Precious metals news

Wall Street traders and the Federal Reserve are finally aligned, anticipating a significant monetary shift as the Fed signals an end to its policy tightening. After projecting more aggressive interest-rate cuts in 2024, a notable rally in financial markets ensued. This rally, starting Wednesday and continuing into Thursday, saw global shares, front-end Treasuries, world currencies, gold and corporate bonds all experiencing significant gains.

Chairman Jerome Powell's Federal Reserve has decided to maintain its target interest rate range at 5.25% to 5.5%, the highest level in over two decades. Despite this, the Fed's post-meeting statement, acknowledging the recent slowdown in inflation, coupled with forecasts from policymakers projecting lower rates by the end of the following year, suggests that the Fed might be considering easing monetary policy sooner rather than later. This decision comes amid concerns about an inverted yield curve, often seen as a precursor to a recession.

The Federal Reserve just surrendered to inflation.
Fed officials won't call it a surrender. They're claiming victory. But surrender is the effect of the policy trajectory laid out by the Federal Open Market Committee (FOMC) at its December meeting.

The Bloomberg Dollar Spot Index fell to its lowest since August, dropping by 0.5%, following signals from the Fed about a faster pace of rate cuts than previously anticipated. The US central bank has maintained steady rates, with Chair Jerome Powell indicating potential hikes if inflation rises. However, the Fed is largely seen as ending its tightening cycle, shifting focus to when rate cuts should begin as inflation approaches their 2% target.

Gold is outperforming other commodities, with room for further growth beyond its current price of $2073 per ounce. This trend hints at a decrease in US geopolitical dominance, as the overreliance on the US Dollar in international commerce faces challenges. Nations are exploring alternatives to the Dollar, with gold emerging as a natural choice despite political resistance. The rising gold price reflects this shift towards gold in the global financial landscape. That's what gold is telling us.

Gold's appeal in Japan is surging, marking a significant shift since 1971 when President Nixon detached the dollar from gold. This detachment led to the gold price floating from $35 per troy ounce. Now, 51 years later, gold has reached $2,000 per troy ounce, a remarkable 57-fold increase against the US dollar. Currently, gold is priced around $1,980 per troy ounce. This trend underscores the contrast between the unlimited printing of fiat money by governments and the limited supply of gold, highlighting gold's enduring value and appeal as a stable investmen

Surging demand in China has pushed gold prices above international levels, driven by economic uncertainty and a weaker yuan. New York gold futures exceeded $2,100 per ounce, with Chinese prices now consistently higher than global benchmarks. This increase reflects gold's growing appeal in China as a stable investment amid domestic and global financial challenges.

Jim Grant, editor of "Grant's Interest Rate Observer," expects Federal Reserve Chair Jerome Powell to remain cautious due to persistent high inflation. Grant criticizes the Fed's previous underestimation of inflation and predicts gradual rate cuts, later than the market anticipates. The Fed, which misjudged inflation as "transitory" in 2021, raised rates 11 times since March 2022. Banks like ING and UBS forecast varying timelines for rate cuts, while the Fed plans a modest reduction in 2024.

American entrepreneur Robert Kiyosaki, during a podcast interview, criticized the Biden Administration's policies, claiming that "America is going to be the poorest country in the world, starting now." Reflecting on his visit to Mumbai's slums, Kiyosaki noted the growing prevalence of similar conditions in America, indicating a significant decline in the country's living standards.

The Federal Reserve's disregard for the quantity theory of money, which connects monetary supply with economic outcomes, seems flawed. The rapid increase in the money supply (M2) since 2020 led to high inflation, and its current sharp decline suggests an impending recession and possible deflation by 2025. This situation highlights concerns about the Fed's current monetary strategy and the risk of economic downturns.

The Federal Reserve has adopted a more dovish stance than anticipated, reducing its rate forecasts closer to market expectations. The median policy rate for 2023 is now set at 5.375%, with further decreases expected through 2026. This adjustment follows notable market movements, including a surge in stocks, gold, bonds and a dollar decline. There's uncertainty about how Fed Chair Powell will address market expectations for earlier rate reductions.

The U.S. retail sector faces a bleak outlook, potentially leading bankruptcies into next year due to persistent inflation and high interest rates. 2023 has already seen 591 corporate bankruptcies, the most since 2020, largely driven by the end of ultra-low interest rates. Many companies are teetering on the brink, unable to manage their debts in this challenging economic climate.

Treasury Secretary acknowledges significant rent increases, a concern for many Americans. "Bidenomics," President Biden's economic policy brand, struggles to gain widespread approval. A Bankrate survey reveals that 50% of Americans feel their financial situation has worsened since the 2020 election, posing a challenge for Biden's re-election campaign. Only 21% see improvement, while 26% see no change.

China's banking system is at risk of a severe crisis, with its real estate sector's troubles potentially wiping out $4 trillion. The sector, plagued by debts and defaults, has left enough empty homes to house 3 billion people. This crisis could have a major impact on the highly-levered banking system, potentially exceeding the $700 billion losses of the U.S. Great Financial Crisis says Hayman Capital CIO Kyle Bass.

Inflation is dead!
At least that's what you would think if you listen to government officials and talking heads in the financial media.
So, how is this victory over inflation working out for the average person?
Not so great.

In November, U.S. Producer Prices were unchanged, with Core PPI at its lowest year-over-year increase since January 2021, largely due to lower energy prices. Despite this seemingly positive trend, the outlook remains uncertain, heavily influenced by global commodity prices, China's economic stimulus decisions, OPEC+ oil production, and U.S. strategies to maintain low gas prices during the election year.

Argentina plans a 50% devaluation of its peso to 800 per dollar, cuts in energy subsidies, and cancellation of public works, under new Economy Minister Luis Caputo. This drastic action targets the country's deep fiscal deficit and soaring inflation. The IMF supports these measures for economic stabilization, but their implementation carries significant risks.

In November, U.S. inflation slightly cooled, but President Biden continues to face challenges in proving the effectiveness of his economic policies. The Consumer Price Index indicated a minor deceleration in inflation due to lower energy costs, despite increases in food and housing prices. Despite these signs of a "soft landing," Biden acknowledges the ongoing struggle with high living costs and pledges to tackle issues like prescription drug costs and corporate pricing practices. This approach marks a shift from his earlier optimistic tone on economic progress, influenced by negative polling on his economic policies.

The U.S. federal budget deficit in November soared 26% from the previous year to a record $314 billion for the month, mainly due to higher interest costs. This figure surpassed economists' expectations of $301.05 billion. Federal revenues increased by $23 billion to $275 billion, marking a 9% rise from the previous year.

The "Everything Bubble," encompassing bonds, real estate, and stocks, is showing signs of collapse in 2023. Banks are distressed due to Federal Reserve's quantitative tightening and interest rate hikes, causing bond values to drop. High corporate default rates are rising, with expectations of further increases in 2024. The housing market is stagnant, with high prices and interest rates, leading to affordability issues and potential bailouts for struggling homeowners. Overall, the economic landscape is strained, with looming concerns over further deterioration in 2024.