The Russians are dumping US Treasuries and buying gold.
As we reported earlier this week, the three largest holders of US Treasuries are not in a buying mood. In fact, they’re selling. The Japanese disposed of $12.3 billion in US debt. Meanwhile, Chinese Treasury holdings fell by $5.8 billion. The Federal Reserve has shed about $70 billion in US bonds since launching its tightening program last fall. So far, individual and institutional investors have picked up the slack.
Lost in the latest data about Treasury holdings was the fact that Russia dumped nearly half of its US debt in April. But even as it divests itself from US bonds, Russia’s total reserves have grown as the country adds to its gold holdings.
What do you do if one of your biggest trading partners is embroiled in a trade war and the other faces economic sanctions?
That’s exactly what Kyrgyzstan’s central bank is doing.
Humans are by nature somewhat myopic. We tend to focus primarily on what is right in front of us and filter out things further removed. As a result, we can sometimes overlook important factors.
As Americans, we generally devote most of our attention on American policy. We follow political maneuverings in Washington D.C., study the Fed’s most recent pronouncements and track the US stock markets. But we also need to remember there is a whole wide world out there that can have a major impact on the larger economy and our investment portfolio.
One factor that could potentially rock the world economy that a lot of American may not be aware of is the mess in the European banking system.
Analysts say demand for gold in India will likely rise in the second half of the year thanks to a good monsoon season. Increasing demand for gold in the world’s second-largest market could help boost overall global demand for the yellow metal.
According to NDTV, monsoon rains hit Kerela at the end of May. This was a few days earlier than usual and bolstered an optimistic outlook for agricultural and economic output.
The Japanese and Chinese aren’t buying US Treasuries. In fact, both countries reduced their holdings in April.
According to the US Treasury Department, the Japanese disposed of $12.3 billion in US debt. Meanwhile, Chinese Treasury holdings fell by $5.8 billion.
This could be a troubling development for the US government as it scrambles to fund its massive deficits and ever-growing debt.
At this point, the European Central Bank isn’t nearly as keen on raising interest rates as the Federal Reserve. The ECB announced Thursday it would likely hold its interest rate steady at zero through the summer of 2019.
“We decided to keep the key ECB interest rates unchanged and we expect them to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary,” ECB President Mario Draghi said during a press conference.
As Peter Schiff pointed out in his most recent podcast, nobody expected the dovishness of the ECB and it roiled the markets. But ultimately, he thinks the Europeans will try to fight the wave of inflation that is about to engulf the planet. Meanwhile, the Fed probably won’t.
Jerome Powell is like a kid playing with matches and he’s dangerously close to starting a fire he isn’t going to be able to control.
The Federal Reserve nudged interest rates up again last week. It was the seventh hike since the Fed launched the current tightening cycle in December 2015. The Fed Funds Rate (FFR) currently sits at around 2%. Although this remains historically low, it may already be near the cycle peak. That means we may be close to a major economic downturn, as indicated by analysis by GoldMoney’s Alasdair MacLeod recently published at the Mises Wire.
If you saw the headlines about the latest retail sales figures, you probably noticed adjectives like “hot,” “booming” and “sizzling.” Total retail sales including food services were up 5.9% year-on-year in May.
That’s an impressive number until you factor in inflation. In fact, a decline in the dollar’s purchasing power accounted for nearly half the gains in retail sales.
As expected, the Federal Reserve nudged rates up another .25 basis points on Wednesday. Perhaps more significantly, the Fed took a more hawkish tone than expected, signaling it would likely increase rates two more times this year for a total of four hikes. The central bank had been projecting three 2018 rate increases.
A buildup in inflation pressures was a major reason for the Fed’s more hawkish tone. According to the latest data released by the Bureau of Labor and Statistics, the Consumer Price Index (CPI) jumped by 2.8% year-over-year in May. The central bankers projected inflation will likely run above their 2% target into the near future. Analysts expect the CPI to hit 2.1% this year and run at that level through 2020.
In his latest podcast, Peter Schiff said higher inflation might be a victory for the Federal Reserve, but it will be a big loss for consumers. In fact, we are heading for a no-growth, high-inflation economy.
The Chinese gold jewelry market reversed three years of declines in 2017, marking its first gain since a 2013 boom. According to a report released by the World Gold Council, the modest increase in gold jewelry demand last year could mark a return to sustained growth thanks to continued efforts to reinvigorate the industry through innovation, along with growing Chinese incomes.
The Chinese jewelry market is an important component in the overall global demand for gold. Jewelry accounts for more than half the yearly gold demand, and the Chinese make up about 30% of the gold jewelry market.
