Gold and Silver Industry & Investing News
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READ MORESOFR Options Hint at Cautious Fed Rate Increases in 2024
The US rate options market, sensitive to inflation trends, is cautiously pricing in potential Federal Reserve interest rate hikes for this year and next. Options on Secured Overnight Financing Rate (SOFR) futures, a key indicator used by bond investors to predict Fed policy, suggest a modest likelihood of rate increases. Despite current SOFR rates at 5.31%, market consensus is mixed, with some anticipating a possible single rate cut rather than multiple hikes, reflecting a strategy of maintaining higher rates longer amidst persistent inflation and a strong labor market.
READ MORERepublic Bank Shuts Down; FDIC Coordinates $10 Billion Asset Transfer to Fulton Bank
US regulators have closed Republic Bank, marking 2024's first bank failure. The FDIC is safeguarding $10 billion, comprising $6 billion in assets and $4 billion in customer deposits, transferring them to Fulton Bank. Republic Bank’s 32 branches across New Jersey, Pennsylvania, and New York will resume operations under Fulton Bank this weekend or Monday, depending on regular branch hours. Customers can access funds through checks, ATMs, or debit cards. This transition follows significant bank failures in the previous year and comes amid ongoing concerns about the banking sector's stability due to its connections with the volatile commercial real estate market and US Treasuries.
READ MOREInvestor Focus on Fed's Rate Strategy Boosts Gold During Rising Inflation
Gold prices rose modestly, rebounding from a 2% drop last week, in anticipation of the upcoming Federal Reserve meeting expected to maintain a policy of high interest rates for an extended period. Despite the broader anticipation of rate cuts this year diminishing due to recent inflation data, gold has gained over 13% this year, reaching record highs earlier this month. The upcoming U.S. jobs report will also play a crucial role in shaping market expectations.
READ MOREPowell's Pivot: Fed Likely to Adopt Tougher Stance as Inflation Climbs
Despite a period of dovish signals, the Federal Reserve is expected to revert to a hawkish stance due to rising inflation figures. This shift, anticipated by economists, comes after Federal Reserve Chair Jerome Powell previously indicated at a 2022 Jackson Hole meeting that tough measures might be necessary to manage inflation. Experts like Ellen Meade and Marc Giannoni suggest that recent easing in financial conditions will likely prompt a more stringent approach to monetary policy.
READ MOREConvergence of Gold and Dollar: Precursor to Stock Market Downturn?
The close movement between gold and the dollar, typically seen as defensive assets, is currently signaling a potential deep correction in the S&P 500. Historically, when these two assets converge in behavior, it often precedes significant downturns in the stock market, suggesting that investors should brace for possible declines.
READ MOREModerate U.S. Inflation Rise Suggests Fed Could Keep Rates Steady Until Fall
U.S. inflation edged up in March, meeting expectations and reinforcing the view that the Federal Reserve will likely hold off on interest rate cuts until September. The personal consumption expenditures (PCE) price index rose by 0.3% last month, the same as in February, according to the Commerce Department's Bureau of Economic Analysis. This steady increase, in line with market forecasts, suggests that the central bank will maintain its current rate policy for the time being.
READ MORETraders Increase Bets on September Fed Rate Cut Following Inflation Report
Traders are increasingly betting on the U.S. Federal Reserve initiating its first interest rate cut of the year in September, following a recent government inflation report. This report, which indicated that the U.S. personal consumption expenditures (PCE) price index rose by 0.3% from February to March, has influenced interest rate futures prices. These now suggest a 65% probability of a rate cut during the Fed's mid-September meeting, a noticeable increase from the previous likelihood of less than 60%.
READ MORECore Fed Inflation Metric Surpasses Expectations, Rising 2.8% in March
Inflation persisted in March, as revealed by the Federal Reserve's closely monitored personal consumption expenditures (PCE) price index. Excluding food and energy, the core PCE index rose by 2.8% year-over-year, surpassing the anticipated 2.7%, according to the Commerce Department. Including these volatile categories, the overall PCE index also exceeded expectations, climbing 2.7% compared to a forecasted 2.6%. Despite these figures indicating sustained inflationary pressure, market response was muted, with Treasury yields dipping slightly and Wall Street poised for a positive open.
READ MOREGold Set for Weekly Dip as U.S. Inflation Fears Weigh on Market Sentiment
Gold is on track for a weekly loss as U.S. inflation worries dampen demand, despite a modest increase ahead of critical inflation data due this Friday. The anticipated personal consumption expenditures index is expected to confirm that March continued to see high price pressures. Heightened inflation has raised doubts about the Federal Reserve's ability to lower borrowing costs, which has boosted Treasury yields—a negative for gold, which yields no interest. Compounding concerns, a recent report showing U.S. GDP growth falling short of expectations has reignited fears of stagflation, characterized by slow growth and high inflation.
READ MOREEconomic Slowdown and Rising Inflation Cast Doubt on Soft-Landing Prospects
The U.S. economy experienced its slowest growth in nearly two years last quarter, accompanied by a notable increase in inflation, which dampened hopes for a soft landing. The Bureau of Economic Analysis reported that the Gross Domestic Product (GDP) grew at an annualized rate of 1.6%, falling below all economists' forecasts. The primary driver of economic growth, personal spending, increased at a modest 2.5% rate, which was less than expected. Additionally, a widening trade deficit contributed to the slowdown, marking the largest subtraction from growth since 2022. Inflation also showed signs of acceleration, with a key indicator rising at a 3.7% annualized rate. This was the first quarterly increase in a year, indicating that price pressures are resurfacing.
READ MOREChinese Retail Investors Drive Gold Boom on Shanghai Futures Exchange
Gold's remarkable rise this year had analysts scratching their heads until a new force was identified: Chinese retail investors swarming the Shanghai Futures Exchange (SHFE). Despite headwinds like increasing Treasury yields and a robust dollar, trading volumes on the SHFE tripled, propelling gold prices upward. China's long-standing connection to gold, coupled with recent market uncertainty, has contributed to this surge, indicating a major shift in gold trading patterns. However, as gold prices fluctuate, questions persist about the SHFE's broader impact on the global gold market.
READ MOREDecline in Gold Prices Leads to Weakening of Zimbabwe's ZiG Currency
Zimbabwe's new gold-backed currency, the ZiG, experienced its first decline since its introduction this April, slipping nearly 1% to trade at 13.38 against the dollar on Thursday. This weakening aligns with recent drops in gold prices, which have seen a downturn over the past three days. The ZiG, an acronym for Zimbabwe Gold, is supported by a mix of precious metals, including approximately 2.5 tons of gold, and $100 million in foreign currency reserves maintained by the central bank. The currency debuted at 13.56 per dollar, replacing the significantly devalued Zimbabwean dollar, which had plummeted about 80% against the US dollar since the beginning of the year. During a business conference in Bulawayo, Zimbabwe’s Vice President Constantino Chiwenga emphasized the ZiG's role in transitioning away from the US dollar, which is used in roughly 80% of transactions. The government plans to phase out the US dollar as legal tender by 2030.
READ MOREGold and Bitcoin Surge: Signals Time for a New Gold Standard?
In a month marked by remarkable surges in both Bitcoin and gold prices, speculation is growing about the sustainability of high interest rates in heavily indebted Western economies. These assets, usually favored by distinctly different investor groups, have seen simultaneous rallies, driven by soaring inflation and market volatility. Kathleen Brooks, Research Director at XTB, points out the significance of these parallel trends: "When gold and Bitcoin rise together, it prompts a deeper analysis of investor behavior. Both are capitalizing on the current market sentiment, as evidenced by record highs in major U.S., Japanese, and European stock indices." This alignment raises questions about the broader economic implications, including the feasibility of returning to a gold standard in a world moving away from dollar dominance.
READ MOREIn Response to a Steady Fed, Southeast Asia Adjusts Rates to Safeguard Currencies
As 2024 unfolds, the anticipation that the U.S. Federal Reserve might reduce interest rates has waned. Initially, the consensus was that a rate cut was imminent; however, four months into the year, the Fed's updated stance suggests no rush to lower rates, supported by a stronger-than-expected U.S. economy and persistent inflation. This cautious approach by the Fed is not just a concern for analysts and investors. Central bankers globally, particularly in Southeast Asia, are scrutinizing the Fed's moves closely. Their decisions on whether to adjust interest rates hinge significantly on the Fed's actions to avoid adverse impacts on their own currencies.
READ MOREU.S. GDP Growth Stumbles to 1.6% in Q1, Missing Economic Forecasts
The U.S. economy started the year on a weaker note than anticipated, with the GDP growth rate decelerating to 1.6% in the first quarter, as reported by the Commerce Department. This figure significantly undershot the 2.4% growth economists had projected based on surveys by Dow Jones. The Gross Domestic Product (GDP), which gauges the total output of goods and services, showed a marked slowdown from the 3.4% increase in the final quarter of 2023 and the 4.9% rise in the quarter before that. While consumer spending did grow by 2.5%, it was less robust compared to the 3.3% increase in the previous quarter and also fell short of the 3% expected by Wall Street analysts.
READ MOREDollar's Decline Fuels Gold's Advance; All Eyes on U.S. Economic Data
Gold prices experienced a notable increase on Thursday, primarily driven by a declining U.S. dollar. Investors are now closely monitoring upcoming U.S. economic data, which could provide significant insights into the Federal Reserve's future interest rate decisions. As of midday in London, spot gold climbed 0.6% to reach $2,328.61 per ounce. Meanwhile, U.S. gold futures saw a modest rise of 0.1%, settling at $2,341.00 per ounce.
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READ MORETurkish Investors Turn to Gold as Safe Haven
In response to escalating Middle East tensions, Turkish investors like Faruk Mutlu are increasingly turning to gold as a safe investment. At a bustling jewelry store in Istanbul, Mutlu exchanged his savings for gold, citing its enduring value. The recent geopolitical instability, particularly the conflict between Israel and Iran, has fueled speculation about rising gold prices, spurring a rush to buy. This surge in demand is evident in Istanbul’s Kuyumcukent, the heart of Türkiye’s jewelry industry, where long lines at gold shops have become a common sight. Riza Gokay Tugsavrol, owner of Harem Gold, notes that in times of uncertainty, gold’s reputation as a secure asset makes it even more appealing to investors.
READ MORESteps Toward De-Dollarization in Zimbabwe
Vice President Constantino Chiwenga stated that Zimbabwe’s new currency, the ZiG, marks a significant move toward phasing out the US dollar in the national economy. Introduced on April 5 as a replacement for the unstable Zimbabwean dollar, the ZiG aims to restore monetary sovereignty in a country where over 80% of transactions are currently conducted in US dollars. Chiwenga emphasized the permanence of the ZiG, highlighting its role in Zimbabwe’s de-dollarization strategy, which focuses on fiscal discipline, monetary prudence, and economic revitalization.
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