The spike was short-lived, as gold subsequently dropped back down to $2,030 per ounce — just below its previous peaks in August of 2020, March of 2022, and May of this year. Gold’s breakout warrants investors’ attention. As always, gold’s performance is telling a story about the global financial system that might otherwise remain invisible. Why is Gold Rising? The primary technical drivers of gold certainly played a role in this rally. Treasury yields have declined in recent months as markets factor in possible interest rate cuts in 2024. This week, the 10-Year Treasury yield slid down to 4 ..read more

Gold prices have surged over 10% in the last three weeks, primarily due to two factors: Israel-Gaza conflict — the war in the Middle East has investors reaching for gold’s promise to provide a reliable hedge against geopolitical instability. Treasury troubles — the US debt problem and subsequent outsized interest payments are raising questions about the security of the US monetary system. Middle East conflict puts energy markets on edge The current conflict in Israel has the potential to be multidimensional, multinational, and lengthy, especially considering Iran’s involvement. As we sa ..read more

Corporate delinquencies on the rise With pandemic loans and low interest rates now behind us, companies now find themselves straining beneath their accumulated debt burdens. “Default” means that a company has missed its interest or principal payments because of bankruptcy or a renegotiation of its debt obligations with creditors. According to S&P Global data, the United States has experienced 69 corporate debt defaults so far this year — a 176% increase from the 25 tracked in 2022. Among the largest include: Yellow: The bankruptcy of the 99-year-old trucking company has led to 30,000 layo ..read more

Markets at a Crossroads Inflation has fallen from its peak, but remains stubbornly high. The question for gold investors is: will real yields (nominal yields minus inflation) start to stagnate or fall, or will the Fed’s tightening push them higher still? The market is forecasting that real yields will soon begin to stall out or even drop. Such a shift would be welcome news for gold, as historically, the metal has thrived when real yields are falling. However, the Fed has indicated that more rate hikes are required to win the battle against inflation. Federal Reserve Chair Jerome Powell has mai ..read more

Gold and Silver Performance Gold has followed a strangely linear decline over the last month, but has finally broken out of its narrow channel to the upside. Traders are taking advantage of lower prices. A slightly weaker US dollar is also boosting the price. Silver is also seeing some solid gains, though it has not yet reached last month’s peak. Real Yields vs. Gold We thought it would be wise to revisit gold’s primary technical price driver: real yields. Real yields are interest rates minus inflation. For example, if you have a bond that pays 5% per year but inflation is 4%, your real yiel ..read more

The US dollar has been rising since mid-July. Gold has given up about half of its gains from earlier in the year, but it is still up 5.5% in 2023. Silver is currently headed for the floor of its trading channel. The gold/silver ratio rose sharply to 84.45, providing a strong opportunity for silver. US Gets a Downgrade Fitch, one of the nation’s leading credit rating agencies, downgraded the United States’ credit rating from ‘AAA’ to ‘AA+.’ The company cited “steady deterioration” of the nation’s fiscal and monetary situation over the last two decades, citing concerns about how the US will e ..read more

The sun is shining and happier days are here again in banking… maybe. After the banking crisis this spring, earnings look surprisingly strong in the banking sector. JPMorgan Chase reported net income growth of 67% over the last year, while Wells Fargo had a 57% net income growth over the previous year. Bank of America reported a 19% rise in earnings, outpacing Wall Street’s expectation. Meanwhile, the inflation rate fell to 2.97% in June, down from 4.05% reported in May. And stocks are rising on all the good news. Weakness in the US dollar has been advantageous for gold prices, which have su ..read more

What Recession? Markets Party Like It’s 1929. With all the bearish signals throughout this year and last, it would seem that the recession is nigh. And yet, stocks continue to rally. Last Friday, the S&P 500 closed up for the fifth week. Since March, stocks have been on a parabolic rise — as seen in this chart: A recent article in Barrons reported the beginning of a new bull market, noting that stocks look forward and “the S&P 500 already suffered through a bear market in 2022.” But there’s no denying the dangerous signals in the market. The regional banking crisis saw the closure of ..read more

Gold vs. the Dollar After hitting an all-time high earlier this month, gold is finally feeling some pressure. The dollar index (which tracks the strength of the US dollar against other leading fiat currencies) is ticking up for the first time since February. The dollar and gold tend to move in opposite directions. Their inverse correlation can be attributed to a combination of factors: Gold competes with the dollar as a safe-haven asset. When investors are concerned about the stability of other investments, they tend to flock to either gold or cash. For much of US history, the dollar and gol ..read more

Gold Sets a New Record Gold hit $2,081.82 per ounce in the futures market, briefly surpassing the previous high of $2,075.14. The price in the physical market has not yet surpassed the record set in August 2020, but we are likely very close. The new record came shortly after the collapse of First Republic Bank, the second-largest bank failure in U.S. history. First Republic joined the graveyard alongside Silicon Valley Bank and Signature Bank, all of which were considered premier banking institutions just a couple of years ago. Banking Crisis Continues Last Friday, the Federal Reserve reporte ..read more