Key Inflation Indicator for the Fed Spikes to Highest Level in 39 Years

July 29, 2022

The Bureau of Economic Analysis released the personal consumption expenditures price index (PCE) report Friday. The report indicated that PCE rose 6.8% year-over-year (YoY) in June – the highest increase recorded since January 1982. Month-over-month (MoM) PCE jumped 1%.

Rates

The PCE is a key inflation indicator used by the Federal Reserve for its monetary policy decisions.   

Core PCE, which excludes food and energy, is up 4.8% YoY and 0.6% MoM. Both indicators are 0.1% above Dow Jones’s expected figures.

The PCE report closes off a week of bleak economic data that has led many economists, investors, and consumers to worry about the Fed’s capability to control inflation while preventing a recession. 

Many investors flocked to precious metals this week, as a way to hedge against inflation and protect their wealth from a recession.Gold rose 0.10%% to $1,769.90 per ounce. Silver grew 0.55% to $20.43 per ounce. Platinum decreased 0.45% to $911.80 per ounce, while Palladium jumped 1.39% to $2,166.00 per ounce. Bitcoin fell 1.08% to $24,109.00.

GDP Falls for the Second Quarter in a Row, Totaling a 0.9% Drop in Q2 

July 28, 2022

The US economy tightened for the second quarter in a row as the country battles high inflation. Gross domestic product (GDP) dropped 0.9% year-over-year (YoY), which follows a decline of 1.9% for the first quarter of 2022.

Capitol

Two consecutive drops in GDP usually signal that the economy is in recession, but the US government is denying that the US is in recession, going as far as to create a new definition of what constitutes a recession. 

The National Bureau of Economic Research is the agency that officially declares if the country is in a recession. Economists believe that the agency will not make a declaration for months to come. 

Economists within the US and abroad are treating the negative GDP as a recession indicator and adjusting future economic forecasts under recessionary policies.

Foreign governments like China are selling US bonds by the billions and are further diversifying their country’s portfolio with more gold bullion.

Gold rose 1.08% to $1,726.40 per ounce. Silver grew 3.22% to $18.89 per ounce. Platinum decreased 0.11% to $907.80 per ounce, while Palladium jumped 2.14% to $2,077.00 per ounce. Bitcoin fell 0.43% to $22,862.70.

Do you think the current GDP figures indicate that the US economy is in a recession?

India to Launch New International Bullion Exchange on July 29th

July 27, 2022

India is set to initiate the country’s first international bullion exchange (IIBX) on Friday. 

Gold and silver coins

The IIBX will be located in the new central business district called Gujarat International Finance Tec-City (Gift City) in Ahmedabad, the most populous city in the Indian state of Gujarat. The development marks India’s first greenfield smart city, which blends eco-friendly elements and highly developed infrastructure.

Indian Prime Minister Modi’s objective with this launch is to “empower India to gain its rightful place in the global bullion market and serve the global value chain with integrity and quality.” As the world’s second-largest market for gold, India has much to gain from this development.

PM Modi also believes that the IIBX will also allow India to influence the international bullion market’s prices and become competitive with COMEX and LBMA

Another initiative will be launched on Friday in parallel with the IIBX called the “NSE IFSC-SGX Connect”. The NSE IFSC-SGX Connect will process all Nifty orders placed on the Singapore Exchange Limited (SGX).

So far, 56 jewelers are currently onboarded to the IIBX which will use three vaults to store bullion. 

Gold rose 0.03% to $1,726.40 per ounce. Silver grew 0.13% to $18.89 per ounce. Platinum increased 1.49% to $907.80 per ounce, while Palladium jumped 0.72% to $2,077.00 per ounce. Bitcoin climbed 3.79% to $21,475.90.

Do you think that India’s bullion exchange will change the international bullion market? If so, in what ways will other exchanges be affected?

Natural Gas Prices Skyrocket as Russia Cuts off Significant Supplies to Europe 

July 26, 2022

Russian energy company Gazprom PJSC announced that it would stop a Nord Stream 1 turbine on Wednesday. 

Natural Gas

Gazprom attributed the shutdown of the turbine to maintenance work. The turbine shutdown would drop gas supplies via Nord Stream 1 at 20% capacity. 

Natural gas prices surged right after the Gazprom announcement. Futures trading at more than 11% – up to $9.75 per million British thermal units (MMBtu). Natural gas is up 77% month-over-month (MoM).

Moscow reported that a turbine that was sent to Canada for maintenance was “en route” but faced delivery delays due to Western sanctions. The turbine is currently en route to Germany, then will continue on to Finland.

Europe is facing a record-setting heat wave that has boosted energy consumption leading to lower supplies. Germany in particular is now facing an energy emergency. This will possibly leave the country with critically low supplies for the upcoming winter months. 

Gold fell 0.03% to $1,727.30 per ounce. Silver rose 0.98% to $18.59 per ounce. Platinum decreased 0.23% to $894.90 per ounce, while Palladium jumped 0.36% to $2,055.00 per ounce. Bitcoin sunk 1.94% to $20,895.90.

Do you think the European gas supply will return to its normal flow, or is this the beginning of more gas supply cuts to Europe from Russia?

Gold Prices Rose Friday as Investors Anticipate Next Week’s Federal Reserve Meeting

July 22, 2022

The price of Gold rose Friday morning as investors prepare for the Federal Reserve’s policy meeting at the Federal Open Market Committee (FOMC) next week. 

gold krugerrands

Investors are concerned about the implementation of higher interest rates. This is occurring as the Fed tries to slow down inflation – which accelerated to 9.1% month-over-month in June. That’s the highest recorded inflation rate since 1981.

Usually, gold suffers from higher interest rates, as the market viewers higher rates as deflationary. However, many investors believe they aren’t high enough to negatively impact gold’s trajectory.

Due to June’s higher-than-expected inflation rate and mounting geopolitical pressure, investors believe that high inflation rates are just getting started, and buyers are therefore investing heavily in precious metals like silver and gold. 

Gold rose 0.96% to $1,744.20 per ounce. Silver fell 0.34% to $19.06 per ounce. Platinum increased 0.11% to $899.10 per ounce, while Palladium jumped 7.18% to $2,070.00 per ounce. Bitcoin sunk 1.46% to $23,488.10.

The National Bank of Ukraine Devalues Currency

July 21, 2022

On Thursday, Ukraine’s central bank devalued the exchange rate for its currency, the hryvnia, by 25% against the US dollar.

War

The National Bank of Ukraine (NBU) announced that the devaluation of the hryvnia would improve the competitiveness of Ukrainian manufactured goods and support the economy. 

The new rate for the hryvnia is now set at 36.5686 per 1 US dollar. NBU Governor Kirill Shevchenko says that the new fixed exchange rate will allow the economy to be “more resilient at times of uncertainty”. 

This comes after the NBU released information forecasting Ukraine’s inflation rate to reach 30% by December. Ukraine has been working on stabilizing the hryvnia since the start of the Russian invasion. 

Gold rose 0.64% to $1,716.60 per ounce. Silver grew 0.08% to $18.91 per ounce. Platinum increased 1.05% to $883.90 per ounce, while Palladium jumped 0.79% to $1,898.00 per ounce. Bitcoin sunk 3.79% to $22,345.80.

Demand for Mortgages Falls to a 22-year Low

July 20, 2022

Mortgage demand dropped 6% last week – its lowest point in 22 years according to the Mortgage Bankers Association. Applications for mortgages sunk 19% year-over-year (YoY).

Real Estate

Buyers are losing purchasing power as mortgage rates and inflation rise to high levels. Inflation was currently recorded at 9.1% month-over-month in June. 

The average 30-year mortgage contract interest rate for homes costing $647,200 or less jumped to 5.82% from 5.74%. Rates for the same type of mortgage was at 3.11% a year ago.

Refinancing also fell 4% last week and 80% YoY, which is also a 22-year low.

The Federal Reserve is expected to raise interest rates next week by at least another 75 basis points. This is causing a heightened state of worry in the real estate industry. 

Gold fell 0.15% to $1,721.70 per ounce. Silver grew 0.69% to $19.02 per ounce. Platinum decreased 1.14% to $900.20 per ounce, while Palladium sunk 0.11% to $1,910.50 per ounce. Bitcoin jumped 3.47% to $24,207.50.

China’s US Treasury Holdings Drop Below $1 Trillion 

July 19, 2022

China has dumped close to $100 billion of US treasury securities in six months. Beijing now holds less than $1 trillion in treasury securities. This has brought China down from the world’s largest holder of American debt to the second-largest. 

TIPS

Japan, the current top owner of US debt, has also lowered its US debt holdings by $116 billion to $1.2 trillion.

The US is facing downward economic pressure due to skyrocketing inflation and a slowdown in GDP. This has led economists to believe that the US is headed for a recession soon.

The Federal Reserve has recently increased interest rates as a way to curb inflation. But high rates make US treasury securities less profitable. This is why many countries have chosen to rid their portfolios of US debt.

Many countries are now replacing US treasury securities with foreign debt from other countries that align more closely with their geopolitical priorities.

Gold rose 0.23% to $1,721.70 per ounce. Silver grew 0.51% to $19.02 per ounce. Platinum increased 1.62% to $900.20 per ounce, while Palladium jumped 0.73% to $1,910.50 per ounce. Bitcoin fell 0.94% to $22,230.30.

Gazprom Announces ‘Force Majeure’ for European Gas Outflow

July 18, 2022

As of July 14, Russian energy company Gazprom announced a force majeure on energy supplies to at least one EU member customer. Force majeure is a common clause found in contracts that essentially frees both parties from obligation/liability when an extraordinary event or circumstance occurs beyond the control of either party.

refineries

Gazprom’s “extraordinary circumstances” preventing it from fulfilling its commitments refers to a supply interruption in Canada. An important piece of equipment used in Gazprom’s Nord Stream 1 was sent to Canada for maintenance but was not returned as scheduled due to sanctions on Russia.

Germany is the major recipient of gas flows via the Nord Stream 1 pipeline. They are now preparing to heighten energy emergency measures to prevent an economic collapse.

US Retail Sales Jumped in June

July 15, 2022

The Commerce Department reported Friday that consumer spending in June surpassed the expected rate estimated by Dow Jones. Retail sales increased 1% month-over-month (MoM).

Unfortunately, the retail sales figures are not adjusted for inflation, so sales are negative. Sales figures were seemingly boosted by rising food and energy prices.

Consumer Prices

Fuel sales jumped 3.6%, as prices topped $5 a gallon nationally.

Although US consumers continue to spend, consumer confidence has hit rock bottom. Manufacturing surveys have shown a slowdown in production, and housing data is weakening.

On Thursday, Federal Reserve Board of Governors member Christopher Waller announced that the retail sales report would be a key determining factor for a 75 basis points or 100 basis points interest rate hike.

Gold fell 0.33% to $1,710.80 per ounce. Silver rose 0.57% to $18.41 per ounce. Platinum increased 0.47% to $854.20 per ounce, while Palladium dropped 4.29% to $1,938.00 per ounce. Bitcoin jumped 1.88% to $20,939.30.

US Consumers Added Record Levels of Debt in May

July 12, 2022

Americans added $22.35 billion in debt in May, as consumers continue to struggle with making ends meet. American consumers now owe close to $4.58 trillion in debt.Credit Card

The consumer debt figures take into account auto loans, student loans, and credit cards, but do not include mortgages. When including mortgages, Americans owe $15.8 trillion in total. 

Economists worry that as the Fed’s interest rates rise, credit card interest rates will jump along with it. This can leave US consumers with few options to make ends meet as prices and bills continue to grow.

Another growing concern is the new trend of consumers using the “buy now and pay later” (BNPL) option to pay for everyday expenses. BNPL data is not included in the debt report but the amount of this debt is skyrocketing.

Gold dipped 0.29% to $1,738.10 per ounce. Silver fell 0.81% to $19.20 per ounce. Platinum decreased 2.53% to $863.80 per ounce, while Palladium dropped 1.24% to $2,174.50 per ounce. Bitcoin sunk 0.93% to $19,756.80.

Russia Stops Gas Flows to Europe – Putting the Continent on High Alert

July 11, 2022

Europe is facing an energy crisis that can plunge the EU into an economic disaster not seen in decades. Nord Stream

The operator for the Nord Stream pipeline has confirmed that Russian gas flows will drop to zero on Monday. The operator says that the shutdown is due to scheduled maintenance. 

The Nord Stream pipeline line provides Germany with over 40% of the country’s energy supply. European governing bodies believe the suspension of gas deliveries can sideline the region’s winter supplies and lift inflation to extraordinary levels.

Gold dipped 0.28% to $1,747.90 per ounce. Silver fell 0.73% to $19.41 per ounce. Platinum decreased 2.47% to $890.00 per ounce, while Palladium rose 0.02% to $2,218.00 per ounce. Bitcoin sunk 1.65% to $20,504.90.

West Coast Railroad Bottleneck Approaching Boiling Point

July 8, 2022

Railroad congestions from Union Pacific and BNSF at the Port of Los Angeles and Long Beach are causing extreme cases of bottlenecks that will have terrible inflationary consequences in the US. shipping bottlenecks

About 60% of long-dwell containers are set to ship through rail. The container wait times are currently being recorded at over 8 days at the ports of LA and Long Beach. 

The bottleneck problems have arisen due to a lack of available rail cars at the country’s largest container gateway. Another issue affecting the distribution of containers is an ongoing railroad union dispute that started in 2020.

As a way to alleviate shipping bottlenecks on the West Coast, ships have been rerouted to ports on the East Coast. The ports on the East Coast have seen an influx of shipping activity.  

Investors believe that if the bottlenecks do not subside, it will cause an uptick in inflation which currently sits at a 40-year high.

Gold grew 0.72% to $1,759.30 per ounce. Silver rose 1.20% to $19.64 per ounce. Platinum increased 3.09% to $918.80 per ounce, while Palladium jumped 7.39% to $2,188.50 per ounce. Bitcoin gained 0.70% to $21,642.40.

Central Banks Continue to Add Gold to its Reserves

July 7, 2022

For the month of May, central banks across the world added a net of 35 tons of gold to their reserves. This is the second month in a row of net buying for gold.  Gold reserves

The countries that bought the most gold bullion were Turkey, Uzbekistan, and Kazakhstan, each buying 13t, 9t, and 6t, respectively.

Germany’s central bank was the most prominent seller of gold, dropping its gold reserves by 2 tons. 

For the month of June, Iraq announced its purchase of 34 tons. The Central Bank of Iraq now has a total of 130 tonnes of gold so far this year.

Data provided by the World Gold Council reported that 25% of the world’s central banks plan on adding gold to their reserves over the next 12 months.

Gold grew 0.58% to $1,756.20 per ounce. Silver rose 1.41% to $19.68 per ounce. Platinum increased 1.87% to $891.30 per ounce, while Palladium jumped 4.23% to $2,030.50 per ounce. Bitcoin sunk 0.20% to $20,501.20.

Russia Shuts Down Caspian Pipeline to Europe

July 6, 2022

On Wednesday, Moscow ordered a 30-day suspension of oil delivery to Europe from Kazakhstan via the Caspian Pipeline Consortium (CPC). Operational sources at the terminal said that oil exports continued through Wednesday morning.Gas Pipeline

A Russian court explained that the shutdown was due to technical violations. The CPC issued an appeal to the Russian court in the city of Novorossiysk, requesting to defer the stop order.

The CPC pipeline delivers about 1.2 million barrels of crude oil to Europe. Any disruptions to this system would lead investors to worry about higher oil prices and inflation. 

Gold dipped 0.59% to $1,765.10 per ounce. Silver fell 0.05% to $19.45 per ounce. Platinum decreased 0.81% to $881.90 per ounce, while Palladium rose 1.02% to $1,994.00 per ounce. Bitcoin sunk 0.20% to $20,116.30.

2 Comments

  1. Colleen Anne Anderson

    I just wanted to let you know that this and other information provided by Bullion Exchange are extremely helpful to me as we are opening a Precious metals IRA. While we have purchased small amounts of bullion over the years (all held physically by us,)we really didn’t have a good grasp on the benefit and handling of this type of IRA. We know it MUST be better than the stocks/bonds currently included in our retirement accounts and that it can’t disappear completely. We appreciate educational opportunities you provide.

    • Thank you for reading our content. We strive to provide the best information possible to our customers so that everyone can have some financial independence and education. Best wishes!

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