Precious metals news

Gold extended gains on Friday following weaker U.S. nonfarm payrolls numbers, raising doubts about future interest rate hikes. Spot gold rose 0.4% to $1,918.62 per ounce, while U.S. gold futures increased 0.5% to $1,924.30. The decline in U.S. Treasury yields and a slip in the dollar further supported gold's positive momentum. Traders remained cautious about additional rate hikes beyond this month.

Despite doing nothing at the June meeting, Federal Reserve officials continue to talk tough about fighting inflation. The anticipation of another rate hike created headwinds for both stocks and gold this week. But Friday Gold Wrap host Mike Maharrey thinks something is amiss. In this episode, he talks about the disconnect between the central bankers' rhetoric and their actions. Are they clueless or running scared? This week, he also talks about another big jump in the national debt and the latest on central bank gold buying.

The Federal Reserve's total assets declined by $87 billion in June and have dropped by $667 billion since the peak in April 2022, marking the fastest 15-week decrease ever recorded. This reduction in assets reflects the ongoing Quantitative Tightening (QT) and the unwinding of bank liquidity support measures. The current balance sheet stands at $8.298 trillion, its lowest level since August 2021.

The average rate on the 30-year fixed mortgage soared to 7.22%, the highest point since early November. This surge was triggered by the substantial increase in the yield on the 10-year Treasury, which followed a much stronger-than-expected employment report from ADP. Adding to the negative trend, Federal Reserve Chairman Jerome Powell's comments indicating a possible continuation of interest rate hikes further contributed to the rise. In just one week, the 30-year fixed mortgage rate jumped by 31 basis points, leading to an increase in monthly payments for homebuyers. For instance, for a $400,000 mortgage, the monthly payment of principal and interest rose from $2,637 to $2,720 within a week.

The latest jobs report from the Bureau of Labor Statistics (BLS) fell short of expectations, with June payrolls showing a modest increase of 209,000 jobs. This figure represents a significant drop from the previous month's higher-than-expected print of 339,000 jobs, which was subsequently revised down to 306,000. It is the lowest number of jobs added since December 2020. The miss in job growth was the first since April 2022, following a streak of 13 consecutive beats. Moreover, there were downward revisions to job numbers for both April and May, with a combined total of 110,000 fewer jobs reported than previously estimated. These revisions indicate a trend of downward adjustments to employment figures throughout the year 2023.

China's recent move to impose export restrictions on minerals used in various industries serves as a stark reminder of its control over global mineral resources. This action not only demonstrates China's dominance but also signifies its willingness to wield this power in its ongoing rivalry with the United States. It highlights the potential disruptions it can create in Western supply chains. The restrictions specifically affect minerals crucial for semiconductors, solar panels, and missile systems. This development serves as a warning of China's strategic leverage in the global mineral market.

China continues to bolster its gold reserves, extending its streak of consecutive monthly purchases to eight. The People's Bank of China added 680,000 troy ounces of bullion in the previous month, equivalent to 23 tons, bringing the total stockpile to 2,330 tons. This consistent buying reflects China's efforts to diversify its holdings and reduce reliance on the US dollar amid economic and geopolitical risks. Central banks worldwide have been increasing their gold purchases, with a quarter of them planning to further expand their holdings in the coming year. Additionally, China's foreign currency reserves grew to $3.193 trillion by the end of June, signaling its continued focus on strengthening its financial position.

Chinese President Xi Jinping has issued a negative and concerning directive to the military, urging them to deepen war and combat planning. He emphasized the need to increase the chances of victory in actual combat, highlighting a perceived unstable and uncertain security situation. Xi's comments, made during an inspection tour of the Eastern Theater Command, focused on safeguarding China's sovereignty and territory. This renewed call for military readiness comes at a time when tensions with the United States are high, as U.S. Treasury Secretary Janet Yellen arrived in Beijing for talks aimed at easing tensions between the two nations. The directive underscores China's aggressive stance and its determination to assert control over regions such as the Taiwan Strait and the South China Sea, despite international concerns.

U.S. Treasury Secretary Janet Yellen's visit to Beijing turned into a scathing critique of China's economic practices. Yellen wasted no time in calling for market reforms and openly criticized China for its recent harsh treatment of U.S. companies and implementation of export controls on critical minerals. Yellen's intention to repair the strained U.S.-Chinese relations quickly turned into a confrontational stance. In her public remarks, she made it clear that Washington and its Western allies will not hesitate to retaliate against what she deemed as China's "unfair economic practices."

China's shares are experiencing a third consecutive week of losses, with the yuan trading close to an eight-month low. Concerns are growing in the nation's credit market. Premier Li Qiang has promised to implement targeted stimulus measures to stabilize growth, employment, and mitigate risks. However, he provided no specific details, leaving investors eager for more information. The weakening property market, high youth unemployment, and sluggish household and business confidence have raised expectations for economic support from the government.

Investors have continued to pour money into cash funds, driving total cash assets under management to a significant $7.8 trillion. Inflows into cash funds reached $29 billion, while equity funds received $13 billion and bond funds saw $9.8 billion in investments. Despite the strong performance of global equity markets, concerns about a potential recession have led investors to maintain significant cash positions throughout the year.

Volatility trading in 2023 is marked by contradictions and warnings of impending turmoil. Despite expectations of the VIX rising, market participants act as if it won't. The S&P 500 bet on continued peace reached record levels, overlooking the risks posed by the Federal Reserve and an unstable economy. However, recent events have exposed the fragility of the market. The fear gauge surged, resulting in a significant selloff across financial assets. The potential for damage remains high, emphasizing the unique challenges faced by speculators.

Clearly, many investors lack faith in the U.S. consumer. Personal savings rate plummets to 4.6%, below the pandemic peak and long-term average. Struggling paychecks and depleted savings make spending difficult. Uncertainty looms with potential interest rate hikes, low savings, and persistent inflation, dampening prospects for retailers and consumer-centric stocks.

World stocks closed the first week of the third quarter on a downward slide as the U.S. jobs data signaled the likelihood of higher interest rates. MSCI's global stock index dipped 0.2% and Europe's Stoxx 600 fell 0.3%. Strong U.S. labor market figures prompted a sell-off in bond markets, with two-year Treasury yields surpassing 5%. The possibility of the Federal Reserve raising rates twice this year became more likely, causing selling pressure across global markets. Bond yields in Germany and the UK also experienced fluctuations, with long-term borrowing costs ending the week significantly higher.

Positive Outlook for Gold as Central Banks Approach End of Tightening Cycles. Amidst expectations of a mild contraction in the US and slow growth in developed markets, gold continues to shine. Supported by rangebound bond yields and a weaker dollar, the precious metal has delivered positive returns in the first half of the year. Investors are optimistic about gold's resilience and anticipate stronger investment demand in the event of deteriorating economic conditions. As developed market central banks near the end of their tightening cycles, the stage is set for gold to thrive in the current market environment.

Four significant megatrends in the precious metals market have emerged: central bank gold buying, increasing silver uses, a breakdown in platinum supply, and the impact of "ethical sourcing" ESG mandates. Central banks worldwide are building up their gold reserves to hedge against economic uncertainty and weakening currencies. Demand for silver is rising in various industries, especially as it is essential for technological applications and green technologies like solar panels. The supply of platinum is becoming precarious due to power shortages, social unrest in South Africa, and trade disruptions caused by Russia's conflict with Ukraine. Additionally, government-driven "ethical sourcing" initiatives are affecting the mining sector, influencing practices and capital control schemes. These megatrends are expected to shape the precious metals market in the coming years.

Globalist elites disregard democratic outcomes like Brexit and Trump's election. Both China and Russia reject globalism, while the pandemic weakens its hold. Free trade is a myth, as major economies subsidize industries and impose barriers. The theory of comparative advantage overlooks dynamic factors. Globalists fear nationalism and seek to undermine democracy. Climate change is exploited as a cover for globalist agendas. Media, corporations, and international organizations are influenced by globalists, suppressing dissent.

Biden's economic approach, referred to as "Bidenomics," favors a Soviet-style command economy where the Federal Government controls spending and directs the allocation of funds. The use of the Strategic Petroleum Reserve (SPR) is an example of this approach, as Biden has depleted almost 50% of the reserve since taking office. This depletion is seen as an attempt to manipulate fuel prices ahead of the 2024 Presidential election. The recent crude draw was smaller than expected, indicating fluctuations in oil stocks and notable product draws. Biden's focus on fuel prices may shift once he secures reelection.

Meta, formerly known as Facebook, has unveiled Threads, a text-based conversation app positioned as a friendly alternative to Twitter. With over 10 million sign-ups, Threads is linked to Meta-owned Instagram and aims to provide a more wholesome social media experience. However, concerns about data privacy and censorship have surfaced. Former Twitter owner Jack Dorsey highlighted the vast amount of data collected by Threads, and journalist Michael Shellenberger revealed that the platform was already censoring users without an appeal process. The entry of Threads into the market raises questions about Meta's control over public discourse and potential for increased censorship.

Former SEC official John Reed Stark strongly criticizes the idea of a central bank digital currency (CBDC), calling it absurd and unnecessary. He argues that trusted digital currencies already exist and are regulated by government authorities and financial institutions. Stark raises concerns about policy implications, financial risks, and privacy and security issues associated with a CBDC. He supports proposed legislation to ban the creation of a direct-to-consumer CBDC, as advocated by Senator Ted Cruz. The debate around CBDCs continues to evolve...