As rate hike fears drove heavy selling on Wall Street this week, precious metals investors are finding some silver lining amid the storm clouds. Worse than expected inflation data has put a 75 basis-point rate increase firmly back on the table. Futures markets are now pricing in the possibility that the Federal Reserve will move by a full percentage point, though a three-quarters of a percent move is currently viewed as more likely. Earlier in the month, investors had hoped that weakening economic data would cause central bankers to pivot away from their historically large interest rate hikes. But Tuesday’s Consumer Price Index report showed inflation is still raging. The CPI came in at an annualized rate of 8.3%.  Despite a drop in gas prices and weakness in most industrial commodities, retail costs for consumers continue to climb. Especially worrisome is persistently rising food costs.  Food prices have surged 11.4% over the past year, marking the biggest annual increase since 1979. A sub-index that measures price changes at the grocery store jumped by a whopping 13.5%. Meanwhile, according to the Bureau of Labor Statistics, the average American worker is seeing only a 5.2% annualized bump in earnings. The purchasing power of wages, savings, and investments is getting clobbered at a staggering rate.  Unfortunately, none of the major asset classes have provided investors with a safe haven from the corrosive forces of inflation. Stocks, bonds, and yes, even precious metals are being dragged down.  Volatility is inevitable in metals markets. Riding out downswings is the price investors must pay to enjoy the upswings that follow.  What investors must never risk is losing their actual, physical stake. Secure storage of your bullion is as important as the decision to obtain it in the first place. Money Metals Depository offers maximum security for physical precious metals owners. All bullion holdings are fully segregated and never commingled or rehypothecated.  And they are fully insured by Lloyd's of London. The most convenient and cost-effective way to buy and store precious metals is to purchase them from Money Metals Exchange and have them delivered directly to the Depository.  Of course, all the products we sell are guaranteed for weight, purity, and authenticity. Money Metals now ships about 40,000 gold and silver orders across America each month, with thousands of other investors choosing to securely store their precious metals in individually segregated accounts at Money Metals Depository. Due to our steadily growing customer base on the way to becoming an industry leader, we have outgrown our existing facility.   This week, Money Metals Exchange announced it is breaking ground on a new 40,000 square foot vaulting and fulfillment facility in Idaho. The $21 million facility will be the largest private depository of its kind in the Western United States.  The convenience and security of storage, including the seamless process Money Metals customers experience when buying and selling metal, has been the main catalyst for the new, dramatically larger facility. With completion scheduled for late 2023, the ultra-secure, state-of-the-art facility will be erected on a 3.2-acre lot adjacent to emergency services near the heart of Eagle, Idaho. The demand for secure storage of physical gold and silver from our very large, nationwide customer base has increasingly filled up our depository vaults.  We frankly don't anticipate a reversal in the destructive trend in the U.S. (and the world at large) toward bigger government along with more debt, attacks on Americans' freedoms and privacy, currency debasement, stock market volatility, and geopolitical political conflict.   We expect more and more Americans to wake up and take prudent steps to protect themselves and their families -- and that includes diversifying into gold and silver. Only about 1% of Americans today own gold and silver bullion as an investment or financial hedge, a number that's poised to rise dramatically in the coming years. That’s why Money Metals is confident in making this major long-term investment. Precious metals holders also tend to be long-term oriented and aren’t going to let go of their core holdings to chase some new investment fad.  Gold and silver markets may test investors patience and even trigger their nerves at times. But like no other form of money, precious metals have stood the test of time.

USD/JPY hovers under 24-year high The Japanese yen steadies as the government signals a market intervention. A rapid rise in interest rates across the globe has cut investors’ appetite for Japanese assets. Japanese officials have expressed their concerns over the currency's steep decline lately. The Finance Minister remarked that options are open to stop the yen’s bleeding as imported inflation may dampen consumer and business sentiment. A recent rate check with dealers by the BoJ shows that policymakers are closely watching the market, fueling speculations of a potential intervention. The pair is closing in on the 24-year high at 147.50. 138.00 is a fresh support. GBP/USD slides on stagflation worries The pound weakens over the rising cost of debt. Markets are expecting the Bank of England to raise its interest rate by at least 50bps. The latest data showed consumer prices slowed down for the first time in a year. This may lead the central bank to double down on tightening to stifle inflation. However, even if the BoE joins the 75 basis point club, the currency may find little relief as the fear of stagflation gains ground. Debt burdens from the UK government’s energy support package could weigh on investors’ demand for Sterling-denominated assets. The pair has been capped by 1.1700 and is heading towards 1.1100. XAU/USD struggles over robust US dollar Gold loses its shine as it feels the weight of a firm US dollar. Following hotter-than-expected US inflation traders may reckon that the Federal Reserve would carry on with its shock therapy to bring prices under control. Talks of a 100-basis-point have made their way back among market participants, sending the dollar index back to its two-decade peak. Amid a fast-paced rise in Treasury yields, the appeal of the non-yielding metal would continue to diminish. A hawkish FOMC this week would confirm the recent rally as a dead cat bounce. Bullion has entered bearish territory below 1680. 1580 is next with 1730 as the first resistance. US 500 slips over economic headwinds The S&P 500 reverses its course as investors brace for a super-sized US rate hike. The market must have realised that recent inflation and retail data gave the Fed no reason to hit the brakes on the tightening. There is little good news to soothe the jittery mood either. Warnings about a global slowdown from both the World Bank and the International Monetary Fund may continue to push investors away from risk assets. Meanwhile, contraction in China’s property sector, which accounts for a quarter of the country's GDP, fans fears of a protracted downturn. The index is drifting to June’s low at 3650 and 4120 is a fresh resistance.

Gold is breaking below 1700 this week, as US yields rise on hawkish FED expectations that will have to be very aggressive to bring down the inflation. We know that USD is on the rise and as long that’s the case, gold may not find the buyers that easily. However, I assume that COT data will now shows us even more heavy shorts by large speculators after recent breakdown, but data may show similar extreme numbers like back in 2013/2014, late 2016 and 2018.   So the question can gold stabilize? We will have to wait and see, but with Elliott waves approach we will try to determine if gold is about to turn, or will it continue lower. If you are interested, make sure to track wave counts with us. Have a nice weekend.  Get Full Access To Our Premium Analysis For 14 Days. Click here!

Europe Having seen a weak lead from Asia markets, European markets have seen another negative session, dragged lower by further weakness in the US, whose losses have been driven by the surprise decision by FedEx to bring forward their Q1 earnings numbers from next week. The company cited a warning over a significant business slowdown, missing on revenues and profits and pulling their guidance for the whole year, prompting investors to take fright that this could be the proverbial “canary in the coalmine” for a raft of downgrades, when US earnings gets underway at the beginning of October. These increasing concerns over a global recession, as well as rising US yields are prompting a flight into the US dollar and not much else, with the DAX set to post its lowest weekly close since November 2020. The FTSE100 has also come under pressure, although the rise in yields this week has helped the likes of Lloyds Banking Group and NatWest Group outperform, although that’s not been enough to stop the UK benchmark from closing at a one week low. Risk sentiment here wasn’t helped by UK retail sales falling off a cliff in August, declining by -1.6% sending the pound to its lowest levels against the US dollar since 1985. Retailers have also slipped back as a result of those retail sales numbers, with the likes of B&M European Retail, Frasers Group, JD Sports and other consumer discretionary taking a hit. The FedEx effect has clobbered the price of Royal Mail, sending the shares to their lowest levels in two years, and opening the trapdoor in a sector that is bellwether for the wider global economy. It’s doubly bad news for Royal Mail given its own inefficient working practices, as well as the threat of further strikes, the last thing the sector needed was a profits warning from one of the sector leaders when it comes to logistics. With Royal Mail already losing £1m a day the road back is likely to be a long and arduous one. On a more positive note, AstraZeneca shares are performing well after getting approval from the EU for its Evusheld drug for treating Covid-19, while Nirsevimab has been recommended for approval and is used for the treatment of respiratory tract infection in babies and young infants. US US markets have opened sharply lower, and on course for their worst week since June, with the narrative now shifting to what could be coming down the pipe with respect to earnings downgrades, after yesterday’s unexpected decision by FedEx to bring forward the publication of its latest quarterly numbers from next week and issuing a profits warning. Companies like FedEx, which have huge logistics operations are generally considered a decent bellwether of the global and domestic economy, as the flow of goods and services acts as a good measure of global supply and demand. Having only raised its full year profits guidance in June insisting that it could manage the increase in operating costs by raising prices, yesterday’s decision to pull it, along with big misses on revenue and profits has seen the shares plunge, with the company blaming a slowdown across all of its businesses. Q1 revenues came in at $23.2bn, below expectations, with the company saying it expects Q2 revenues to come in 4% lower at $23.75bn. Profits for Q1 also came in below expectations of $5.14c a share, at $3.44c. Yesterday’s downgrade has in turn prompted a number of analyst downgrades, with falls in the likes of UPS and Amazon as well. Uber shares are lower after a hacker claimed to have penetrated a number of the company’s key databases. FX With the UK currently in a period of mourning, the pound’s performance this week appears to be matching the national mood, sliding to a fresh 37 year low against the US dollar, and an 18-month low against the euro. This morning’s sharp decline in August retail sales of -1.6% speaks to an economy that is probably already in recession, having already seen a -0.1% GDP contraction in Q2, and likely to see a similarly weak performance across Q3. While the pound has had a disappointing week it hasn’t come close to being the worst performer, that honour goes to the Norwegian Krone, with the falls in oil and gas prices weighing on that. Commodities Oil prices are seeing a modest rebound as we close out the week, however they have struggled to rally meaningfully against a backdrop of a weakening demand outlook. More interestingly Brent crude prices having slipped below the 200-week SMA are showing little sign of moving back above it, suggesting the potential for further declines. The rise in US yields and global yields more broadly is continuing to exert more downward pressure on gold prices which hit 2-year lows...

In today's live stream, David said he was taught, "The white stuff leads." Although there have been false starts he believes the physical market and backwardation make this different.

We are so far only in a technical recession, but the true recession is coming, or it has already begun. It should be positive for gold prices. After the real GDP declined in the first two quarters of this year, many commentators declared that the economy had fallen into a recession. Such calls are met with a fierce denial from the government’s officials. Both President Joe Biden and Treasury Secretary Janet Yellen insisted that the economy is not in a recession but in a “state of transition”. Recession or Transition? Who is right? Well, in a sense, both sides are right – and both are wrong. Why? Two consecutive quarters of negative economic growth constitute only the so-called technical recession. Which is the popular definition of recession used widely by the financial press and those analysts who don’t want to wait several months for the final verdict of the National Bureau of Economic Research (NBER), the official arbiter of recessions in the U.S. Also, not all people like the idea that recessions are decided by a small committee of Ph.D. economists. However, what’s the official NBER definition of recession? It is “the period between a peak of economic activity and its subsequent trough, or lowest point” and “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.” Although most of the recessions identified by the NBER do consist of two or more consecutive quarters of declining real GDP, not all of them do. This is because what also matters is the depth of the decline, and economic activity is not identified solely with real GDP, but with a range of indicators: Because a recession must influence the economy broadly and not be confined to one sector, the committee emphasizes economy-wide measures of economic activity. The determination of the months of peaks and troughs is based on a range of monthly measures of aggregate real economic activity published by the federal statistical agencies. These include real personal income less transfers, nonfarm payroll employment, employment as measured by the household survey, real personal consumption expenditures, wholesale-retail sales adjusted for price changes, and industrial production. There is no fixed rule about what measures contribute information to the process or how they are weighted in our decisions. There is no fixed rule! So, basically, dating the peaks and troughs of the business cycles by the NBER resembles deciding which pictures are pornographic by the Supreme Court. “I know it when I see it,” as Justice Potter Stewart famously said. Anyway, the key question is whether the U.S. economy is experiencing a significant and broad-based weakening. Not yet. As the chart below shows, the decline in the real GDP wasn’t too deep, at least so far. I mean here that the GDP dropped 0.4% in Q1 and 0.23% in Q2 (quarter-to-quarter), which is significantly less than in past recessions. However, I wouldn’t be surprised if the GDP declined in the third quarter as well. What’s more, other indicators, such as real personal income, real personal consumption expenditures, or industrial production, don’t call for a recession either. However, they show weakness, while some other indicators are flashing red. The yield curve has inverted, the manufacturing PMI is slowing down, and home sales are plunging. The recession may not be there yet, but it’s coming! We may be unprepared, but at least we have memes! Another issue is that the pundits say that we shouldn’t fear recession because the labor market remains strong. However, given that employment never fully recovered from the pandemic, the GDP may decline with relatively strong nonfarm payroll numbers. It’s also worth being aware that the labor market may be in worse conditions than it’s commonly believed. After all, according to the household survey (instead of the establishment survey), the U.S. economy lost 168,000 jobs since March 2022 (see the red line in the chart below). Additionally, according to PwC’s survey, half of more than 700 US executives and board members said they are reducing headcount or plan to, and 52% have implemented hiring freezes. So, layoffs are becoming more widespread, which is pretty odd for a “strong” labor market. Will It Be Beneficial for Gold? The general problem with both the popular and NBER’s definitions of recession is that they merely describe the various manifestations of recession instead of explaining its essence. So, what is it? According to Frank Shostak, a recession is a period of liquidation of economic activities that came into being because of the credit expansion and loose monetary policy of the central bank. In other words, just like a hangover is an unpleasant but necessary readjustment process after a previous alcoholic binge, a recession is an unpleasant but inevitable readjustment period after previous distortions of the economic structure...