Precious metals news

Global economic turmoil looms with the U.S. facing a dangerous spike in Treasury yields and a potential credit crunch, China navigating a burst housing bubble, and Europe teetering on recession and a renewed sovereign debt crisis. Concurrent crises in key economies may plunge the world into a severe financial disaster by mid-next year, demanding urgent, yet currently unforthcoming, policy responses.

Weak demand in a recent Treasury bond auction raises alarms as the U.S. sells $20 billion of 30-year bonds, with dealers absorbing an unusually high 18% of the supply. The narrow auction tail and rising yields reveal declining demand amidst surging federal deficits and the Federal Reserve's quantitative tightening, fueling concerns over Wall Street's ability to handle the escalating U.S. debt supply.

The Congressional Commission urges the U.S. to urgently expand and restructure its nuclear arsenal in response to escalating threats from China’s rapidly growing nuclear capabilities and existing risks from Russia. The U.S., presently "ill-prepared" to handle two major nuclear adversaries, requires a substantial and swift overhaul of its nuclear forces and strategies to effectively navigate the evolving global threat landscape.

The IRS is grappling with a growing "tax gap," as unpaid taxes notably increased to $688 billion in 2021 and $601 billion in 2020, up from $550 billion and $496 billion in 2017-2019 and 2014-2016 respectively. Despite most Americans paying their taxes voluntarily, the continual upsurge in annual unpaid taxes underscores the escalating challenge faced by the IRS to ensure comprehensive tax compliance among citizens.

Elevated risks loom over the U.S. economy as the Federal Reserve navigates a highly leveraged financial environment amidst its "higher for longer" strategy. Historically rooted patterns suggest the intersection of surging debt and restrictive financial conditions may steer towards a crisis, particularly given prior instances where rate hikes and yield curve inversions precede recessions. The heightened policy misstep risk amidst slowing economic growth and rising borrowing costs signals caution for potential crisis onset in the near future.

October's UMich data reveals a troubling economic outlook: inflation expectations soared to a disconcerting 3.8%, the highest since May 2023, while consumer sentiment plummeted to 63.0 from 68.1 due to rising inflation fears. A stark 49% of consumers report eroding living standards due to escalating prices, and the economic news index nosedives, reflecting increasing concerns about unemployment and price hikes.

Gold prices experienced a notable rise on Friday, potentially marking their best week since mid-March, as U.S. bond yields decreased, boosting the allure of the U.S. dollar-backed bullion. Spot gold increased by nearly 1% to $1,886.40 per ounce. A range of factors contributed to this surge, including a fall in U.S. Treasury yields and the dollar, strong U.S. inflation data, and the dovish policy stance of policymakers. Additional influences included safe-haven demand amidst conflict in Israel and evolving inflation data from China, the world's largest gold consumer. Spot silver also saw a 1.5% climb, positioning it for its first weekly gain in three.

The U.S. Federal debt is skyrocketing, recently escalating by $40 billion in a single day, reaching a staggering $33.55 trillion. With an astounding pace of potentially adding $1 trillion to the debt every 45 days, the financial future appears precarious. From 2008, the debt has catapulted by $24 trillion, now 3.8 times its initial size. Despite already increasing by over $2 trillion since the resolution of the debt ceiling crisis, with the ceiling now effectively uncapped until January 2025, the ultimate scale of U.S. debt remains alarming.

Bolivia is spiraling into a severe economic crisis, highlighted by the drastic depletion of gold reserves and mounting debt. The hasty sale of 17 tonnes of gold, a precarious attempt to navigate financial straits, has jeopardized its economic stability, while vanishing investor confidence and opaque handling of foreign currency reserves darken Bolivia's fiscal future amidst an escalating balance of payments catastrophe.

Argentina's central bank hiked the benchmark interest rate to 133% due to surging inflation, which registered at 12.7% monthly and 138% annually, ahead of the presidential election amidst a deepening economic crisis. With the nation grappling with soaring prices, diminished wages, and eroded savings—pushing 40% of the population below the poverty line—an end-of-year inflation rate exceeding 180% is anticipated.

Skyrocketing vehicle ownership costs, now hitting an average of $12,000 annually, alongside surges in other essential expenses like healthcare, are placing American households in a precarious financial situation. The substantial uptick in prices for both new and used vehicles post-2020 and ballooning big-ticket essential expenses are shrinking budgetary flexibility, indicating an increasingly fragile economic stability for numerous households amid these escalating costs.

Nobel Laureate Paul Krugman boldly declared the "war on inflation" won, with "very little cost," a statement met with skepticism amidst the reality that the average American family is now $7,400 poorer than in January 2021. Contrasting his optimism, the palpable impacts of inflation and economic strategies under "Bidenomics" present a stark, financially-straining reality for many, suggesting that the alleged victory may indeed have come at a significant, albeit unevenly distributed, cost.

Bidenomics is under intense scrutiny as indicators hint at catastrophe. Rising interest rates, a tool deployed to combat spiraling Federal spending, have triggered a concerning trend: bank credit growth has contracted to -0.41% YoY, marking 10 consecutive weeks of negative terrain. Meanwhile, short-term loan interest payments have skyrocketed, nearing a staggering 10%, magnifying the financial stress under the current economic strategies.

Great news! The inflation war is over and we won! At least that's how Paul Krugman sees it. But he's playing tricks with the data and making assumptions that are meaningless in the real world. In this episode of the Friday Gold Wrap, host Mike Maharrey dissects Krugman's claims in light of the September CPI data. He also talks about market reaction to the CPI and shares some interesting gold news from Zimbabwe.

CEO Jamie Dimon describes the global situation as potentially the most dangerous in decades, citing the Ukraine war, Middle East conflict, and significant financial threats from towering national debt and fiscal deficits. He stresses escalated risks from persistent high inflation and interest rates, alongside liquidity concerns amid Federal Reserve actions, with a gloomy outlook on potentially soaring interest rates ahead.

Gold is being touted as a critical investment, with experts urging purchases now, irrespective of current prices. The US Federal Reserve's monetary tactics, like interest rate hikes, draw parallels to the 1970s scenario, suggesting a significant gold price surge is imminent. Historical patterns indicate that with the current economic climate and trends in real interest rates, gold prices could potentially exceed US$3,000/oz, and even reach up to US$4,500/oz. Investors are advised to capitalize on gold's potential as a hedge against the unpredictable nature of paper assets.

Economist Mohamed El-Erian strongly advises turning to cash and cash-like assets as a shield against increasing market volatility. With stocks and bonds facing turbulence, El-Erian has significantly bolstered his holdings in cash and similar assets. Concurrently, he warns of a potential economic downturn, suggesting heightened caution in other investment avenues.

Brian Riedl warns of an impending "debt crisis" as the 10-year bond rate surges to 4.7%. Washington's failure to secure lower interest rates combined with rising deficits puts the economy at significant risk. Despite current market optimism, a high rate above 4% could spell disaster, not only for the bond market but also equities. With historic data suggesting negative impacts, about a third of Russell 2000 companies aren't profitable, a record high since 1985. The stock market's current vulnerability echoes the concerning patterns of 1987, hinting at potential turmoil ahead.

On October 13, 1989, "Black Friday” sent shockwaves through Wall Street... What can we learn about the crisis today?

The IMF warned of Joe Biden's high borrowing pushing global debt towards instability, primarily driven by the US and China. Contrary to Biden's claims, US debt reached an alarming $33 trillion. The IMF anticipates US debt will soon surpass 100% of GDP. While Treasury Secretary Janet Yellen asserts the US's debt interest is manageable, the Congressional Budget Office voices significant concerns about the rising debt's implications.