Precious metals news

There has been a steady migration of gold from West to East over the last three decades.
When the World Gold Council published its first Gold Demand Trends report 30 years ago, Asian demand made up 45% of the world's total. Today, the Asian share of global gold demand is approaching 60%.

The Federal Reserve's stress test, the first of a series of regulatory actions, is expected to show banks' resilience in a severe recession. However, banks are cautious about committing to significant payouts due to upcoming Basel III Endgame requirements and potential changes in bank supervision. Analysts note that the stress test results may carry less weight this year amid uncertainties about the economy and capital reform.

The IMF's Gita Gopinath warned that central banks may need more time to curb inflation, potentially leading to prolonged financial turbulence. She highlighted the risk of delayed inflation reduction, urging central banks to maintain tight policies despite the negative impact on growth. Gopinath cautioned that investors' optimism about inflation and economic growth could be misplaced, with potential consequences including asset price repricing and systemic crises that challenge central banks' limited powers.

(Morgan Stanley economists, including Ellen Zentner, have revised their outlook and now anticipate the Federal Reserve to raise interest rates at its upcoming July meeting. This adjustment comes after Federal Reserve Chair Jerome Powell indicated that the central bank is not yet finished with its aggressive tightening cycle. In a research note published on Tuesday, the economists stated that the threshold for a rate hike in July is now much lower than their initial expectations, and they predict a 25 basis point increase next month.

Germany's Bundesbank may need a bailout to cover losses from the ECB's bond-buying program, warns the federal audit office. The report raises concerns about the impact on inflation and Germany's public finances. The Bundesbank faces financial strain due to negative interest rates and rising bond prices. Dividend payments to the government are suspended. Thorough risk assessment and reporting are urged to mitigate budgetary risks.

Warren Buffett's global market gauge, the "Buffett indicator," is sounding the alarm as it surges to nearly 110%, indicating an alarming overvaluation of stocks worldwide. With stocks now worth more than the global GDP, concerns of an imminent crash in the coming months loom large. The US version of the indicator stands at a worrisome 159%, signaling an elevated risk. Despite not reaching the extreme levels of the past, the situation remains precarious as investors tread on increasingly dangerous ground.

The technical analysis last month was published when gold was around $1975 and concluded:

Gold prices inched higher, benefiting from a weaker dollar, despite trading near three-month lows. Spot gold rose 0.2% to $1,925.78 per ounce, while US gold futures were up 0.3% at $1,935.50. Bullion had experienced a 2% decline the previous week due to hawkish comments from Fed officials suggesting more rate hikes. However, the sentiment regarding tightening cycles and the potential extension of rate hikes has kept gold prices relatively subdued. The dollar's slight decline also contributed to gold's attractiveness for overseas investors. While geopolitical developments have not had a significant impact on gold, the situation remains dynamic. Silver, platinum, and palladium also saw gains during this period.

Investor sentiment is overly optimistic, as indicated by the CNN Fear and Greed Index reaching "extreme greed" levels. However, economic surprise indexes have declined significantly in the same period, with the euro area experiencing a recession despite favorable factors. Massive government stimulus plans, such as the EU Next Generation plan, have failed to boost growth or productivity. The negative trend in economic surprise cannot solely be blamed on rate hikes, but also on the ineffectiveness of stimulus packages and negative real rates. Enormous stimulus plans have resulted in high inflation and poor growth instead of a strong recovery. Social programs have also failed to significantly reduce poverty rates. The weakening eurozone economy is a result of excessive government spending rather than rate hikes.

The financial press struggles to interpret weekly money supply figures, often providing conflicting views on interest rates. This confusion arises from multiple causal factors impacting interest rates in different directions. Initially, expanding the money supply lowers interest rates, while restricting credit raises them. However, as chronic inflation sets in, the public becomes aware of its effects on creditors and debtors. Inflation expectations begin to influence interest rates, leading to uncertainty about the impact of Fed actions. The strength of these causal chains is uncertain, making economic forecasts inherently unreliable.

Two conservatives debate whether Americans are better off now. Oren Cass argues that the cost of thriving has surged, leading to a 36% decline in living standards since 1985. Scott Winship disagrees, claiming it is easier to thrive today with lower taxes and improved inflation measures. Financial stress, living paycheck to paycheck, and the disappearance of affordable housing add to the negative outlook. The generational burden of debt and the inability to start families exacerbate the situation.

Goldman Sachs has estimated a peak-to-trough decline in housing prices, while Realtor.Com has revised its 2023 forecast with a downward revision. The median existing home sales price is expected to fall by 0.6% in 2023. However, the author expresses skepticism, considering the current state of high home prices and mortgage rates. Additionally, existing home sales recorded a minor gain in May but declined by 20.4% compared to the previous year. The affordability of starter homes has also become a significant challenge. The author disagrees with the forecasts, expecting a more significant decline in housing prices.

Sweden's parliament has passed a new energy target, allowing the government to proceed with building new nuclear power plants. This decision deviates from the country's previous goal of 100% renewable energy. The change in target aims to meet rising electricity demand and achieve net-zero emissions by 2045. Meanwhile, the growing demands to combat climate change come with estimated costs of trillions of dollars per year.

Global leaders and organizations gathered in Europe for climate change summits, focusing on demands for a new global financial system that supports climate solidarity. French President Emmanuel Macron hosted a summit in Paris with the participation of 50 heads of state, aiming to equip vulnerable countries to combat poverty and climate change. The estimated cost for these efforts is substantial, but discussions on financing mechanisms are ongoing. Progress in funding has been limited so far.

Steve Hanke, an Applied Economics Professor at Johns Hopkins University, expresses concerns about the Federal Reserve's ability to manage inflation and employment. According to Hanke, the Fed lacks a clear understanding of its actions and is "flying blind." He emphasizes the importance of monitoring the money supply and predicts that an "ugly" recession will impact the U.S. economy in 2024. Additionally, Hanke touches on the topic of gold and his involvement with currency boards.

The US Treasury yield curve remains inverted, indicating ongoing economic concerns, while M2 Money YoY continues to decline. Silver prices have increased by over 1% today, and Bitcoin Cash has surged by 12.39%. Meanwhile, the cost of a fully loaded 2023 Chevy Silverado 1500 ZR2 is around $100,000, with auto loan rates skyrocketing. Some attribute these challenges to the policies of President Biden and Federal Reserve Chair Jerome Powell.

Fabio Panetta, an executive board member of the European Central Bank (ECB), believes cryptocurrencies are suitable only for gambling due to their volatility and perceived limitations. He argues that crypto has not brought societal benefits and warns of market disruptions without proper regulations. Panetta also criticizes the security, scalability, and decentralization of crypto transactions. He supports the ECB's research on a potential digital euro and proposes banning crypto assets with excessive environmental impact. However, he is seen by some as opposing competition to central bank printing presses, similar to Senator Elizabeth Warren and SEC's Gary Genslar.

US money supply growth, under Jerome Powell and the Fed, continued to decline in April, reaching negative territory. This trend follows a period of high levels over the past two years. The Fed's extensive money printing to combat the Covid crisis and economic challenges has resulted in a near all-time low in US M2 Money Velocity. Moreover, real average weekly earnings have been in negative territory for 25 consecutive months due to the Fed's monetary expansion and contraction.

The recent banking crisis, starting with SVB's failure, has spread beyond the tech world. Credit Suisse faced major challenges and was eventually acquired by UBS for a nominal price, leaving shareholders with significant losses. The crisis also impacted CoCo bonds, wiping out investors and causing mark-to-market losses in the AT1 credit market. The contagion from the failure of Silvergate Bank in the crypto world has now reached mainstream banking, with uncertain outcomes and ripple effects throughout the international banking system.

This article argues that Keynes' dismissal of Say's law in 1936 has led to the current economic and monetary crisis. By rejecting market reality, Keynes invented macroeconomics and emphasized the role of the state. The flaws in macroeconomics, the state theory of money, misleading statistics, and misplaced fears of a general glut are discussed. Say's law, which links production to demand, challenges the belief that recessions can reduce price inflation. The mainstream's adherence to macroeconomic theories hampers reasoned debate, leaving a final crisis as the only solution to challenge these dogmas.