Precious metals news

Stock futures climbed as investors awaited the release of the Federal Reserve's preferred inflation gauge. All three major stock benchmarks are on track for a strong performance in the second quarter and first half of 2023.

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Gold prices declined towards the key $1,900 mark, reaching their lowest level since March, influenced by Federal Reserve Chair Jerome Powell's recent comments and the strength of the U.S. dollar and Treasury yields. Positive U.S. economic data raised the possibility of a July interest-rate hike, which further pressured gold prices. However, analysts believe that gold may be reaching a bottom and expect it to rebound as sentiment weakens and approach record price highs in the coming quarters. While prices have been sliding since May, some suggest that bargain hunters could step in as gold nears $1,900, preventing further declines and potentially sparking a modest recovery.

The U.S. dollar index reached a two-week high as positive economic data indicated a strong labor market and potential for further interest rate hikes by the Federal Reserve. Weekly jobless claims dropped significantly, and the revised first-quarter GDP estimate exceeded expectations. Fed Chair Jerome Powell and other central bank heads expressed support for rate hikes, citing resilient economic performance. However, concerns about inflation persist, with Powell not expecting it to reach the Fed's target until 2025. European data showed mixed inflation figures, highlighting the central banks' cautious approach.

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The Federal Reserve's stress tests show that the largest US banks would lose $541 billion in a doomsday economic scenario but still have enough capital to absorb the losses. This has led to optimism among Wall Street executives for higher dividends and share buybacks. However, the recent failures of Silicon Valley Bank, Signature Bank, and First Republic have raised concerns about the regional banking crisis. The stress tests are just one way to measure strength, and regulators should remain cautious about potential risks. Despite the positive results, new international standards may require American banks to hold more capital. The reforms since the 2008 crisis are seen as achieving a stronger banking system, but some argue for more stringent requirements. The inclusion of mid-sized banks in future stress tests is expected, considering recent events.

Major economies teeter on the edge of recession, with Germany already in a technical recession. China's post-COVID rebound fizzles, while the US economy faces the likelihood of a mild recession. Labor hoarding and mixed signals complicate economic assessment. Inflation worsens due to continued stimulative policies, prompting rapid rate hikes and potential yield curve inversion. Predictions of a recession abound, but the situation remains unprecedented. Fiscal battles loom in the US, with disagreements over taxes and spending, exacerbating cash shortfalls in Social Security and Medicare. Higher taxes pose risks to short-term stability and long-term prosperity. Economic forecasting faces significant challenges. Bleak outlook persists.

US credit markets face looming problems as deliberate rate hike schedule leads to bankruptcies. Fiscal stimulus and credit card spending delay financial meltdown, but tightening banking and lending standards exacerbate the situation. Student loan forbearance nears its limit, and commercial real estate demand declines. Federal Reserve aims to rewrite monetary policy history by raising rates and ending easing measures. Global implications and significant fiscal relief not expected until Q2 2025. Bleak outlook persists.

U.S. debt set to skyrocket to historic levels, reaching 181% of GDP by 2053, despite claims of fiscal improvement. Congressional Budget Office warns of future economic drag and significant risks to long-term fiscal climate. Political battles and potential tax cuts pose further challenges. Looming insolvency threatens retirement programs. Fiscal outlook remains bleak and uncertain.

Bidenomics continues the reckless trend of excessive spending and borrowing, pushing bond yields higher and burdening taxpayers. The surge in Treasury bills is just the beginning, with escalating debt issuance and rising interest payments spelling trouble for the economy. The market's complacency and the Treasury's need to increase auction sizes across the yield curve point to a grim future. The long-term consequences of unsustainable debt loom large, trapping the economy in a vicious cycle.

Bidenomics continues to disappoint as the economy suffers from consecutive years of negative wage growth and a sharp decline in Pending Home Sales. In May, pending home sales plummeted by 2.7% month-on-month, far worse than anticipated, and marking a distressing 20.8% year-over-year drop. The middle class and low-wage workers bear the brunt of inflation, further exacerbating their financial hardships.

The Federal Reserve is expected to continue raising interest rates, despite their recent decision to temporarily slow down the pace of rate increases. Chair Jerome Powell conveyed uncertainty regarding the extent and speed of future rate hikes. Having raised rates rapidly in the past year, officials are now unsure about the appropriate magnitude and pace to further elevate them.

Last week, there was a notable decline in the number of Americans filing for initial jobless claims, plummeting to 239k from the previous week's 265k, which had reached a 20-month high.

Unexpectedly, a peculiar surge in exports led to a sudden jump in Q1 GDP to 2.0% during its third revision, completely catching the market off guard. This outcome deviated significantly from market expectations, causing rate-hike projections to skyrocket. As a result, there is now approximately a 50% probability of two more rate hikes by the end of the year.

Bank of Canada's resumption of action after a five-month pause suggests that significant economic pain may be necessary to control stubborn inflation. Investors are now raising concerns about an impending hard landing for the economy. The central bank fears that the Canadian economy is overheating, making it challenging for inflation to return to its 2% target. Waiting to act could worsen inflation expectations and leave the economy vulnerable to higher borrowing costs, coinciding with the impact of recent rate hikes.

Federal Reserve Chair Jerome Powell warned of the imperative to tighten regulatory oversight of the American financial system in light of the unsettling collapse of three prominent U.S. banks this spring. Speaking at a banking conference in Madrid, Powell acknowledged that although stricter regulations were implemented after the 2007-2008 financial crisis, the recent failures have exposed lingering vulnerabilities. He emphasized that while large multinational banks have become somewhat more resilient to widespread loan defaults, such as the catastrophic housing bubble burst that precipitated the previous crisis, the current situation demands even more stringent measures to address the underlying weaknesses in the system.

Inflation: Has it gone away for good? Or is it taking a temporary break and about to roar back?

The Federal Reserve's potential interest rate hike to 6% has triggered worries about variable-rate commercial mortgages. With these mortgages, the interest payment increases in tandem with rising interest rates. This has become a concern as short-term rates have soared, causing mortgage interest payments to double or more. As a result, landlords are struggling to cover the increased costs, leading to defaults and property value declines. The unpredicted rise in rates has exposed the vulnerabilities of variable-rate commercial mortgages.

A housing bust of potentially catastrophic proportions looms as the short-term rental market faces an "Airbnb bust" that could rival the magnitude of the 2008 Subprime Crisis in certain cities. The downturn, which began in late 2022, has led to a drastic 50% decline in revenue for Airbnb operators, signaling an imminent crisis. This alarming situation arises from a combination of dwindling post-pandemic travel demand and an overwhelming surge in Airbnb supply, resulting in substantial financial losses for hosts. The projected wave of distressed selling by Airbnb operators in 2023 and 2024, particularly in the cities most severely affected by plummeting revenue and excessive supply, could create a housing market collapse reminiscent of the 2008 Subprime Crisis.

A potential flood of housing inventory looms as mortgage rates drop, causing concerns for the market, according to Compass CEO Robert Reffkin. With the majority of homeowners holding onto low mortgage rates, inventory remains tight. However, if rates reach a sustainable level of 5% to 5.5%, Reffkin expects a surge in inventory reminiscent of the pandemic era. The current average 30-year fixed mortgage rate stands at 6.67%, near a 20-year high. Experts predict little relief in mortgage rates as the Federal Reserve's monetary policy continues to influence borrowing costs. The possibility of further rate hikes adds to the pessimism, with markets already factoring in an 82% chance of a rate increase at the next policy meeting.