Precious metals news

The boom in AI could mean a boom in industrial demand for precious metals in 2024.
Metals Focus, an independent precious metals research consultancy, released a note recently that said it expects the increased demand for chips powering AI technology to drive "widespread support for a range of precious metals bearing components."

Chalk one up for the status quo.
As expected, the Federal Reserve held interest rates steady in a range between 5.25 and 5.5% for the second straight month, and chairman Jerome Powell was intentionally noncommital about future Fed moves.

Barry Eichengreen, professor of economics and political science at the University of California, Berkeley, and Chima Simpson-Bell, economist in the African Department at the International Monetary Fund, joined Taylor Pearce, senior economist at OMFIF, to discuss the rise of gold as a central bank reserve asset. OMFIF’s Global Public Investor 2023 report revealed a resurgence in demand for traditional reserve assets, including gold. The podcast explores the structural trends behind the increase in gold accumulation and offers insight into emerging markets’ motivations for acquiring it.

Global debt has ballooned to a staggering $235 trillion, a ticking time bomb for the world economy. This 32% surge over the past 15 years, fueled by cheap borrowing costs, leaves nations from the U.S. to China teetering on the brink of financial peril, with less developed countries already struggling under the crushing weight of debts they can't afford. As interest rates soar, the era of easy money ends, threatening to burst the global debt bubble and plunge economies into turmoil.

Inflation in the eurozone is decelerating more significantly than forecasted, plunging to 2.9% in October from 4.3% in September, signaling a potential shift towards a deflationary trend. This stark decline is propelled by a substantial 11% year-on-year reduction in energy costs, hinting at a broader economic cooldown. With food prices and core inflation also on a downtrend, there are mounting concerns that deflationary pressures could throttle economic growth, complicating the European Central Bank's policy path amid a weakening economy.

The FOMC held policy rates steady with the federal funds rate target range at 5.25%-5.5%. This pause follows a cumulative 525 basis point hike in the current cycle. While the Fed left the door open for future hikes, it continues quantitative tightening, capping Treasury roll-offs at $60 billion and MBS at $35 billion monthly. The next economic projections in December will clarify expectations for potential rate cuts, as current projections delay cuts until the second half of 2024. Concerns persist about the impact of tighter credit on the economy.

Join Mike Maloney and Alan Hibbard as they dissect the latest news for gold, silver, and the stock markets.

Larry Summers warned that the U.S. faces an unprecedented economic challenge with a federal budget deficit of $1.7 trillion, or 5.3% of GDP, significantly higher than the 40-year average. He emphasized the criticality of tax law enforcement, especially when fiscal deficit is skyrocketing. The deficit issue is graver than ever, and despite support for the Inflation Reduction Act aimed at addressing this through IRS funding increases, there's concern that proposed cuts in IRS funding could exacerbate the deficit situation further.

Stanley Druckenmiller lambasted U.S. fiscal policies, citing the government's failure to capitalize on past low interest rates and its "reckless spending," which has ballooned the deficit to nearly $1.7 trillion. He pointed to the increase in government spending from 20% to 25% of GDP as unsustainable, emphasizing the dire need for financial discipline in the face of a national debt nearing $34 trillion. Druckenmiller's disapproval extends to recent requests for an additional $56 billion in government expenditure.

Mortgage applications fell 2.1% from the previous week, with refinancing down 4% and purchase applications down 1% seasonally adjusted. Year-over-year, refinancing is down 12%, and purchase activity is 22% lower, hitting a level not seen since 1995. Refinancing is at its lowest since 2001. Meanwhile, two-year yields have increased by 5%, but there's a pause in rate hikes expected for now.

September's JOLTS report showed a slight rise in job openings by 56,000 to 9.553 million, slightly above expectations but with significant revisions to prior data. Despite higher job openings, hires increased marginally, and quits remained stable, not reflecting the optimism of previous months. The report's credibility is questioned due to a record low response rate of 31%, suggesting that most job opening data is estimated. The market largely ignored the JOLTS data, influenced more by other negative labor market indicators.

U.S. manufacturing is contracting, with the ISM survey dropping to 46.7 in October, hinting at a potential GDP decline. Firms face weak demand, leading to the first job cuts in over two years and reduced output forecasts. Rising costs are driving up inflation in the sector, and tightening financial conditions suggest further deterioration ahead.

Gold remains steady, with the market anticipating Federal Reserve Chair Jerome Powell's insights on future rate adjustments, maintaining investor interest in the metal as a potential hedge against economic uncertainty. Despite a slight pullback from recent highs above $2,000, the precious metal's value is buoyed by government debacles and geopolitical tensions.

The U.S. Treasury Department is ramping up debt auction sizes to manage its soaring debt amid rising financing costs, with yields at their highest since 2007. Next week's auctions aim to raise additional funds, with increased future auction sizes signaling potential for even higher yields and market stress. This move reflects concerns over maintaining demand for Treasury securities as the Fed fights inflation.

Japan's government is rolling out a 37.4 trillion yen stimulus package, including tax cuts and low-income support, to combat inflation and support wage increases. Despite these efforts, Prime Minister Kishida's popularity is waning, with public skepticism about the package's effectiveness as real wages fall for the 17th month in a row.

In 2023, 516 U.S. firms went bankrupt amid increasing 'zombie firms'—companies surviving on debt despite low sales. The IMF suggests this trend negatively impacts the economy. While some banks have propped up these firms, the Fed observes a shift towards healthier corporate balance sheets and continued high-interest rates, suggesting a tougher environment for at-risk businesses.

Increased benefits such as extra vacation and family leave contribute to labor shortages and lower productivity. Data shows that while average hours paid per job rose during the pandemic, actual hours worked have been declining since 2015, with a widening gap due to more paid time off. Despite higher benefits, real earnings are falling when adjusted for inflation, pointing to a drop in productivity and inflationary pressures.

For the third consecutive month, ADP's job addition figures fell short, with October adding only 113k jobs versus the expected 150k. This underperformance comes after a significantly lower ADP number in September compared to BLS data. The discrepancy continues, with ADP's number well below BLS's anticipated +180k. Service sector hiring remained prevalent, but significant wage increases are now considered a thing of the past. Professional and business services reported job losses again, and overall wage growth has been on a decline for 13 months, the weakest since Q3 2021, despite remaining above the Fed's inflation target.

Silver is expected to play a significant role as the "green economy" evolves. The Silver Institute recently participated in a panel discussion titled “Silver’s Role in the Green Economy” at the London Bullion Market Association’s Global Precious Metals Conference in Barcelona, Spain.
This is one of several silver-related stories in the latest edition of Silver News published by the Silver Institute.

Japan is in the midst of a slow-motion train wreck. The country has a massive national debt and it is starting to feel the pressure of rising interest rates. In his podcast, Peter Schiff talked about the situation in Japan and pointed out some disturbing parallels to what's happening in the US.