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Precious metals news

    The Dangers of Betting Against Silver: Ted Butler
Sep 22, 2023 - 12:56:24 PDT
The current price of silver might not truly represent its actual market demand, suggesting potential long-term manipulation. Evident physical shortages and the overly extended short positions in silver derivatives further reinforce this notion. Considering the impossibility of short sellers acquiring the necessary physical silver to offset their positions, the risks of shorting silver are amplified. Thus, the silver market's dynamics underscore its potential undervaluation and high risk for those betting against it.
Amid deteriorating European economic data and wary central bank decisions, gold stands firm. France's services sector contraction intensifies concerns, prompting experts to scrutinize upcoming central bank actions. While central banks hint at maintaining high interest rates to combat inflation, global policy tightening sends jitters across markets. The rising dollar and treasury yields further cloud the outlook. Yet, amidst this turmoil, gold's stability shines, reinforcing its role as a safeguard in uncertain times. Observers infer that central banks are more fearful of halted global growth than inflation.
Commodities faced a minor decline last week due to hawkish moves by the FOMC and other market corrections. Despite rising bond yields, silver and other precious metals unexpectedly rose, possibly as a hedge against the FOMC's uncertain outcomes, whether that's a soft landing, hard landing, or stagflation.
A potential government shutdown is deepening the business world's anxiety amid already challenging conditions like inflation and labor strikes. Business leaders are frustrated, seeing it as another avoidable crisis. With no clear solution in sight, there's growing apprehension about prolonged disruption, leading to even more uncertainty in an already unstable environment.
Dire underinvestment in the oil industry may cause a severe supply shortage, driving oil prices to a potential $150 a barrel. JPMorgan warns of a decade-long tight supply, with a predicted shortfall of 700,000 barrels a day by 2030 due to stagnant investment, despite rising demand. This bleak outlook is echoed by OPEC+, highlighting chronic underinvestment as the root cause of escalating oil prices.
The global business landscape is under strain, with the UK signaling a potential worldwide recession. A new survey reveals the UK experienced its fastest employment drop since the 2009 financial crisis. The PMI's decline, a result of weakening demand and rising borrowing costs, echoes broader economic concerns. Experts are drawing alarming comparisons to the 2009 global downturn, raising fears of a worldwide economic contraction.
European currencies are plummeting, with bleak economic prospects and looming rate cuts. Sterling hit a six-month low against the dollar, while other European currencies are also faltering amid rising oil prices and a strengthening dollar. There's speculation the Euro could approach dollar parity, highlighting Europe's deepening economic troubles.
Euro area growth is stagnating, particularly in France and the UK, despite minor improvements in Germany. Inflationary pressures, though currently moderate, loom on the horizon. The US faces further economic challenges with manufacturing barely recovering and services declining. With slower growth and inflation, central banks are grappling with the looming threat of 'Stagflation'.
    FOMC on pause
September 22, 2023
The FOMC and the Bank of England surprised markets by not raising interest rates this week as expected. Following the FOMC’s decision, gold and silver fell on the back of its hawkish statement before recovering slightly. In Europe this morning, gold was $1926 up a net $2 from last Friday’s close. Silver fared much better at $23.68, up 65 cents. Silver is obviously in a bear squeeze, while hedge funds have become disinterested in gold.
Often, silver leads the way upwards and this may be the case today. The next chart shows how Open Interest on Comex remains low in both contracts, indicating that downside is limited.

These are the sort of doldrums that can support a substantial bull leg, so on balance the danger is being short rather than long. But there is one big hurdle to overcome, and that is a firm dollar and rising T-bond yields. These are up next:

It is not just a problem facing dollar markets. The next two charts show 10-year bund and JGB yields.
Central banks, including the European Central Bank and the Federal Reserve, are grappling with the complexity of addressing prolonged high inflation. Despite recent challenges, like misjudging the transitory nature of inflation and dealing with unpredictable guiding metrics, these institutions now hint at a prolonged period of higher rates. Their previous forecasts have often been inaccurate, leading to diminished confidence in their projections. Additionally, there's a lack of consensus among economists about key indicators, complicating the policy-making process.
US debt surpassed $33 trillion just 60 hours ago and has increased by an additional $50 billion. This translates to an increase of $833 million in debt every hour. Equally distributing the total US debt to every household would result in a burden of $252,000 per household. Daily interest expenses exceed $2 billion. Furthermore, the debt ceiling remains unlimited until January 2025. Simply unsustainable.
Accounting for inflation, current home prices surpass any previous records. Homes now cost 20% more than their inflation-adjusted 2008 peak. Shockingly, the median home now sells for an alarming 530% of the median annual income, and the median house payment consumes 49% of median PRE-TAX income. Housing affordability is at its all-time low.
Bonds have plunged to their weakest levels in years, pushing mortgage rates to near a 23-year high of 7.47% for a 30-year fixed rate. The Conference Board's Leading Economic Indicator reported a decline of -0.4% for August, with a year-over-year drop of -7.6%. Despite attempts by the Federal Reserve to curb inflation, their efforts fall short. The Fed's target rate has increased rapidly recently, but its balance sheet is slowly contracting.
    Why Corporate Profits Will Fall 50%
Sep 22, 2023 - 05:58:37 PDT
Growth is linked to increasing debt and spending, but when discretionary spending falls, growth stumbles. High corporate profits are unsustainable, and if they drop to a more historic norm, it could lead to a 2/3 decline in stock valuations. Current stock market values are inflated due to temporary financial conditions and are detached from economic reality.
Amid fears of prolonged high interest rates, investors are rapidly withdrawing from equities, says Bank of America Corp. Global equity funds lost $16.9 billion in a week, with US stocks hit hardest. Alarming signs point towards potential market instability by 2024, with major financial firms echoing these concerns.
The Federal Reserve wrapped up its September meeting on Wednesday and left interest rates unchanged. But Powell and Company had plenty to say. In this episode of the Friday Gold Wrap, host Mike Maharrey breaks down the rhetoric and argues that what the Fed says and what it will do are two different things.
    The Escalating Impact of China on Gold Prices
Sep 21, 2023 - 13:06:35 PDT
China, in a strategic move, increased its gold reserves in August, positioning itself positively in the global market. While global gold ETFs saw outflows, Chinese ETFs recorded inflows, highlighting the nation's strong inclination towards the precious metal. The Shanghai Premium, an indicator I've monitored, has been consistently bullish, reflecting China's burgeoning demand for gold. With the launch of the Shanghai Gold Exchange in 2014 and steady growth in official reserves, China's influence in the gold market has undeniably risen. This move not only showcases the public's trust in gold as a safe-haven asset but also emphasizes China's vision to play a dominant role in the gold sector. Simply put, China's golden era is in full swing.
Following Western sanctions due to Russia's incursion into Ukraine, the UAE's primary gold supplier in the past year was Russia. According to the UN's Comtrade database, the UAE imported 96.4 tons of Russian gold, constituting about a third of Russia's yearly mining output and marking over a 15-fold yearly surge in gold imports from Russia to the UAE.
The House Financial Services Committee approved a bill banning the Fed from developing a US central bank digital currency (CBDC). Introduced by Congressman Tom Emmer, the bill highlights concerns about privacy and individual sovereignty. Despite many countries progressing with their own CBDCs, the U.S. remains divided. While the bill's fate in the House is uncertain, its prospects in the Democrat-led Senate appear grim. Rep. Maxine Waters warns the bill could hinder the U.S., especially if the dollar loses its global dominance. The House's decision on the bill remains awaited.
The U.S. penalizes the homeless, poor, and mentally ill for merely trying to survive. Despite a housing crisis, laws against basic survival activities rise. The bail system jails those who can't pay, ruining lives. Many can't handle minor emergencies financially, yet face crippling bails and fines. Instead of aiding the mentally ill, the U.S. imprisons them. These harmful policies deepen societal rifts, showcasing the nation's misplaced priorities.
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