectory, warning of potentially painful solutions if action is not taken soon. They argue for proactive measures to address burgeoning deficits, projected by the Congressional Budget Office to reach $20 trillion over the next decade, with public debt poised to hit record levels.