Precious metals news

Under the Biden administration, the Bankrate's 30-year mortgage rate index has skyrocketed by a staggering 150%. This sharp increase in mortgage rates can be directly attributed to Biden's policies, as indicated by the timeline. In addition, the US Treasury yield curve (10Y-2Y) has reached its most inverted state, displaying a negative slope not seen since 1981. These developments paint a bleak picture of the current economic situation.

The US startup scene is facing a downturn as only 12 unicorns emerged in Q2 2023, signaling a significant decline from the easy-money bubble. Valuations have plunged, and the average worth per unicorn hit a record low. Former unicorns that went public have experienced massive stock collapses, causing substantial losses for retail investors. This downturn has dampened VC funding, resulting in lower valuations and unfavorable terms for early investors and founders. The aftermath reflects the consequences of years of reckless capital allocation fueled by easy money.

The U.S. national debt has surged by $851 billion since the suspension of the debt ceiling a month ago, reaching $32.32 trillion. The Treasury Department has been issuing Treasury bills and bonds to replenish its checking account, causing a reduction in liquidity. However, the Treasury market remains stable, with yields reflecting positive sentiment.

Over the past 30 years, gold prices have shown a distinct seasonal pattern, particularly in the June-July timeframe. This period is marked by a rise in gold prices, attributed to the jewelry industry restocking for the upcoming fall and spring holidays. With this seasonal lift in prices, it could be a favorable opportunity to consider adding gold and/or gold stocks to your portfolio.

Two precious metals firms and their owner, Robert Higgins, have been ordered by a US court to pay $146 million after over 500,000 American Silver Eagle coins went missing. The companies were accused of running a fraudulent scheme, promising to store the coins for customers but failing to do so. The court settlement includes restitution of $112.7 million and a $33 million penalty. The Commodity Futures Trading Commission (CFTC) found evidence of fraudulent silver leasing programs and misappropriation of funds and silver from customers. The missing coins were replaced with IOU slips.

Gold has maintained its status as a reliable store of value and a hedge against economic uncertainty. Over the past five decades, its price has been closely linked to concerns surrounding the growing U.S. national debt. As the debt has risen, investors have turned to gold as a hedge against potential inflation and market instability.

The decline in the US dollar price of gold over the past two months is overshadowed by its strong performance since early 2022. Gold's shift away from its correlation with the 10-year TIPS yield is seen as bullish. The traditional pricing model, which linked gold to TIPS, has been challenged by geopolitical events and changing market dynamics. Gold's sensitivity to real rates remains, but the widening gap between gold and real rates suggests a new era for its pricing. Despite negative sentiment, contrarians see potential for a bottoming out and a possible turning point in the gold market.

Central banks' aggressive rate hikes fail to tame severe inflation. Inflation persists despite a 3.5 percentage point increase in rates by major economies. Monetary policy's impact is delayed and less potent this time, possibly due to a shift towards the services sector and changes in housing and labor markets. Central bankers face the conundrum of combating inflation while risking the health of the financial system. Economists predict that higher rates may push advanced economies into recession.

U.S. Treasury yield curve reaches its deepest inversion since 1981, fueling recession fears. Expectations of more rate hikes by the Federal Reserve due to stubborn inflation worsen economic outlook. Inversion reflects doubts about the Fed's ability to control inflation without harming growth. The prolonged inversion suggests a prolonged period of economic uncertainty. Rising short-term rates lead to increased borrowing costs for consumers and businesses, hindering lending and economic activity.

U.S. Chapter 11 bankruptcy filings surge by 68% in H1 2023, driven by high interest rates and inflation. SVB Financial Group, Envision Healthcare, Bed Bath & Beyond, and others succumb to rising debt and borrowing costs. The Federal Reserve's 10 consecutive rate hikes increase borrowing expenses. Commercial Chapter 11 bankruptcies reach 2,973, up from 1,766 last year. Individual Chapter 13 filings rise by 23%, and small business bankruptcies soar by 55%. The economic outlook remains challenging for businesses and individuals.

Excluding another big sale by Turkey, central banks were net buyers of gold in May, according to the latest data compiled by the World Gold Council.
Eight central banks added gold to their reserves in May with net purchases totaling 50 tons.

Americans have squandered $1.76 trillion in savings since 2020, leaving a meager $533 billion. Personal savings are at a dismal 4.6% of income, well below the 8.9% average. A staggering $986 billion credit card debt adds to their vulnerability. Wells Fargo predicts a looming recession as the labor market weakens. The financial future looks bleak for American households.

Nearly $47 billion has flowed into the US banking system within a week as banks employ new strategies to attract customers back. Regional banks are resorting to borrowing substantial amounts of cash from the Federal Reserve and relying on brokered deposits from intermediaries to bolster their deposits. However, these tactics come at a high cost and pose a long-term risk to bank earnings. The surge in brokered deposits, exemplified by PacWest Bancorp's staggering increase, raises concerns due to their costly acquisition and short-term nature. Despite the recent influx, the total amount of deposits in US banks remains lower than the figure recorded a year ago.

The Federal Reserve has issued a fresh warning about the state of the US economy. According to a research note by two Federal Reserve economists, the number of non-financial firms facing financial distress has reached historic levels. The economists highlight that the recent tightening of US monetary policy, coupled with the high percentage of distressed firms, could have significant effects on investment, employment, and overall economic activity. The economists estimate that the impact may be particularly noticeable in 2023 and 2024. The Fed also cautions that its own policies may push distressed companies closer to default, potentially leading to a wave of unforeseen layoffs. The analysis suggests that the effects on employment could be even more significant than estimated, as bankruptcies and associated layoffs may not be fully captured by the data.

The four largest banks in the US, Bank of America, Wells Fargo, JPMorgan Chase, and Citigroup, are facing a total of $205 billion in unrealized losses on their balance sheets. These losses are a result of bad bets in the bond market. Bank of America is in the worst position, with $100 billion in unrealized losses. Wells Fargo and JPMorgan Chase each have $40 billion in losses, while Citigroup has $25 billion. The failure of Silicon Valley Bank in March serves as a cautionary example of the risks associated with unrealized losses. Despite these losses, the Federal Reserve claims that Bank of America and other major banks performed well in a recent stress test. However, the test also projected total losses of $541 billion in a hypothetical recession.

It's been 90 years since M2 money supply has contracted by at least 2%. The M2 money supply in the United States has experienced its largest increase since the Great Depression. During the COVID-19 pandemic, M2 surged by 26%, leading to historically high inflation rates. Recently, M2 has shown a 4.1% decline, which is concerning given its correlation with deflationary recessions in the past. Other money-based indicators, such as commercial bank credit and tightening lending standards, also suggest economic trouble ahead.

June continued a stock market rally that produced big gains through the first half of the year. But what exactly is driving this rally and is it really justified by the economic fundamentals? Peter breaks it down in a recent podcast and concludes that this is likely a bear market rally.

Now that the relationship with China has soured and the People’s Republic of China has become the greatest adversarial threat to the U.S. and Western security. The United States pays interest on $850 billion in debt held by China, while China is in default on its sovereign debt to American bondholders. This failure to address the issue undermines justice and national security. The U.S. should follow the example of the U.K. in 1987 and demand repayment. Options include utilizing the Chinese bonds to offset U.S. Treasurys owned by China or imposing restrictions on China's access to U.S. bond markets. It's time to take action and enforce international norms.

After a three-year break, 27 million Americans will resume student loan payments in October. The Supreme Court's ruling against President Biden's loan forgiveness plan adds to the financial burden. With a softening labor market and rising interest rates, economists worry about the impact on consumer spending and the broader economy. Borrowers face challenges in adjusting their budgets, potentially leading to delinquencies and financial hardships. The end of the payment pause marks a sobering moment for many borrowers.

A massive asset price bubble looms, but according to Jeremy Grantham, the artificial intelligence craze may postpone its inevitable crash for a few more months. Grantham, the market historian and GMO co-founder, identified a "superbubble" encompassing stocks, housing, and commodities in early 2022, suggesting a major crash was imminent. However, the recent rally, fueled by the AI hype, has provided temporary respite. Companies like Nvidia and Microsoft, with AI exposure, have experienced significant stock surges. Grantham acknowledges that the AI frenzy may sustain the broader stock market for a couple more quarters, but he remains cautious, predicting the eventual bursting of the superbubble. He previously warned of a potential 44% drop in the S&P 500 from its current level.