This week, Your News to Know rounds up the latest top stories involving precious metals and the overall economy. Stories include: Gold hits $2,424 on speculations of a rate cut, shifting our understanding of the gold market, and Africa’s turn to gold is sending us signals.
But first, I feel moved to say something about the assassination attempt on Donald Trump. This is part of a pattern – there have been 14 fatal politically-motivated attacks over the last three and a half years alone. This is a powder-keg situation.
I hope this is another “stress test” that will ultimately prove the resilience of our nation, our institutions and our laws. I fear it’s an indication of just how severe the polarization in American society has grown. I worry we’re on the brink of the “Great Conflict” Ray Dalio described. As always, let’s hope (and pray) for the best while preparing for the worst.
Gold returns to $2,424, despite Powell’s non-committal stance on rate cuts
In a week, gold gained more than $70 and came just short of reaching its all-time high of $2,450, set in May. The official reason is the latest inflation reading, which showed the first signs of easing since 2020.
[ZH: Gold hit a new record high shortly after this note was penned…]
You might expect some kind of big story propelling this kind of price action, but in reality, it’s the same inching upwards that we’ve seen for the last few years. Especially since the start of 2024.
In his latest speech, Federal Reserve Chair Jerome Powell again gave mixed signals that were interpreted as dovish, but can go either way.As we have pointed out over and over, gold appears exceptionally sensitive to the upside, with the smallest tailwind seemingly sending it towards a new ATH on any given week.
Robert Minter, abrdn’s Director of Strategy, told Kitco that inflation is only one half of this run, the other being deep-rooted economic weakness:
There is a strong case for a September rate cut. If you look at how high consumer debt is, it’s not going to take much labor market stress to cause real problems in the economy. I don’t think we are going to see a recession, but that all depends on the Fed. They are a little late, but not fatally late, to do something.
For all the supposedly positive bits of economic data we’ve seen, it does feel increasingly nuts to be an economic optimist. We have supposedly avoided a Volcker-era recession, but have we really? Or is the media downplaying how bad things are on the ground? And for that matter, are we living on borrowed time? Could the brutal recession begin after the Fed begins lowering interest rates?
That’s generally what happens, as Ryan McMaken warns us – the reason a “soft landing” is so elusive is because it’s impossible:
But there are two problems with this [soft landing] narrative: The first is that the Fed has never actually managed to pull this off—at least not at any time in the last 45 years. In actual experience, this is what happens: the Fed denies there is a recession approaching well until after the recession has begun. Then, the Fed cuts interest rates after unemployment has already begun to march upward.
The markets definitely believe that there is a strong case for a rate cut, with the CME FedWatch Tool reflecting a greater-than-90% probability. Carsten Fritsch, Commodity Analyst at Commerzbank, says that the markets have already priced a September rate cut and even one more before the end of the year.
Because of this, Fritsch says gold has all that’s needed to test, recapture, and possibly surpass its all-time high this week. And all of this is still in the near-term.
As we move towards the end of the year, gold will leave its weakest quarter and move into an election cycle that’s looking chaotic even by the standards of the last twenty years.
Read more: Zerohedge
