Precious metals news

This week, gold and silver went their separate ways, with gold rising and silver falling. In European trade this morning gold was $1985, up $4 from last Friday’s close, while silver was 22.81, down 21 cents. Gold is edging higher, while silver edges lower.
Indeed, all the action is in gold, with Comex Open Interest continuing to rise as our next chart shows, while that of silver is still subdued.

This month, the relationship has driven the gold/silver ratio higher, currently at 87. But it is not as if the hedge funds have been aggressive buyers of gold contracts. While in these markets the Commitment of Traders figures for 17 October are stale (update for 24 October due tonight), they revealed that the Managed Money category was only net long 15,103 contracts. The next chart shows the position relative to the gold price.

The widening gap between the price and net longs is bullish. It means the gold price has held up well despite hedge funds not buying. With Ope...

In an alarming move, JPMorgan CEO, Jamie Dimon, is dumping 1 million shares of the bank for the first time ever, cashing out roughly $140 million. The timing is suspicious, especially following Dimon's stark warnings about economic uncertainties and his pointed criticism of central banks, particularly the Fed. At a recent summit, Dimon explicitly called out central banks for their consistent misjudgments and emphasized caution for what's looming in the next year. This massive stock sale, juxtaposed against his vocal skepticism, raises red flags about his dwindling trust in the Federal Reserve's ability to navigate the murky financial waters ahead.

Cooperman anticipates a recession in 2024, attributing it to soaring energy prices and the effects of quantitative tightening. He expressed concerns about the Federal Reserve's continual rate hikes, questioning their impact on persistent inflation. He mentioned factors such as the rising price of oil, a strong dollar, and Fed tightening as contributors. Cooperman also warned that if the government addresses the deficit, it could negatively impact corporate profits and overall economic growth. Furthermore, the Fed's aggressive stance on inflation might trigger market selloffs.

U.S.-China tensions rise sharply in the South China Sea. Communication between their militaries has been severed, heightening the risk of accidental conflict. A recent incident saw a Chinese jet dangerously close to a U.S. aircraft. Amid the tensions, talks between the U.S. and Chinese militaries remain largely frozen, which leads Washington to worry that a misstep could trigger a dangerous escalation.

US forces conducted airstrikes on Iran-linked facilities in eastern Syria overnight. Directed by President Biden and in response to recent attacks on US troops, F-16s and F-15s targeted installations affiliated with Iran’s Islamic Revolutionary Guard Corps. Earlier, reports indicated that US troops in the same region faced attacks and several suffered Traumatic Brain Injury due to drone and rocket strikes on US bases.

The Treasury market, once the bedrock of safe-haven investments, is now in alarming decline, as emphasized by Mohamed El-Erian on CNBC. Even with Middle East tensions escalating, the expected rush to U.S. government debt is nowhere in sight. Instead, yields are skyrocketing as traders increasingly dump bonds with seemingly little faith left. The turn towards traditionally volatile assets like equities is a glaring red flag. Given the current trajectory, combined with the Federal Reserve's maneuvers and the looming surge of bond issues, the bond market stands on the precipice of a major downturn.

Amid escalating tensions with the West, Russia, under President Putin's oversight, conducted a simulated nuclear strike. This comes shortly after the Russian parliament's decision to withdraw from a global nuclear test ban treaty. Defense Minister Sergei Shoigu stated the drill practiced a retaliatory nuclear strike in response to an enemy's nuclear attack. With tensions rising due to the conflict in Ukraine, there's growing concern that Russia might resume nuclear tests, potentially destabilizing global relations further.

The Fed's touted inflation indicator, Core PCE Deflator, marginally improved to 3.7% YoY in September. However, on a monthly basis, it saw its most significant increase in four months. Despite slowing annual inflation figures, the data indicates inflationary pressures persist, driven by services and energy prices. Notably, while personal consumption surged, incomes lagged, resulting in private workers seeing a wage decline. Government workers, on the other hand, experienced a wage hike nearing record levels. The personal savings rate, having been adjusted multiple times, plummeted further, reaching near historic lows. This raises questions about the effectiveness of current economic policies.

The U.S. national debt has soared to a staggering $33 trillion, leading to a trillion dollars spent annually on just servicing this debt. This alarming rise is due to factors like wars, recessions, and the economic fallout of the COVID-19 pandemic. Financial experts, like Steve Moore, warn that soon, interest payments could become the biggest budgetary expenditure, surpassing even national defense. This year, interest payments reached $659 billion, nearly doubling from the previous year. The U.S. now spends more on debt interest than vital programs, like education. If unchecked, this escalating debt could cripple the nation's economy, with taxpayers already owing an average of $98,460 each.

Treasury Secretary Janet Yellen downplayed the role of the expanding fiscal deficit in the rise of long-term bond yields, attributing it instead to a "strong US economy." She made these claims despite mounting evidence and Federal Reserve Chair Jerome Powell's acknowledgment of several factors, including growing deficits, behind the yield surge. Yellen optimistically projected a 2.5% growth rate for 2023 and suggested that the pre-pandemic factors leading to low yields are still present, displaying a questionable read of the current economic landscape.

When it comes to economic data, context matters. In this episode of the Friday Gold Wrap, host Mike Maharrey explains how the Fed, many mainstream economists, and financial network talking heads get a lot wrong because of bad data, shoddy economic frameworks, and ignorance of history. Along the way, he covers the GDP and the latest price action for gold.

With the Israel ground invasion now starting in North Gaza today, energy and precious metals prices surged higher.  But, what happens if this Middle East conflict escalates further?  We are already seeing the U.S. attacking facilities in Syria, believed to be linked to Iran...

U.S. Treasury yields are alarmingly approaching 5% because of unexpected U.S. economic growth, causing global shares to plummet. Persistent recession warnings since 2022 have been overshadowed by wage surges, resulting in reckless consumer spending. This economic illusion has unnerved the bond market, leading to significant sell-offs. Quincy Krosby of LPL Financial warns of potential hastened Fed interest rate hikes to combat spiraling inflation. Major U.S. stock indices suffered sharp declines, further emphasizing the reliability of gold in these turbulent times.

Inflation is set to persist due to altered perceptions and increased fiscal spending. Millennials, once oblivious to inflation, now constantly see its effects in daily prices. While the government and the Federal Reserve try to manage these perceptions, rising prices remain evident. Unions and fiscal spending amplify the inflation issue. Surprisingly, the 1970s stagflation wasn't primarily about oil prices but the decoupling from gold.

With mountains of data pointing towards a looming recession (if we aren’t in one already), how does one invest during these periods? What asset offers a proven track record of protection from hard times?

The U.S. deficit for 2023 was $1.7 trillion, up from the previous year, making it the worst GDP growth excluding debt increases since 1929. This hints at a recession masked by excess deficit spending. Despite tax hikes by the Biden administration, revenues fell by 9.3% from 2022. Higher taxes didn't yield expected revenues, indicating a weak economy. The U.S. can't spend less than 22.8% of GDP, and taxing the wealthy can't cover the deficit. Rising public debt and inflation challenges the U.S. dollar's position globally. China is rapidly selling U.S. bonds, and the U.S. 10-year Treasury yield exceeds 4.5%. High government spending doesn't guarantee growth or wage increases. The U.S. must reduce its deficit to protect its currency and economy.

Governments ignore debt crisis signs. Despite inflation, the U.S. borrows heavily. Investors avoid sovereign bonds, causing central banks to buy and amplify inflation. U.S. debt rises sharply with impending maturities and global tensions. Trusting global dollar demand and the Fed's adaptability is risky as countries cut U.S. Treasury holdings. Global fiscal imbalances and monetary debasement since 2009 diminish savings. Gold emerges as a more secure option than failing sovereign bonds.

U.S. fiscal policy is undermining the Federal Reserve's autonomy, increasing inflation risks, and devaluing the dollar. Central banks are losing independence, threatening fiat currencies' real value. Despite a brief dollar rally, its long-term purchasing power is set to decline further due to rising government debt and deficits. Historically, reduced central bank independence leads to higher inflation. As the Fed aligns more with government needs, the quality of its assets decreases, exacerbating the dollar's decline.

In 2023 Q3, real GDP grew by 4.9%. However, when breaking it down, real final sales accounted for a 3.5% rise, with the remainder being inventory adjustments, which balance out over time. The growth from private domestic sales was even more modest at 3.3%. GDI paints a grim picture with real disposable personal income dropping by 1.0%, reversing a 3.5% gain from the last quarter. The gap between GDP and GDI seems to be widening. The Fed faces significant challenges, largely due to its own actions, with seemingly no solutions in sight.

Bidenomics benefits the top 1% but is detrimental for the middle class. In August 2023, pending home sales plummeted 7.1%, affecting all U.S. regions both monthly and annually. Rising mortgage rates have deterred buyers, causing an 11% drop in transactions from the previous year.