Precious metals news

Bidenomics continues the reckless trend of excessive spending and borrowing, pushing bond yields higher and burdening taxpayers. The surge in Treasury bills is just the beginning, with escalating debt issuance and rising interest payments spelling trouble for the economy. The market's complacency and the Treasury's need to increase auction sizes across the yield curve point to a grim future. The long-term consequences of unsustainable debt loom large, trapping the economy in a vicious cycle.

Bidenomics continues to disappoint as the economy suffers from consecutive years of negative wage growth and a sharp decline in Pending Home Sales. In May, pending home sales plummeted by 2.7% month-on-month, far worse than anticipated, and marking a distressing 20.8% year-over-year drop. The middle class and low-wage workers bear the brunt of inflation, further exacerbating their financial hardships.

The Federal Reserve is expected to continue raising interest rates, despite their recent decision to temporarily slow down the pace of rate increases. Chair Jerome Powell conveyed uncertainty regarding the extent and speed of future rate hikes. Having raised rates rapidly in the past year, officials are now unsure about the appropriate magnitude and pace to further elevate them.

Last week, there was a notable decline in the number of Americans filing for initial jobless claims, plummeting to 239k from the previous week's 265k, which had reached a 20-month high.

Unexpectedly, a peculiar surge in exports led to a sudden jump in Q1 GDP to 2.0% during its third revision, completely catching the market off guard. This outcome deviated significantly from market expectations, causing rate-hike projections to skyrocket. As a result, there is now approximately a 50% probability of two more rate hikes by the end of the year.

Bank of Canada's resumption of action after a five-month pause suggests that significant economic pain may be necessary to control stubborn inflation. Investors are now raising concerns about an impending hard landing for the economy. The central bank fears that the Canadian economy is overheating, making it challenging for inflation to return to its 2% target. Waiting to act could worsen inflation expectations and leave the economy vulnerable to higher borrowing costs, coinciding with the impact of recent rate hikes.

Federal Reserve Chair Jerome Powell warned of the imperative to tighten regulatory oversight of the American financial system in light of the unsettling collapse of three prominent U.S. banks this spring. Speaking at a banking conference in Madrid, Powell acknowledged that although stricter regulations were implemented after the 2007-2008 financial crisis, the recent failures have exposed lingering vulnerabilities. He emphasized that while large multinational banks have become somewhat more resilient to widespread loan defaults, such as the catastrophic housing bubble burst that precipitated the previous crisis, the current situation demands even more stringent measures to address the underlying weaknesses in the system.

Inflation: Has it gone away for good? Or is it taking a temporary break and about to roar back?

The Federal Reserve's potential interest rate hike to 6% has triggered worries about variable-rate commercial mortgages. With these mortgages, the interest payment increases in tandem with rising interest rates. This has become a concern as short-term rates have soared, causing mortgage interest payments to double or more. As a result, landlords are struggling to cover the increased costs, leading to defaults and property value declines. The unpredicted rise in rates has exposed the vulnerabilities of variable-rate commercial mortgages.

A housing bust of potentially catastrophic proportions looms as the short-term rental market faces an "Airbnb bust" that could rival the magnitude of the 2008 Subprime Crisis in certain cities. The downturn, which began in late 2022, has led to a drastic 50% decline in revenue for Airbnb operators, signaling an imminent crisis. This alarming situation arises from a combination of dwindling post-pandemic travel demand and an overwhelming surge in Airbnb supply, resulting in substantial financial losses for hosts. The projected wave of distressed selling by Airbnb operators in 2023 and 2024, particularly in the cities most severely affected by plummeting revenue and excessive supply, could create a housing market collapse reminiscent of the 2008 Subprime Crisis.

A potential flood of housing inventory looms as mortgage rates drop, causing concerns for the market, according to Compass CEO Robert Reffkin. With the majority of homeowners holding onto low mortgage rates, inventory remains tight. However, if rates reach a sustainable level of 5% to 5.5%, Reffkin expects a surge in inventory reminiscent of the pandemic era. The current average 30-year fixed mortgage rate stands at 6.67%, near a 20-year high. Experts predict little relief in mortgage rates as the Federal Reserve's monetary policy continues to influence borrowing costs. The possibility of further rate hikes adds to the pessimism, with markets already factoring in an 82% chance of a rate increase at the next policy meeting.

Deepening inversions in the U.S. Treasury yield curve intensify economic concerns as the Federal Reserve plans more rate hikes. Widespread distress in the market and conflicting signals contribute to a gloomy outlook, casting doubt on the effectiveness of current policies to prevent an impending downturn.

Federal Reserve Chairman Jerome Powell and his colleagues' admission of their lack of understanding in the battle against inflation sent unsettling messages, even though stock markets remained relatively unchanged. The unexpected resilience of economies and low unemployment rates have left policymakers puzzled, as the economy has not experienced a downturn despite significant rate hikes. The dependence on data reflects a lack of confidence in their own forecasts, seeking further guidance from real-world observations. While inflation has slowed due to declining energy prices and resolving supply-chain issues, it remains persistently high due to companies raising prices and workers demanding higher wages. Despite significant rate hikes, the impact on the real economy and consumer prices has been minimal. Powell's rare acknowledgment that inflation won't reach the 2% target until 2025 solidifies the notion that interest rates will remain elevated for an extended period, further heightening concerns.

Investors issue a stark warning to hedge funds involved in the highly leveraged Treasuries trade, cautioning them about the looming dangers of a potential yield curve reversal. With the yield curve already heading for one of its longest and deepest inversions, any sudden steepening could spell disaster for the popular basis trade strategy. Traders would scramble to close their positions, risking significant losses. The extreme positioning and increased bets on the basis trade amplify the risks, particularly as volatility remains a looming threat. As the market dynamics shift, the trade becomes increasingly precarious, raising concerns for investors.

Researchers at the US central bank have issued a stark warning about the growing number of distressed American companies, exacerbating the consequences of the Federal Reserve's battle against inflation. The surge in borrowing costs poses a significant risk of widespread corporate collapses. The share of nonfinancial firms in financial distress has reached a level higher than previous tightening periods, according to the researchers. The Fed's consecutive interest rate hikes aimed at addressing high inflation could severely impact business investment, employment, and overall economic activity. The economists anticipate a potential scenario where debt-laden companies curtail spending on new ventures, hiring, and production. Currently, approximately 37% of firms are in distress, signaling a concerning possibility of over one-third of companies facing default due to tightening monetary policies in the coming months.

The regulator's stress testing of banks revealed their ability to withstand a significant drop in commercial real estate prices and substantial losses without failing. However, the scenarios included a severe recession, high unemployment, and declining home prices. Exploratory market shocks on trading books showed resilience to rising interest rates but did not contribute to capital requirements. Projected losses of over half a trillion dollars were higher than previous years, indicating potential risks. Results varied across institutions based on various factors. The outcome raises concerns about the possibility of future bank failures.

Stocks were set to open higher on Thursday as investors awaited economic updates that could provide insights into the Federal Reserve's next moves on interest rates. Futures pointed to gains for the S&P 500, Dow Jones, and Nasdaq Composite. Key data, including jobless claims and GDP updates, will shape expectations for corporate earnings and Fed actions.

World shares edged higher, while the dollar gained modestly, and gold reached a three-month low. Traders remained focused on the battle against inflation and speculated on currency interventions in China and Japan. Europe's STOXX 600 index and Wall Street futures showed little movement. Sweden raised interest rates, and H&M's shares soared after strong results. Inflation figures from Spain and Germany were awaited, and central bankers discussed monetary policy in Lisbon. Global Chief Economist Paul Gruenwald warned of potential default rate increases and the delicate balance of tightening policies. Asian markets showed mixed performance, with Japan's Nikkei slightly up.

Seasonally Adjusted Money Supply in May increased $131B. This is the first growth in adjusted M2 since last July and the largest increase since December 2021.

Central bank leaders, including Powell, Lagarde, and Bailey, expressed doubts about their ability to rein in high inflation. Powell hinted at further rate hikes, Lagarde suggested an imminent ECB increase, and Bailey pledged to combat inflation. Japan's rates remain unchanged due to low inflation. The central banks' aggressive tightening last year has not yet yielded desired results.