Precious metals news

Markets might be too optimistic about decreasing inflation, overlooking two major challenges: 1. **Persistent Price Inflation**: Due to base effects, consistent price rises may seem like declining inflation. If monthly U.S. inflation exceeds 0.2%, 2024 could see even higher inflation rates, potentially above 6%. 2. **Temporary Commodity Disinflation**: Global commodities' prices have dropped but recently rebounded, indicating that the inflation dip might be short-lived. Real wages are decreasing, weakening consumer purchasing power. Key economic indicators, like the Employment Cost Index, are trending downwards. With the Fed's balance sheet still bloated, the economic outlook remains precarious, suggesting that the worst of inflation might still be ahead.

The U.S. consumer's financial health directly impacts the country's economic outlook. Recent indicators hint at a situation reminiscent of the period leading to the 2008 Great Recession. Key signs of concern include: 1. Household income, adjusted for inflation and taxes, has dropped 9.1% since April 2020. 2. Credit card debt exceeded $1 trillion, with average interest rates over 20%. 3. Rising credit card delinquency rates, highest since 2012. 4. More Americans are withdrawing from their 401(k) plans due to financial distress. 5. The cost of homeownership has risen by 20% in the past year. 6. The national rent-to-income ratio has been over 30% for two consecutive years. 7. Vehicle repair costs have surged by nearly 20% in a year. 8. 69% of urban consumers live paycheck to paycheck.

COVID-19 has cast a long shadow over the commercial real estate (CRE) sector. Although federal regulators have flagged potential risks, the Fed’s stress test may be misleadingly optimistic. While major banks seem fortified against CRE loan losses, small banks have aggressively expanded their CRE loans, doubling their stakes since 2006. These smaller institutions, having already grappled with deposit challenges earlier this year, are precariously overexposed. Their deep entanglement with the vulnerable CRE market could amplify the US economy's fragility, potentially hastening or intensifying a recession.

The US is unlikely to cut spending, significantly raise taxes, seek an IMF bailout, or default on its $32 trillion debt, said David Rubenstein, co-founder of the Carlyle Group. Instead, the solution might be to "inflate your way out," he told Bloomberg TV. However, he cautioned that increased inflation would disproportionately affect the lower-income population, leading to heightened income inequality and potential societal turmoil, particularly between age groups.

The collapse of unbacked credit value was only a matter of time, which is now rapidly approaching. The Great Unwind is underway. US Treasury bond yields are set to surge, contradicting the prevailing belief they'd stabilize or drop. This mirrors the end of the post Bretton Woods era and the shift towards tangible-backed credit. The "Great Unwind" looms due to long-standing monetary imbalances, with capital fleeing the dollar, leading to a US funding crisis. Global bonds, including Eurozone and UK gilts, show similar worrisome patterns. Those banking on declining interest rates might face stark disappointments as the currency and dependent credit must be sound.

Major US banks, including JPMorgan, Wells Fargo, and Bank of America, are poised to pay billions to the Federal Deposit Insurance Corporation (FDIC) to replenish an insurance fund crucial for propping up the financial system. Altogether, these institutions will shell out $8.2 billion, with JPMorgan contributing the largest sum at $3 billion. This payment stems from the FDIC's "special assessment" system, primarily targeting large banks that greatly benefited from the protection of uninsured depositors.

Credit cards are great until the bill comes due. And the US economy has about maxed out the plastic. The Federal Reserve incentivized borrowing and the economy is buried under trillions of dollars in debt. As Friday Gold Wrap host Mike Maharrey explains in this episode, the bill is about to come due. He also goes over the July CPI data and digs into some of the ramifications.

Market expectations for rate hikes for the remainder of the year barely shifted post the CPI release. Before the inflation data, there was a 14% probability of a quarter point increase by the Fed in September. This expectation slightly dipped to 11% after the release. The November and December expectations experienced minor alterations of only about 1 to 2%. Essentially, the CPI data seemed to have minimal influence on market forecasts regarding Fed rate adjustments.

Seniors face a disappointing 3% Social Security cost-of-living adjustment (COLA) in 2024, a stark contrast to the previous year's 8.7%. This rise, estimated by The Senior Citizens League, amounts to an underwhelming average monthly increase of less than $54. Despite inflation cooling down, seniors continue to grapple with high prices, notably in housing and healthcare. The current COLA calculation method is under scrutiny as it doesn't accurately reflect the spending patterns of retirees. Many older individuals, burdened by healthcare costs, have deferred essential services, from dental work to medical prescriptions.

The chief investment officer of Guggenheim Partners, managing over $225 billion, is focusing on high-quality bonds and anticipating challenges in the credit market. Despite market optimism, she foresees potential risks, especially for lower-quality borrowers, given the Federal Reserve's stance and the likelihood of increasing defaults and bankruptcies. While high-quality credit remains relatively stable, weaker credits without significant cash reserves could struggle.

China is facing significant economic headwinds, evidenced by its recent slide into deflation. The once robust economy, which experienced growth rates above 10% in the 2000s, now confronts a slower GDP growth, currently pegged at 5.2% for this year. Additionally, the country grapples with decelerating exports, skyrocketing youth unemployment rates, and a turbulent property market highlighted by potential debt crises for leading developers. Xi's government has responded by tightening control over economic narratives and taking measures to silence negative economic news, further raising concerns over transparency and the nation's actual economic stability.

Despite the recent tech rally driven by generative artificial intelligence, concerns rise as Nvidia's shares have almost tripled in 2023, with some attributing this surge to speculative mania. Its substantial weight in benchmark stock indexes poses risks to everyday investors regardless of their belief in AI. The rapid stock growth of major tech companies has intensified worries about market concentration. With Nvidia trading at 41 times its last 12-month sales, doubts emerge about its valuation versus actual growth, suggesting potential for a significant market correction reminiscent of the dot-com bubble crash.

Producer prices rose by 0.3% MoM in July, surpassing expectations and marking the most significant jump since January 2023. This pushed the YoY rise to 0.8%. The increase was mainly driven by a 0.5% surge in final demand services, particularly in portfolio management, which saw a 7.6% price hike. Final demand goods only saw a slight increase of 0.1%, with meats seeing a notable 5.0% rise. Despite these hikes, diesel fuel prices dropped by 7.1%. The data suggests a more persistent inflation than anticipated.

The Bundesbank's gold revaluation account (GRA), representing unrealized gains from gold assets, stands impressively at €176 billion, highlighting gold's enduring strength as a financial asset. As central banks, including the Bundesbank, navigate the complexities of rising interest rates and financial losses, tapping into their robust GRAs can serve as a beacon of stability. Joachim Wuermeling of the German central bank, in a 2023 press conference, confirmed the bank's confidence in its GRA as a solid financial bulwark. Similarly, the Dutch central bank had expressed confidence in gold the previous year. The increased reliance and trust in gold assets by major central banks hint at a modern era where gold's prominence and relevance in the financial system are once again in the spotlight.

Key updates on the banking crisis, indicators challenging the Fed's outlook, and research on why now is the time to add to your silver portfolio...

The surging demand for silver, fueled by green technologies like electric vehicles and solar panels, is set to skyrocket in the upcoming decade. In 2023 alone, the silver requirement for solar tech is projected at 160 Moz. Silver's pivotal roles in these technologies, from solar cell coatings to electric vehicle connections, have led to a staggering record deficit of 237.7 Moz in 2022. Although new mines, such as Mexico's Cordero project, are being developed to address this demand, the Silver Institute forecasts a decrease in mined silver output over the next five years. Even with the introduction of new mines, the rapid consumption suggests that the world might be on a trajectory to running out of this essential metal.

Conservatives are concerned about Congress granting excessive power to executive and regulatory bodies. The U.S. faces a potential fiscal crisis, with projections suggesting the need to borrow over $100 trillion in the next three decades, four times its historical borrowing. This impending crisis is largely driven by underfunded entitlement programs like Medicare and Social Security. As the population ages, these programs grow in importance, with political pressures resisting reforms. If unchecked, this trajectory threatens economic stagnation and a potential catastrophic fiscal crisis, eclipsing past financial downturns. Recent downgrades of U.S. Treasury bonds by major credit agencies highlight this challenge. A fiscal commission might break the current policy deadlock, but past attempts by Congress have repeatedly failed.

The Federal Reserve's attempts to curb relentless inflation appear futile. Market indicators project a persistent inflation rate exceeding 2% for the foreseeable future. The 5-year breakeven inflation rate stubbornly remains above the Fed's target, showcasing their inability to control the situation. Notwithstanding aggressive interest rate hikes, inflationary pressures show no sign of abating. With crude oil and wheat prices on a worrying upward trajectory and geopolitical tensions mounting, global financial stability hangs in the balance. Wall Street's heightened alarm suggests an impending economic catastrophe.

Amid rising anxieties for the upcoming refunding week due to alarming forecasts of an impending deluge in Treasury supply, the Treasury's latest endeavor to offload $23BN in 30Y paper proved to be a dismal affair. Despite the sky not falling, this was undeniably the worst auction of the lot. The auction hit an alarming yield of 4.189%, the most unfavorable since July 2011, and a sharp increase from last month's 3.910%. The low bid-to-cover ratio and lackluster internals further accentuated the gloomy outcome.

The U.S. economy is under strain as many Americans tap into their retirement funds due to financial distress. With household debt, especially credit card balances, surpassing $1 trillion, concerns are rising about a potential slump in consumer spending. Bank of America's recent report reveals a 36% surge in "hardship distributions" from 401(k) plans compared to last year, indicating a troubling financial landscape for many.