Precious metals news

After 17 years of maintaining a negative interest rate policy, Japan's central bank has taken a historic step by raising its key interest rate from -0.1% to a range of 0%-0.1%. This move marks a significant shift in Japan's economic strategy, reflecting a response to rising consumer prices and increased wages. In 2016, Japan had lowered its interest rate below zero, aiming to invigorate its stagnant economy by encouraging spending over savings.

A recent Bankrate report reveals that 56% of Americans are financially unprepared to handle a $1,000 emergency expense. The survey found that only 44% could rely on their savings in such situations, with the majority having to resort to credit cards or borrowing from friends and family. According to Bankrate's senior economic analyst, Mark Hamrick, this situation emphasizes the broader issue of a consumer-based society that emphasizes spending over saving.

Japan's Government Pension Investment Fund (GPIF) is exploring the potential inclusion of illiquid assets, including forests, farmland, gold, and bitcoin, into its investment portfolio. This move, aimed at diversifying its holdings, marks a significant shift as these assets were previously not considered for GPIF's investments. In addition to seeking basic information on these unconventional assets, the GPIF is also gathering data on the markets, evaluation methods, and incorporation strategies of other illiquid assets like infrastructure, real estate, and private equity, which are already part of its investment landscape.

The Federal Reserve is contemplating slowing down the process of "quantitative tightening" (QT), which involves reducing its $1.5 trillion balance sheet accumulated from buying Treasury and mortgage bonds during the pandemic. This method, aimed at tightening financial conditions to combat inflation, allows the bonds to mature without renewal, indirectly raising long-term interest rates as the market absorbs the supply. As inflation begins to subside, the central bank faces the challenge of decelerating the balance sheet reduction without causing market disruptions similar to those experienced in the previous decade when it last attempted to unwind its holdings.

Thirteen miners became trapped following a rock fall at the Pioneer mine, one of Russia's largest gold mines located in the Amur region of Eastern Siberia, near the China border. The incident was reported by Russia's Ministry of Emergency Situations, which is currently working on restoring communications and clearing the transport slope to reach the miners. The situation underscores the risks associated with mining operations, especially in such large-scale facilities.

The proposal for a BRICS grain exchange, championed by Russian President Vladimir Putin, is gaining momentum. This initiative would enable buyers to purchase grain directly from producers within the BRICS countries—Brazil, Russia, India, China, and South Africa—and potentially include other nations like Egypt, Ethiopia, Iran, and the United Arab Emirates. With China and India being the largest wheat producers and Russia the leading wheat exporter, the establishment of such an exchange could significantly impact the global grain market. Eduard Zernin, the head of the Russian Union of Grain Exporters, anticipates that organizational details will be finalized by the upcoming BRICS summit in Kazan, Russia.

Join Mike Maloney in his backyard as he delves into the compelling case for silver.

Consumers aren’t the only ones defaulting on their debts: Corporate bond defaults were up massively in 2023, especially for high-risk junk debt, and the trend is continuing this year at a pace not seen since the 2008 global financial crisis. Unsurprisingly, companies selling low-rated junk debt are being hit the worst.

In some Asian markets, the demand for physical gold has declined due to high prices, leading consumers to reduce purchases. This shift has prompted dealers in key markets like India to offer substantial discounts, while in China, gold premiums have fallen to their lowest since July. Although the demand from consumers has weakened, there is still investor interest in gold as a safe haven, particularly in China, amid concerns about an uneven economic recovery. However, the People's Bank of China is expected to keep its import policy unchanged unless there's notable fluctuation in the RMB exchange rate.

The Federal Reserve's recent interest rate hikes have deviated from the historical norm, resulting in a net loss in interest income for U.S. households for the first time in fifty years. While increases in the Fed's rates typically lead to a net gain for households, the interest paid on mortgages, credit cards, and other debts has surged by nearly $420 billion since March 2022, overshadowing the $280 billion rise in interest income. This shift has led to a significant reduction in household net interest income, marking a departure from past trends. Although the impact of Fed policies on employment has not yet mirrored previous cycles, with no significant layoffs or wage stagnation observed, the decrease in net interest income has become a notable burden on consumer spending.

As the Federal Reserve's crucial March meeting approaches, U.S. stock indexes have retreated from record highs in anticipation. The key event on Wednesday will reveal the Fed's latest monetary policy decision and economic forecasts. Investors are keenly awaiting to see if the Fed maintains its projection of three rate cuts in 2024, especially after recent inflation data indicated a slower than expected decline, adjusting market expectations for rate cuts from six to three this year. The outcome hinges on whether the Fed considers recent inflation trends significant enough to alter its monetary policy further.

Gold has shown promising signs of continued momentum, with recent technical indicators reinforcing bullish sentiments. After initially highlighting a bullish reversal in October 2023 and issuing a buy signal, the recommendation was adjusted to neutral in December when gold failed to maintain a close above $2100. The metal's trajectory is now set on breaking out of a four-year base, potentially entering a new bull market with targets of $2400 in the short term and, following a monthly close above $2200, long-term projections range between $3600 to $4000, signaling strong buyer control and diminishing selling pressure.

The price of silver has experienced a pullback, trading around $25.10, after approaching the upper limit of its long-term range. This correction is likely attributed to adjusted expectations for U.S. interest rates, which are now anticipated to stay higher for an extended period. Given silver's status as a non-yielding asset, higher interest rates increase the opportunity cost of holding it, especially in light of recent U.S. inflation data indicating persistently high inflation. This scenario postpones the likelihood of the Federal Reserve cutting interest rates, exerting downward pressure on silver prices.

Despite initial signs of declining inflation and rising consumer confidence at the end of last year, the early months of 2024 have presented a mixed picture. Inflation rates remain above 3%, retail sales have weakened, and wholesale prices have unexpectedly increased. However, these developments haven't significantly shaken investor confidence, with expectations still leaning towards the Federal Reserve reducing interest rates within the year, albeit potentially later than anticipated. This anticipation comes amidst consumers' ongoing frustrations with high prices across various sectors. The Federal Reserve's upcoming meeting is expected to further clarify their stance on inflation and interest rates, providing insight into the economic trajectory for the near future.

Gold has recently hit a record high, attracting the attention of young Chinese investors who are now focusing on acquiring gold beans and jewelry. These gold beans, weighing one gram each and priced at approximately $84.5 (600 yuan), are particularly popular among China's Generation Z for their affordability and the protection they offer against economic uncertainties. The slight premium over the global market price reflects production costs and the closed nature of China's market, making these beans a valuable commodity for investment.

As we move into 2024, gold has seen an impressive rally, breaking the US$2,100 per ounce mark and nearing US$2,200, raising questions about its potential for further gains and increased investor interest. The past year, 2023, was notable for gold's resilience and performance, even amid high interest rates, setting new record levels and outshining most other asset classes except US equities. A key driver of gold demand has been its unwavering appeal in the jewelry sector, particularly in emerging markets like India and China, despite the significant price increase from US$250 in 1999 to US$2,000 now. This enduring interest suggests a market readiness for gold at these high price points.

Goldman Sachs anticipates the Bank of Japan (BOJ) will increase interest rates at its next meeting, marking the first rate hike since 2007. This prediction follows recent developments, including stronger wage outcomes and speculation fueled by news articles. The expected policy shift suggests the BOJ will abandon its negative interest rate policy, cease yield curve control, maintain current government bond purchase levels, and keep its exchange-traded fund holdings unchanged. This shift is backed by recent wage negotiations and diverges from previous expectations of a rate change in April.

The American office real estate market is experiencing significant challenges post-Covid-19, with vacancy rates soaring to 17%—higher than during the 2008 financial crisis. Despite this, forced sales of office buildings remain rare, with only 3.5% of office deals in 2023 involving distressed sellers. This is partly because a still-strong economy has allowed tenants to continue paying rent. However, as leases expire, many companies are downsizing their office space by 30% to 40%, suggesting that the market may face more stress in the future.

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The Federal Reserve is often viewed as a neutral guardian of the economy, tasked with safeguarding employment and ensuring stable prices. However, the Fed is run by individuals who, like anyone else, are swayed by certain motivations. Do the people behind the Fed truly have the incentive to remain impartial? Our guest commentator demystifies the notion of ‘Fed neutrality,' revealing the intersections of politics and policy within its operations.