Precious metals news

Deepening inversions in the U.S. Treasury yield curve intensify economic concerns as the Federal Reserve plans more rate hikes. Widespread distress in the market and conflicting signals contribute to a gloomy outlook, casting doubt on the effectiveness of current policies to prevent an impending downturn.

Federal Reserve Chairman Jerome Powell and his colleagues' admission of their lack of understanding in the battle against inflation sent unsettling messages, even though stock markets remained relatively unchanged. The unexpected resilience of economies and low unemployment rates have left policymakers puzzled, as the economy has not experienced a downturn despite significant rate hikes. The dependence on data reflects a lack of confidence in their own forecasts, seeking further guidance from real-world observations. While inflation has slowed due to declining energy prices and resolving supply-chain issues, it remains persistently high due to companies raising prices and workers demanding higher wages. Despite significant rate hikes, the impact on the real economy and consumer prices has been minimal. Powell's rare acknowledgment that inflation won't reach the 2% target until 2025 solidifies the notion that interest rates will remain elevated for an extended period, further heightening concerns.

Investors issue a stark warning to hedge funds involved in the highly leveraged Treasuries trade, cautioning them about the looming dangers of a potential yield curve reversal. With the yield curve already heading for one of its longest and deepest inversions, any sudden steepening could spell disaster for the popular basis trade strategy. Traders would scramble to close their positions, risking significant losses. The extreme positioning and increased bets on the basis trade amplify the risks, particularly as volatility remains a looming threat. As the market dynamics shift, the trade becomes increasingly precarious, raising concerns for investors.

Researchers at the US central bank have issued a stark warning about the growing number of distressed American companies, exacerbating the consequences of the Federal Reserve's battle against inflation. The surge in borrowing costs poses a significant risk of widespread corporate collapses. The share of nonfinancial firms in financial distress has reached a level higher than previous tightening periods, according to the researchers. The Fed's consecutive interest rate hikes aimed at addressing high inflation could severely impact business investment, employment, and overall economic activity. The economists anticipate a potential scenario where debt-laden companies curtail spending on new ventures, hiring, and production. Currently, approximately 37% of firms are in distress, signaling a concerning possibility of over one-third of companies facing default due to tightening monetary policies in the coming months.

The regulator's stress testing of banks revealed their ability to withstand a significant drop in commercial real estate prices and substantial losses without failing. However, the scenarios included a severe recession, high unemployment, and declining home prices. Exploratory market shocks on trading books showed resilience to rising interest rates but did not contribute to capital requirements. Projected losses of over half a trillion dollars were higher than previous years, indicating potential risks. Results varied across institutions based on various factors. The outcome raises concerns about the possibility of future bank failures.

Stocks were set to open higher on Thursday as investors awaited economic updates that could provide insights into the Federal Reserve's next moves on interest rates. Futures pointed to gains for the S&P 500, Dow Jones, and Nasdaq Composite. Key data, including jobless claims and GDP updates, will shape expectations for corporate earnings and Fed actions.

World shares edged higher, while the dollar gained modestly, and gold reached a three-month low. Traders remained focused on the battle against inflation and speculated on currency interventions in China and Japan. Europe's STOXX 600 index and Wall Street futures showed little movement. Sweden raised interest rates, and H&M's shares soared after strong results. Inflation figures from Spain and Germany were awaited, and central bankers discussed monetary policy in Lisbon. Global Chief Economist Paul Gruenwald warned of potential default rate increases and the delicate balance of tightening policies. Asian markets showed mixed performance, with Japan's Nikkei slightly up.

Seasonally Adjusted Money Supply in May increased $131B. This is the first growth in adjusted M2 since last July and the largest increase since December 2021.

Central bank leaders, including Powell, Lagarde, and Bailey, expressed doubts about their ability to rein in high inflation. Powell hinted at further rate hikes, Lagarde suggested an imminent ECB increase, and Bailey pledged to combat inflation. Japan's rates remain unchanged due to low inflation. The central banks' aggressive tightening last year has not yet yielded desired results.

The seemingly bullish economic indicators of shrinking inventories at warehouses may not be as positive as they appear. Copper traders, who regularly monitor inventories, are facing a troubling trend. Metal stockpiles in warehouses monitored by the world's major exchanges are providing increasingly unreliable signals.

Taxing authorities are attempting to tax remote workers who no longer commute, creating legal and constitutional issues. The unconstitutional actions of states like Massachusetts and Ohio in taxing nonresident workers are depriving smaller municipalities of revenue and violating due process. The Supreme Court's decision not to address the matter leaves remote workers vulnerable to unjust taxation. The outcome of ongoing cases will determine how remote workers nationwide are taxed, with potentially negative implications for their income.

The Chinese city of Tianjin hosts the first in-person World Economic Forum (WEF) event in China since the pandemic, raising concerns. Executives, officials, and media members gather, but critics question the timing amid ongoing global challenges. Chinese Premier Li Qiang acknowledges the escalating global challenges and warns that COVID-19 won't be the last devastating health crisis.

The European Union joins an international effort to explore risky climate interventions, including manipulating the Earth's weather patterns and deflecting the sun's rays. Critics argue that these interventions distract from addressing rising emissions and pose potential dangers, such as altering vital rain patterns. The EU's involvement in this debate raises concerns about power imbalances, conflicts, and ethical issues. Scientists urge for an international agreement to refrain from using such solutions.

Billionaire investor Jeffrey Gundlach warns that the ballooning US debt, currently exceeding $32 trillion, is a cause for concern. The Federal Reserve's interest rate hikes are making it more expensive to service the debt. With interest expenses rising and the debt nearing $33 trillion, Gundlach highlights the 500 basis point rate hikes as a major factor. He also points out that a significant amount of short-term debt issued at near-zero interest rates is coming due, which could worsen the situation. The US bond market's inversion, with the 2-year yield surpassing the 10-year yield, has historically predicted an economic downturn, aligning with Gundlach's warning of an imminent recession.

The United States federal debt is at its highest level since World War II and is projected to continue growing. This poses concerns as it leads to additional interest payments and less funding for productive capital assets. High debt levels can also result in financial crises and government defaults. Factors such as fiscal policies, inflation, GDP growth, and interest rates contribute to this projection. The debt-GDP ratio is expected to exceed 100 percent in the near future. The ability to stabilize the ratio depends on various factors, including interest rates, inflation, economic growth, and effective deficit-reducing policies.

The risk of a nuclear war is growing in Ukraine, with President Biden accusing Russian President Vladimir Putin of preparing to use tactical nuclear weapons. However, Russia is currently winning the war in Ukraine and has no need to resort to nuclear weapons. The suggestion by former Pentagon official Michael Rubin that the US should provide tactical nuclear weapons to Ukraine is reckless and could escalate the conflict. There is also a worrying possibility that Ukraine could stage a "false flag" attack on the Zaporizhzhia nuclear power plant, potentially spreading radiation and triggering NATO intervention. These developments increase the danger of a direct conflict between the US and Russia, bringing the world closer to World War III.

President Biden's claim of creating close to 500,000 jobs per month for the last two years is misleading, as the actual average increase in nonfarm payrolls is 458,708 per month. The inflated job creation figures conveniently ignore the rise in full-time employment, which is much less. Furthermore, the discussion highlights the detrimental impact of Biden's policies and the Fed's inept decisions on inflation and the unaffordability of homes. The attempt to credit only the positives while deflecting responsibility for the negatives is disingenuous and unlikely to change.

Apartment renters in Las Vegas are currently enjoying the upper hand, with landlords offering enticing perks such as free rent, event hosting, and reduced rents. The city has seen a decrease of 2.2% in rental rates during the first quarter of this year. Similar trends are observed in Sunbelt cities like Phoenix and Atlanta. The surge in multifamily construction, fueled by low interest rates and high rental demand, is now facing a downfall as interest rates rise and economic viability diminishes. The government's intervention during the pandemic, including shutdowns, zero interest rate policies, and fiscal stimulus, has contributed to the current state of the apartment market. The Austrian business cycle theory suggests that government intervention and subsequent market adjustments are to blame for the ongoing apartment sector depression.

The median price of new homes experienced the steepest six-month decline ever in April, but saw a slight increase in May. This decline reflects builders' response to affordability concerns caused by high prices, rising mortgage rates, and inflation. Existing home sales, on the other hand, have mostly stabilized at a low level.

Mortgage applications rose by 3.0 percent, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. The Market Composite Index, which measures loan application volume, also increased by 3.0 percent. However, mortgage purchase demand is down by 45.3 percent, refinance demand is down by 91 percent, and mortgage rates have increased by 128 percent under the current economic conditions.