Important Fed Inflation Gauge Jumped 5.2% for March
Apr. 29, 2022
March’s personal consumption expenditure (PCE) prices, which excludes energy and food, grew 5.2% from a year ago. Core PCE, including energy and food, rose 6.6% which is the fastest rate recorded since 1982. Workforce cost accelerated 1.4% for the first quarter of 2022, while incomes adjusted for inflation fell 0.4% in March.
The PCE gauge gives investors a picture of how American incomes are struggling to keep up with higher prices. Consumer spending is currently outpacing income. This is pushing consumers to dip into their savings to make ends meet. As a result, US personal savings dropped to 6.2%.
US GDP Drops to a 1.4% Rate for the First Quarter
Apr. 28, 2022
The US’s gross domestic product (GDP) declined at a rate of 1.4% for the first quarter of 2022, lower than the Dow Jones reported estimate of a 1% gain. An array of factors ranging from higher inflation rates to commodity shortages have negatively affected the US economy. Fixed investments, a decline in defense spending, and a record trade deficit have also suppressed economic growth. Consumer expenditure increased by 2.7%, most likely due to an increase in inflation.
The current GDP readings are stroking fear amongst many investors and policymakers. Goldman Sachs expects about a 35% probability that the US will have negative growth going forward. Deutsche Bank bank believes that the US will fall into a recession in late 2023, or early 2024. Other investors believe this GDP reading is an indicator that the US is at the beginning of a recession. However, other analysts are taking a different approach. According to Ian Shepherdson, chief economist at Pantheon Macroeconomics, this report “is noise; not signal. The economy is not falling into recession.” Whatever their outlook, a great number of investors have decided to move from paper assets to hard assets like gold and silver to protect their portfolios from a possible economic downturn.
Russia Working Toward Adopting the Gold Standard
Apr. 27, 2022
Moscow is currently working on a plan to construct a two-loop monetary and financial system in Russia. The new system would peg gold and other commodities to the ruble. It is expected that the ruble’s exchange rate will increase favorably due to its real purchasing power parity. The Russian Secretary of the Security Council, Nikolay Patrushev, said Tuesday that “to ensure the sovereignty of any national financial system, it is necessary that its means of payment have intrinsic value and price stability, and is not tied to the dollar.”
Russia is also working toward restructuring its economy to become more technologically sophisticated. Patrushev noted that “We are not against a market economy… but …the West allows other countries to be its partner only when it is beneficial for it.” He also pointed out that Russia’s growth should be focused on its inner potential. At the beginning of April, the Bank of Russia pegged a fixed price for the purchase of buying gold with rubles. The price is currently set at 5,000 rubles ($66.84) per gram of gold.
Japan Creates Massive Spending Bill to Lower Inflation Rate
Apr. 26, 2022
The Japanese government is planning on spending 6.2 trillion yen ($48.2 billion) on cash assistance, low-interest loans, and gasoline subsidies. Japanese government officials believe that this spending bill will help businesses and consumers with rising costs. About 1.5 trillion yen from the spending bill will fund the crude oil subsidy. Additionally, gasoline price subsidies will rise from 25 per liter to 35 per liter to limit the increase in gasoline prices.
Opponents of the spending bill are expressing concerns against the implementation of new subsidies. They believe that inflation rates have risen because of large government spending and this new bill will exacerbate the issue. Japan is also facing currently a major dip in the valuation of the yen, which has dropped to a 20-year low. Many Japanese investors are worried about an oncoming recession and are hedging against higher inflation rates with precious metals.
Gold Prices Sink, Erasing All Gains Made During Ukraine War
Apr. 25, 2022
The gold price dropped below $1900 Monday morning, prompting investors to take note. After the price of gold jumped at the beginning of the Russian invasion of Ukraine, it soon surpassed $2000 due to an increased worry that higher energy prices would negatively affect inflation rates. Inflation rates did climb higher than expected since then, but with the Fed promising to raise interest rates by at least 50 bps, many investors are exchanging gold futures for the US dollar. The gold price drop back to below $1900 could partially be attributed to this asset exchange. On the other hand, some investors posit that a 50 bps rate increase is too low to help curb inflation, and believe the gold dip is a good opportunity to buy gold.
Rising Bond Rates Puts Pressure on Gold
Apr. 22, 2022
Gold prices dropped as a result of high bond yields. US treasury yields continue to reach higher levels due to increased interest rates set by the Fed. The 5-year Treasury rate hit 3% Friday, while 30-year Treasury bonds dropped to 2.91% creating a “yield curve inversion”. A “yield curve inversion” indicates that investors are selling shorter-dated debt for long-dated debt, suggesting that investors have a lack of confidence in the economy.
Bond yields are expected to increase in May, as the Fed hinted they will increase interest rates by 50 basis points. Many investors believe that bond yields are actually in negative territory, suggesting that bond yields need to surpass current CPI rates. These same investors believe that gold and silver are the only safe investment during this high inflationary period.
China Opens New Gold Processing Plant in Tajikistan
Apr. 21, 2022
A new gold processing plant was recently unveiled in the northern Sughd region of Tajikistan on April 14. The new plant was constructed by a Chinese investor for around $136 billion and will be administered by a Tajik firm called Talco Gold. Talco Gold, a new business partnership between Talco Aluminum Company and China’s Tibet Huayu Mining, is set to deliver up to 2.2 tons of gold and 21,000 tons of antimony (a lustrous gray metalloid) annually.
Tajikistan’s economy has been suffering greatly from Russia’s invasion of Ukraine. Sanctions against Russia have disrupted the opportunity for work for hundreds of thousands of Tajik nationals traveling to Russia for seasonal employment. In an attempt to improve the situation, Talco Gold is expected to provide Tajikistan with 1,500 jobs and help its economy to grow. Unfortunately, this venture comes with a caveat: China will receive significant tax exemptions. Since Tajikistan owes China about $1.1 billion, this is one of the concessions the country has to make to benefit its debtor.
Supply Chain Bottleneck Causes Massive Global Concern
Apr. 20, 2022
The Chinese lockdown of the city of Shanghai implemented to control growing Covid cases has brought all exports and production of goods to a standstill. The ripple effect within the global supply chain system is hitting a boiling point, even surpassing previous Covid-related disruptions.
Currently, freight is accumulating in and around Chinese ports. Most plants and warehouses have been shuttered, shipping units are left abandoned, 9 out of 10 trucks are inoperable, airports and ports are working at limited capacity, and over 25 million citizens in Shanghai have been isolated for 18 days. The global impact is expected to be devastating, as the world continues to face supply shortages and record-high inflation rates.
IMF Changes its Global Growth Forecast
Apr. 19, 2022
The International Monetary Fund (IMF) announced on Tuesday that it cut the organization’s global growth projections for 2022 and 2023. The main reason for the cut is that the IMF believes that the war in Ukraine will continue to negatively affect the global economy. The IMF is now currently forecasting a 3.6% GDP rate for 2022 and 2023.
The Russian and Ukrainian economies are set to contract heavily for 2022. It is expected that Russia’s economy will fall by 8.5% this year due to heavy sanctions imposed by Western nations in response to Russia’s invasion of Ukraine. As for Ukraine, the IMF has projected an even more dismal estimate of 35% for 2022. Rising inflation rates are another strong factor jeopardizing the current global economy and an additional factor for the IMF’s global growth assessment adjustment.
Gold Surpasses $2000
Apr. 18, 2022
By 2022, gold has hit over 9%, surging past $2000 early Monday morning as inflation continues to rise globally. In addition to inflation, geopolitical, economic, social unrest, COVID lockdowns, and war has made investments such as stocks and bonds riskier. In contrast to gold, cryptocurrencies are suffering from a strong fluctuation in value, with bitcoin down 15% this morning.
Central banks are doubling down on gold, with countries like Russia, China, Ireland, and many more investing billions of dollars in the precious metals as economies prepare for a possible recession this year. France’s central bank has repatriated 221 gold which is now currently stored in La Souterraine in Paris. France is working on positioning Paris as a top gold trading center.
Gold Prices Cool Off After Retail Sales Grew 0.5% in March
Apr. 14, 2022
Despite inflation rates soaring, US consumers spent more money in March than the previous month. Retail sales grew by 0.5% month-over-month, which was less than the Dow Jones estimate of 0.6%. Since retail sales do not factor in inflation adjustments, the increase in sales is likely attributed to higher prices. The largest gain in sales came from gas stations, which had an increase of 8.9% for March. Meanwhile, internet sales dipped by 6.4%.
In other news, the initial jobless claims jumped to 185,000 for the week ending on April 9. This marks a gain of 18,000 from the previous week; however, continued claims declined by 48,000 for the same period. Investors are worried that higher inflation rates will bring the economy into a recession. As a result, investors are flocking to gold and silver to hedge against inflation.
Producer Prices Jumped 11.2% from a Year Ago
Apr. 13, 2022
The producer price index (PPI), which calculates the cost paid by wholesalers, jumped 1.4% in March and 11.2% year-over-year. The PPI increase is currently the largest gain on record and is expected to climb even higher in the months to come. Core PPI, which excludes energy, food, and trade services, rose 0.9% -close to double the Dow Jones estimate.
PPI is regarded as an effective measure for calculating the production costs of goods and services. Energy prices were a big factor in the higher-than-expected producer costs, increasing 5.7% in March. As inflation continues to heat up, market investors are speculating that the Fed will raise interest rates higher and more frequently in 2022.
Savvy investors are protecting their wealth against inflation by purchasing precious metals. Today, gold grew 0.40% to $1,983.00 per ounce. Silver jumped 0.99% to $25.89 per ounce. Platinum increased 1.45% to $1000.50 per ounce, while Palladium rose 2.32% to $2,452.00 per ounce. Bitcoin surged 1.07% to 40,513.80.
Inflation Hits New 40 Year Peak, Coming in Higher Than Expected for March
Apr. 12, 2022
The consumer price index (CPI), which calculates a varied basket of goods and services, soared 8.5% year over year, higher than the Dow Jones 8.4% estimate. Excluding energy and food costs, the CPI rose 6.5%. The headline inflation rate is the highest recorded in over 40 years, With the current inflation rate reminiscent of the late 70s and early 80s stagflation period.
Cost of living surpassed pay gains for the workforce. Real worker data shows that overall earnings fell by 0.8% for March, and real average hourly earnings also declined by 0.8%. Higher inflation rates and lower wages have many Americans struggling to make ends meet. To help protect their financial future, investors are flocking to gold and silver as a hedge against inflation.
Bitcoin Falls 5% as Sell-Off Continues Through Monday
April. 11, 2022
Bitcoin is experiencing a sell-off as investors prepare for the results of the Fed’s meeting minutes, as the Fed will provide information on policies that can affect cryptocurrency. Current treasury rates recently hit a three-year high, which influences the value of riskier assets. As a result, bitcoin fell to around $41,116.
Bitcoin’s retreat comes after a surge in digital currency investment from large financial institutions over the past two weeks. Terraform bought $175 million worth of bitcoin, while Michael Saylor’s MicroStrategy invested $191 million in the digital currency. Many investors think that bitcoin will rise after the Fed releases inflation data Tuesday, while opponents believe that bitcoin will fall along with the stock market.
Credit Card Debt Explodes to a Record-Breaking $41.8 Billion
Apr. 8, 2022
A Federal Reserve consumer credit report released in February, details current savings and debt amongst Americans. The report states that consumer credit rose by $8.9 billion in January, to a total of $41.98 billion. The total number of debt is the highest recorded amount in US history. Also, January’s debt increase is one of the largest monthly increases recorded. About $23.8 billion of debt was attributed to non-revolving credit (car and student loans) and $18 billion was recorded for revolving credit (credit card debt).
Another troubling data point was also presented in the consumer credit report, which is that Americans have expended almost all their savings. The personal savings rate came in at 6.3%, which is significantly lower than the 34% rate in 2020. Financial analysts believe that Americans are struggling with higher rates of inflation and salaries that cannot keep up with the cost of living.
Gold grew 0.49% to $1,948.50 per ounce. Silver fell 0.28% to $24.82 per ounce. Platinum increased 1.46% to $995.00 per ounce, while Palladium jumped 9.51% to $2,508.00 per ounce. Bitcoin sunk 1.23% to $42,916.00.
The Ruble Returns to Pre-Invasion Exchange Rate
Apr. 7, 2022
The Russian currency gained against the dollar today, reaching 75 rubles per dollar and 81 per euro. The ruble is now at its strongest level since Feb 19, which was right before the Russian invasion of Ukraine. After the initial invasion and the subsequent western-imposed sanctions, the ruble collapsed – dropping as low as 150 rubles per dollar.
Moscow recently stepped up efforts to counter the effects of economic sanctions, which include negotiating an increase in the sale of natural resources to China and India, plus demanding rubles as a form of payment for energy by countries Russia deems ‘unfriendly.’ Another element that has given the ruble a boost is the recent pegging of gold to the ruble: a fixed price of 5,000 rubles per gram of gold has been implemented.
Gold grew 0.23% to $1,938.40 per ounce. Silver fell 0.57% to $24.62 per ounce. Platinum decreased 0.74% to $970.70 per ounce, while Palladium rose 1.93% to $2,286.00 per ounce. Bitcoin sunk 0.07% to $43,615.30.
Mortgage 30-year Rates Cross 5% for the First Time Since 2011
Apr. 6, 2022
Both the housing market and inflation are contributing to more expensive living standards for families. For a 30-year fixed mortgage, average rates have surpassed the 5% mark. They sit at 5.02% today, higher than the rates exactly one year ago which stood at 3.38%. The current mortgage rate, coupled with record-high housing prices, is making homeownership unattainable for a vast proportion of Americans.
Mortgage rates follow U.S. 10-year Treasury yields which also have been climbing significantly this year. U.S. bond rates are sensitive to high inflation, making bonds a much more risky investment vehicle than in previous years. This has caused huge losses for bond investors, with many saying that it is a warning of an impending recession. However, some savvy investors have predicted this outcome and have hedged their portfolios with gold and silver.
Gold grew 0.29% to $1,935.60 per ounce. Silver jumped 0.68% to $24.75 per ounce. Platinum decreased 0.41% to $990.20 per ounce, while Palladium rose 0.37% to $2,280.00 per ounce. Bitcoin sunk 1.64% to $44,761.00.
China’s COVID-Related Industry Shutdowns Disrupt Global Commerce Supply Chain
Apr. 5, 2022
The world economy is struggling to grow after back-to-back events including the Ukrainian war and the reemergence of COVID-19 outbreaks. Economists are extremely concerned about disruptions to exports. They are suggesting that these disruptions may cause supply shortages and increase inflation to higher levels.
China has notably faced an increase in COVID-19 cases in March and April. Because of these outbreaks, the Chinese government has called for new lockdowns in Shanghai, the nation’s financial center, and a shutdown in manufacturing across the country. China produces important components for consumer products such as electronics which are in high demand within the automotive and tech industries. These industries have faced supply chain disruptions since the beginning of the pandemic. Many have struggled to keep up with demand.
Gold grew 0.54% to $1,949.00 per ounce. Silver jumped 1.49% to $25.16 per ounce. Platinum decreased 0.71% to $1008.40 per ounce, while Palladium rose 1.36% to $2,358.00 per ounce. Bitcoin sunk 0.32% to $46,447.90.
Sri Lanka’s Hyperinflation Woes Lead to Government Collapse
Apr. 4, 2022
This past Thursday, citizens took to the streets to protest Sri Lankan President Gotabaya Rajapaksa’s. This is a result of what is claimed as a mishandling of the nation’s economy and increasing inflation rates. Hundreds of protestors fought with police, leading to many injuries and the resignation of the Central Bank Governor on Monday. Twenty-six cabinet ministers have also resigned, causing the president to create a new government. In addition to its governmental problems, Sri Lanka is facing a tremendous shortage of forex. This is needed to pay for the country’s energy and other essential imports. Due to the inability to pay for energy, Sri Lanka is facing power shortages throughout the island nation.
Another issue Sri Lanka is facing is its foreign debt, which currently stands at $12.55 billion. Sri Lanka imports more than it produces, leaving the nation with significant budget deficits and high inflation. Inflation rates are surpassing 17% as of April 1. With rising prices for everyday necessities, Sri Lankans are demanding that the president resign.
Gold grew 0.06% to $1,9370.50 per ounce. Silver fell 1.46% to $24.62 per ounce. Platinum decreased 0.20% to $1009.70 per ounce, while Palladium dropped 0.59% to $2,338.00 per ounce. Bitcoin sunk 0.52% to $46,182.50.
Russia Reverses Gas Flow Away from EU
Apr. 1, 2022
The Kremlin is tightening up pressure on the EU for ruble payment. They are stating that they either agree to purchase in rubles or relinquish their energy imports. The EU member nations have disagreed to make energy purchases in rubles as of Thursday. As a result, Russia has reversed gas traveling through the Yamal-Europe pipeline. The reversal of gas flow is coming from Germany towards Poland.
The reversal came after Gazprom sent out a request to its European customers to change payment from euros to rubles. In regards to the change in payment, EU countries have not given a response to the request. Little is known if Germany and fellow EU members will comply. Over 40% of Europe’s energy comes from Russia. Economists believe that any disturbances in the energy market will create financial difficulties for the European economy.
Gold dropped 0.62% to $1,932.40 per ounce. Silver sank 0.28% to $24.99 per ounce. Platinum increased 1.33% to $1021.00 per ounce, while Palladium rose 1.74% to $2,353.00 per ounce. Bitcoin jumped 1.00% to $45,983.70.