Precious metals news

The global debt binge fueled by years of low interest rates is leading to a staggering interest payment crisis. Governments are projected to spend a net $2 trillion on debt interest in 2023, over 10% more than in 2022, with costs potentially rising to $3 trillion by 2027. This surge in interest payments, triggered by rising rates, poses a severe financial strain on governments worldwide.

The European Commission has downgraded its growth forecast for the eurozone in 2023 and 2024, attributing this slowdown to the rising cost of living and higher interest rates, which are adversely impacting consumers and businesses.

The Japanese yen's value has plummeted, hitting a 15-year low against the euro and a record low against the Swiss franc. Its recent rally against the US dollar was brief and driven by US inflation data, not by changes in Japan's monetary policy. Japan's central bank maintains a negative short-term policy rate, contrasting sharply with the rate hikes in Europe and the US. This significant interest rate disparity, coupled with Japan's recent economic contraction, has left the yen as the weakest among major currencies. With Japan likely to maintain negative rates longer than expected, the outlook for the yen remains bearish.

The People's Bank of China has injected a massive 1.45 trillion yuan ($200 billion) into the economy, the largest in nearly seven years, while maintaining loan rates at 2.5%. This desperate move aims to revive a struggling economy and stabilize the property market, amidst the challenge of preventing the yuan's depreciation. Despite earlier measures like rate cuts and reserve requirement reductions, the economic outlook remains bleak, prompting this significant intervention. Simultaneously, the PBOC's plan to issue bills in Hong Kong indicates a cautious approach to balance economic stimulus with currency stability.

Investor Jim Rogers believes gold and silver will surpass other assets in the current inflationary climate and looming recession. He suggests that commodities generally fare well during periods of inflation. Rogers sees a further rise in inflation and views a significant economic downturn as almost inevitable. He favors silver over gold due to its lower price and warns about the potential decline of the US dollar as the world's reserve currency. Rogers anticipates increased government money printing, which could exacerbate inflation.

Despite enduring the worst year for long-dated Treasuries in U.S. history, Dr. Lacy Hunt, a prominent 'deflationist' and treasury bull, remains steadfast in his bullish stance on these bonds. He believes that the Federal Reserve's current tight monetary policy will lead to a severe economic downturn, causing long-term rates to plummet. While Hunt's unwavering conviction is noteworthy, especially after a challenging 18 months for his fund, there's growing speculation about whether this anticipated 'hard landing' might keep getting pushed further into the future.

Core inflation has cooled to 4%, but it's still double the Fed's target rate. While this indicates some progress, housing costs remain high, with shelter CPI up 6.7% YoY and transportation services up 9.2% YoY. Mortgage rates have surged 169% under Biden, yet the 10-year Treasury yield has dropped to 4.50%. Investors are anticipating significant rate cuts by the Fed in 2024, possibly to support the current administration in the upcoming election. The U.S. economy continues to be heavily influenced by the Federal Reserve's policies.

Gold prices are rising as softer U.S. inflation data weakens the dollar and lowers Treasury yields, increasing bets against further Fed rate hikes. Spot gold grew 0.6% to $1,957.70 per ounce, while U.S. gold futures went up 0.7% to $1,963.00. This comes after the U.S. CPI showed a slower-than-expected annual rise of 3.2%. The market now fully expects the Fed to keep rates steady in December. Silver also gained, with prices jumping 2.3% to 22.81 per ounce.

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The Federal Reserve is facing a challenging situation as public confidence in the return to normal inflation wanes. Inflation expectations have hit their highest level since 2011, complicating the Fed's task. If these expectations continue to rise, the Fed may be compelled to further tighten monetary policy, potentially leading to higher interest rates for a prolonged period. This situation could create a deflationary scenario, where persistent high inflation erodes public trust and forces the Fed into more aggressive action, risking a slowdown in economic activity and potential deflationary pressures.

The Federal Reserve's aggressive rate hikes and quantitative tightening have failed to tighten financial conditions, posing a serious risk of persistent inflation. Despite these efforts, financial markets remain surprisingly loose, and consumer spending continues unabated. This ineffectiveness in curbing economic activity raises the specter of a resurgent inflation, potentially forcing the Fed into even more drastic rate hikes. This scenario spells trouble for the economy, as it risks entrenching a prolonged period of high interest rates and financial instability.

After running the third-largest budget deficit in US history in fiscal 2023, the Biden administration kicked off fiscal 2024 with another big budget shortfall.

In October, U.S. inflation slowed more than expected, with the headline Consumer Price Index (CPI) at 3.2% and core CPI at 4.0%, both below forecasts. The month-over-month change was zero, indicating a halt in price increases. This slowdown was largely due to a significant 5.0% drop in gasoline prices. Although food prices rose slightly, the main inflationary pressure remains in housing-related services. Core goods inflation has been negative for five months, signaling a notable shift in inflation trends.

U.S. Treasury Secretary Janet Yellen has criticized Moody's recent decision to downgrade the U.S. debt outlook from "stable" to "negative." Yellen insists the U.S. economy remains robust, despite concerns about large fiscal deficits and rising interest rates impacting debt sustainability. She emphasizes the Biden administration's commitment to a sustainable fiscal path, including deficit reduction plans. However, the looming threat of a government shutdown and the substantial federal budget deficit, nearly $1.7 trillion in fiscal 2023, highlight the challenges facing the U.S. economy.

Growing speculation suggests the Federal Reserve might cut interest rates soon. With current Treasury yields around 5% and the federal funds rate at 5.25-5.5%, analysts predict the first cut could occur by mid-next year. UBS expects the rate to drop below 3% by the end of next year, and Goldman Sachs sees it falling just below 4%. These cuts may be accelerated by a potential recession and the need to balance rising real interest rates and support economic growth.

Optimism is driving the markets. Most investors seem to believe the economy is strong. The consumer is resilient. Price inflation is easing. And most people think the Federal Reserve is finished hiking rates. In his podcast, Peter Schiff explained why this investor optimism is at odds with reality.

Market expectations of Federal Reserve rate cuts in 2024 might be overly optimistic. Contrary to these predictions, Fed Chair Powell suggests more hikes are likely as the fight against inflation continues. Shrinking monetary supplies contrast with soaring borrowings from the Fed, primarily supporting the banking sector rather than the broader economy. This dynamic suggests persistent inflation, with the private sector shouldering the impact of monetary contraction. If the Fed does cut rates, it could signal a significant slump in demand and deeper economic issues.

Argentina faces a dire economic crisis with inflation hitting over 30-year highs. October saw a 8.3% rise in consumer prices, leading to a staggering 142.7% annual inflation rate. With a presidential election imminent, extreme solutions like dollarization are proposed. Economists predict inflation could spike to 185% by year's end. The country is on the brink of currency devaluation and tough fiscal choices, likely leading to significant GDP contractions in the coming years.

The US faces a potential government shutdown on November 18th due to conflicts over a new short-term funding plan. Hardline conservatives oppose the plan, demanding spending cuts and immigration reforms, complicating its passage before the planned House vote. President Biden hasn't indicated a veto stance, waiting on negotiation outcomes. The plan, lacking key aid components, faces Democratic opposition, and procedural challenges in the House may hinder its progress. Senate Majority Leader Schumer warns against partisan amendments, while Senate Republicans oppose a Democratic alternative, increasing the risk of a shutdown.

From time to time, Peter Schiff hosts Q&A sessions with premium subscribers to his podcast covering a wide range of investing and economic topics. In this video clip, Peter publicly answers eight questions on gold, silver, and general investment strategies.