- ‘Uncertainty’ mentions by executives are higher than in 2020
- ‘Nobody knows what actually is going to happen’: Snap-On’s CEO
Company executives can’t stop talking about the US election.
Earnings calls in recent weeks have been filled with talk of uncertainty about the aftermath of Tuesday’s election, which has delayed spending as potential policy changes loom large.
And things are more intense in this presidential election cycle. Mentions of “election” near the word “uncertainty” on S&P 500 companies’ quarterly earnings calls this year are markedly higher than they were before the 2020 election.
C-Suite Election Worries Grow in 2024
Mention of “election” near the word “uncertainty” in S&P 500 companies’ earnings calls each quarter
“Welcome to the Mad Hatter’s tea party,” Nicholas Pinchuk, tool maker Snap-On Inc.’s chief executive officer, said on the company’s Oct. 17 third-quarter earnings call. “Nobody knows what actually is going to happen, so you can’t even make a pronouncement.”
Much of the C-suite angst is over the risk of additional tariffs, particularly if Republican Donald Trump wins another term. Business leaders say new fees on imported goods could increase costs up and down the supply chain, and force some companies to rethink manufacturing and sourcing. Democratic candidate Kamala Harris’ support for higher corporate tax rates is also a source of concern.
It’s not just companies hitting the pause button until voters decide which party will control the White House and Congress.
A recent survey by research firm Circana found that 16% of US consumers said they would wait until after the election to start their holiday shopping, and 17% said they would spend more or less depending on who won.
Etsy Inc. CEO Josh Silverman said last week that the nonstop political noise is “an incredibly distracting mind-share event.”
House builder D.R. Horton Inc. said it wasn’t just higher interest rates holding back potential home purchasers. “The volatility of rates combined with general uncertainty during the election season is causing some buyers to stay on the sidelines in the near term,” CEO Paul Romanowski told analysts.
Car parts retailer O’Reilly Automotive Inc., mattress-maker Sleep Number Corp. and indoor-cycling specialist Peloton Interactive Inc. also cautioned about election-related sales sluggishness on their latest analyst calls.
Fewer people are traveling around the election, impacting airlines and hotel chains. Park Hotels and Resorts Inc., expects bookings to be down about 13% on election week and another 11% the following week as people stay close to home.
Bombarded by Campaign Ads
Companies are also finding it harder to get their messages across through the relentless campaign advertising.
“Media is more expensive,” Jim McCann, CEO of 1-800-Flowers.com, said on his company’s latest call. “The election does have a big, big impact on what we pay for things both digitally and in traditional media.”
The US political future also weighed on the minds of analysts monitoring earnings calls.
Chris McNally of Evercore asked on the General Motors Co.’s call about future electric vehicle losses, adding: “It’s sort of my way of asking the election question without asking the election question.”
CEO Mary Barra answered that later by saying GM — which has invested billions of dollars in EVs favored by one candidate and loathed by the other — is prepared to deal with any eventuality.
At least one chief executive is brimming with confidence no matter what the outcome.
“Both presidential candidates are now courting the crypto voter,” digital exchange Coinbase Global Inc. CEO Brian Armstrong said on his company’s third-quarter earnings call. “No matter what happens in this election, it’s going to be the most pro-crypto Congress ever.”
Read the full article HERE.
Higher interest rates mean that the next president, whoever it is, will find it much harder to reduce taxes and increase spending.
For all the bold talk of tariffs and price controls, the economic legacy of the next president will mostly depend on something far more mundane: the tax code — specifically, the 2017 Tax Cut and Jobs Act, much of which will expire next year. Whoever is in the White House, working with whichever party controls Congress, will need to decide whether to extend it, change it or let it expire.
Given that Donald Trump favors extending all of it, and Kamala Harris most of it, odds are that the TCJA will survive and most voters will keep their lower tax rates. If so, it may well be the last gasp of the free-lunch era — the delusion the US can cut taxes, increase spending, and never pay the consequences.
But America’s fiscal reality is catching up with its political reality. By the end of the next president’s tenure, if not sooner, politicians will have to start dealing with budget constraints again.
Ever since George H.W. Bush’s presidency, increasing taxes on anyone but the richest Americans has been unthinkable. This may explain why taxes rates have fallen for most Americans over the last several decades, even as the size of government has increased.
This also helps explain why it is so unlikely that either candidate will allow the TCJA to expire. Harris has promised to not increase taxes on anyone who earns less than $400,000, which suggests she will keep all the provisions from the law that apply those earners, who make up about 98% of the working population. Trump plans to make all the provisions of TCJA permanent. Both candidates are also promising tax cuts beyond those in that law, proposing to expand the earned income tax credit and the child tax credit (Harris), eliminate taxes on overtime or Social Security benefits (Trump), or end taxes on tips (both Harris and Trump).
On the spending side, Harris wants to add a new entitlement by having Medicare offer long-term care. She would increase some taxes for high earners as well as the corporate tax rate, and perhaps tax higher earners’ wealth, too.
Overall, Harris’ plan is considered more fiscally responsible — because it increases the primary deficit by only $2 trillion. Trump’s would increase it by $4.1 trillion.
These are both silly numbers, and the fact that the Harris number is less silly should not give voters or bond markets much comfort. Both parties suffer from their own delusions: Republicans that tax cuts and higher tariffs pay for themselves, Democrats that government growth can be funded entirely by higher taxes on rich people.
The question is how long markets will continue to indulge these fantasies. The inflation of the early 2020s, which was caused in part by excess stimulus spending, was a reminder of how reality can intrude. Another reminder may come in the form of rising term premiums as the election nears. Interest rates may fall a bit after the election, but historically speaking, big debt tends to increase rates.
Of course, some people argue that this time is different — but really, it’s the last 20 years that were different. Washington was able to keep spending because investors and foreign governments bought US debt no matter how expensive it got. That may be changing. Foreign appetite for Treasuries is waning both because of other nations face their own economic challenges, and because less trade overall means less need for US Treasuries. Now buyers tend to be investors seeking higher-yielding assets, which suggests that the government may not be able to count on selling its debt and offering such low rates for much longer.
It is possible that faster growth will pay for the debt. But that is a big gamble, especially in a less global and higher-rate environment. Another constraint on policy will be higher inflation, which is more likely with an older population and a more protectionist trade regime. The latest bout of inflation may also have made expectations less stable, pushing up term premiums. On the upside, higher inflation will erode the debt, but at what political cost? Recent history suggests it will be great.
A near zero-rate environment propped up the delusion that profligate fiscal policy was virtually cost-free to taxpayers and politicians alike. In a higher-rate environment, that delusion is harder to sustain. The CBO projects interest payments will take up nearly 4% of GDP in the next 10 years, and eventually exceed 6%. That assumes the 10-year bond rate stays at about 4%. If rates go to 5% or 6%, debt becomes an even bigger burden on the budget. At that level, simply rolling it over pushes up rates and starts to crowd out private investment.
Next year’s debate about the Tax Cut and Jobs Act may be the last one in which each side competes to be more reckless. The US is entering a higher-rate environment, with spending increasing and unfunded entitlements coming due, and demand for debt is changing. Something has to give: Everyone will have to pay higher taxes, or the government will have to spend less.
My bet is on the former. Either way, it’s the end of an era. In fiscal and monetary policy, as in an increasing number of corporate cafeterias, there’s no such thing as a free lunch.
Read the full article HERE.
The US presidential election is approaching, and the race between Kamala Harris and Donald Trump remains tight. The election outcome will significantly impact the gold (XAU) market, with key economic and geopolitical factors in the balance. Gold trades at historic highs, peaking at $2,790 on October 31, 2024. This article presents the movements in gold prices during historical events and discusses how these events may impact the gold price outlook. The price remains strong due to the US election and geopolitical uncertainty, and there are no signs of reversal in the short-term direction.
Gold Safe-Haven Status During Political Uncertainty
Investors have recognized gold as a reliable and safe-haven asset during political uncertainty. Its status as a store of value becomes more pronounced when global events introduce instability. In the context of US elections, policy shifts, and international tensions, investors turn to gold to protect their wealth from the potential devaluation of currencies and market volatility. The upcoming US presidential election on November 5, 2024, features a closely contested race between Kamala Harris and Donald Trump. Investors expect policy changes and geopolitical strategies that could ripple through the financial markets.
Gold Price Movements During US Election
The impact of political uncertainty on gold prices has been evident throughout history. Each administration’s decisions play a crucial role, from trade wars and changes in foreign policy to debates over energy investment and tariffs.
These decisions can influence the market’s perception of risk. During the current election cycle, uncertainty emerges from both candidates’ platforms. Trump focuses on aggressive trade measures, while Harris emphasizes domestic economic support and international alliances. This has contributed to maintaining gold’s appeal. Gold will likely remain attractive if questions about future policies and global stability persist. Investors will continue seeking it to mitigate risks in an unpredictable political landscape.
The monthly gold chart illustrates the impact of US presidential elections over the past four decades. It also highlights the geopolitical events that have contributed to significant gold surges during this period. The chart shows that gold price movements have generally been positive. However, the emergence of these events has triggered intense volatility in the gold market.
Key Historical Events Shaping Gold Prices
The major historical events that have triggered the gold rallies are discussed below.
1980 – Soviet-Afghan War & High US Interest Rates
Cold war tensions escalated with the Soviet invasion of Afghanistan. This war created geopolitical uncertainty. At the same time, high interest rates in the US impacted gold demand, and prices surged.
1990 – Gulf War
Iraq’s invasion of Kuwait created instability in the Middle East. This instability resulted in a peak in oil prices and boosted gold demand due to rising geopolitical risks.
1997-1998 – Asian Financial Crisis
The Asian financial crisis started with the collapse of the Thai baht. This crisis destabilized Southeast Asian economies, increasing gold’s appeal as a safe-haven asset.
2001 – 9/11 Terrorist Attacks
The September 11 attacks led to a surge in safe-haven demand for gold as global markets reacted to heightened uncertainty. Gold prices bottomed and started to surge.
2003 – Iraq War
The US invasion of Iraq fuelled concerns over Middle Eastern stability, adding to gold’s safe-haven appeal during heightened geopolitical tensions.
2008 – Global Financial Crisis
Triggered by the collapse of Lehman Brothers, this period saw massive economic fallout, and gold surged as investors sought stability amid market turmoil.
2010 – European Debt Crisis
Sovereign debt concerns in Greece, Spain, and other Eurozone countries led to a spike in gold demand as a hedge against currency instability.
2016 – Brexit Vote
The UK’s decision to leave the European Union introduced economic uncertainty, driving demand for gold as a safe haven amid fears of financial instability.
2018-2019 – US-China Trade War
The increased tariffs and trade tensions created volatility in global markets, and gold prices rose as investors turned to safe-haven assets.
2020 – COVID-19 Pandemic
The pandemic led to global economic shutdowns, extensive fiscal stimulus, and market volatility, which propelled gold demand.
2022 – Russia-Ukraine Conflict
Russia’s invasion of Ukraine destabilized markets, triggering a rush to gold due to concerns over global stability and economic sanctions on Russia.
Gold Trends Under Different Presidencies and 2024 US Election Outlook
Harris and Trump present competing visions that could drive distinct economic and geopolitical scenarios. Harris emphasized economic support for first-time homebuyers, families, small businesses, investments in renewable energy and continued backing of domestic oil production. Her commitment to supporting US allies in the context of the Russia-Ukraine conflict adds another layer of potential geopolitical impact. On the other hand, Trump focuses on policing, immigration, and boosting tariffs on Chinese goods, along with pledging to end the Russia-Ukraine war through diplomatic measures. The platforms of both candidates are starkly different. Key areas of focus include trade relations, energy investments, and the strength of the US dollar.
The chart below shows the gold price patterns during Donald Trump’s and Joe Biden’s presidencies. Donald Trump’s announcement as president drove the gold price sharply upward, breaking above the key level of $1,350. An inverted head-and-shoulders pattern determined this level, completed after his announcement. The gold value reached a record level of $2,075 just before the 2020 election.
On the other hand, the gold price consolidated below the key level of $2,075 during Joe Biden’s presidency. The price broke above $2,075 and initiated the next surge higher during the last year of Biden’s term. The market is now approaching the same overbought region observed just before the previous presidential election, as indicated by the RSI on the monthly chart.
Major Drivers of Gold Prices During Donald Trump’s Presidency
During Donald Trump’s presidency (2017-2021), gold prices experienced significant volatility and sharp increases due to geopolitical and economic events. Uncertainty arose from his administration’s aggressive stance on international trade, particularly the U.S.-China trade war. Tariffs on Chinese goods and countermeasures sparked fears of a global economic slowdown. Investors turned to gold as a safe haven against potential inflation and currency devaluation. Trump’s “America First” policy raised geopolitical isolation concerns, further driving gold demand. His economic policies, including tax cuts and extensive government spending, fueled worries about a growing federal deficit and long-term inflation. The Federal Reserve responded with rate cuts to stabilize markets. The COVID-19 pandemic in 2020 intensified these trends, as large stimulus packages increased inflation fears and pushed gold prices higher as a store of value.
Major Drivers of Gold Prices During Joe Biden’s Presidency
Economic policies and global geopolitical factors influenced gold prices during Biden’s presidency. The administration implemented the large-scale fiscal stimulus of the $1.9 trillion American Rescue Plan to aid economic recovery from COVID-19. This increased money supply and inflation fears prompted investors to turn to gold as a hedge against currency devaluation. The Federal Reserve kept interest rates low during the early presidency years, making gold more attractive. The Russia-Ukraine conflict boosted demand for gold as a safe haven. Moreover, U.S.-China relations and debt ceiling debates added further uncertainty. The inflation reached multi-decade highs in 2022, sustaining gold’s appeal even as the Fed raised interest rates to control inflation.
Gold Market Levels Tied to Trump and Harris Policies
As the US election approaches, the gold price surges above a 44-year trendline on the quarterly log chart. The price closed Q3 2024 above this trendline, indicating a significant breakout. This breakout followed strong bullish patterns, including the cup formation, which was broken at the key level of $2,075.
Continuing the bullish trend after the strong quarterly close suggests that 2024 could be a strong year during the last months. Moreover, Q3 2024 was the biggest quarter in gold’s history regarding price gains in US dollars per ounce. The price may experience significant volatility as the election results approach, potentially pushing it back below this trendline or causing it to surge higher, depending on the election outcome.
The price has hit strong resistance on the weekly chart, defined by the trendline of the ascending channel pattern. Moreover, the RSI is extremely overbought, signalling a potential correction. The black dotted trendline runs parallel to the ascending channel, indicating the extension of this resistance on the weekly chart. The price range of $2,800 to $3,000 highlights the strong resistance on the weekly chart.
How Trump and Harris Policies Influence Gold Prices?
If Kamala Harris wins the election, gold prices may experience a decline in the weeks following the outcome. This decline can be validated by the strong long-term resistance observed on the weekly chart, including the market overbought conditions. Her presidency is anticipated to be less inflationary than Trump’s, reducing the urgency of investors using gold as an inflation hedge. Harris’s administration would also likely uphold economic stability similar to that of the Biden administration, which could reduce gold’s appeal as a safe-haven asset. Nevertheless, should gold prices dip initially, they are projected to rise again in 2025 if US interest-rate cuts continue, enhancing gold’s long-term attractiveness. Furthermore, strong resistance on the weekly chart suggests that gold may encounter resistance around the $2,800-$3,000 levels, potentially triggering a significant correction.
On the other hand, if Donald Trump wins the election, gold prices are expected to climb due to increased inflationary pressures and heightened uncertainty. In this case, the price can break the resistance and continue to rise in a parabolic fashion. Trump’s policies, such as higher tariffs and a more aggressive stance on trade, could lead to greater market unpredictability and inflation. These dynamics boost gold’s appeal as a safe haven. His economic plan includes removing subsidies for electric vehicles and altering vehicle emission standards, which could raise oil demand and fuel inflation. These factors and the geopolitical risks tied to Trump’s unpredictable foreign policy would make gold an attractive investment as a safe-haven asset and a hedge against rising prices.
Final Words
In conclusion, the US presidential election between Kamala Harris and Donald Trump introduces significant potential for shifts in the gold market. Each candidate’s policies are likely to drive unique economic and geopolitical scenarios. Harris’s presidency could initially lead to decreased gold prices due to expectations of reduced inflationary pressure and a more stable economic outlook. However, long-term price increases may follow if interest rates are cut.
On the other hand, a Trump presidency is expected to increase inflation and geopolitical uncertainty, making gold a more attractive safe-haven investment. Investors must consider these dynamics and prepare for heightened volatility, as the election outcome will shape gold’s trajectory in conjunction with other economic indicators and Federal Reserve actions.
From a technical perspective, the gold market is at the intersection of strong, key long-term resistance, where a Trump presidency could push prices higher in a parabolic fashion. However, the price may experience a significant correction before the next upward move. Moreover, geopolitical uncertainties from the Middle East keep gold elevated, serving as a primary driver for recent rallies. The strong resistance in the gold market is $2800 to $3,000, and the next move will depend on the election outcome.
Read the full article HERE.
Gold is forecast to climb higher than previously expected as central banks in emerging markets have ramped up purchases, according to Goldman Sachs Research.
Gold usually trades closely in line with interest rates. As an asset that doesn’t offer any yield, it typically becomes less attractive to investors when interest rates are higher, and it’s usually more desirable when rates fall. While that relationship still holds, central bank purchases have been a powerful force, resetting the level of gold prices higher since 2022, Goldman Sachs Research analyst Lina Thomas writes in her team’s report.
What is the prediction for gold prices for 2025?
The precious metal is predicted to rise to $3,000 per troy ounce by end-2025, Thomas writes. Gold has risen to multiple all-time highs this year.
Thomas points out that the relationship between changes in the gold prices and changes in interest rates still exists, but sizable central bank purchases of gold bars have reset the relationship between rate and price levels since 2022. Goldman Sachs Research estimates that 100 tonnes of physical demand lifts gold prices by at least 2.4%.
Why has the price of gold increased?
Concern about the risk of financial sanctions is likely one of the reasons central banks have increased their buying of gold. Emerging market central bank purchases of gold have risen notably since the freezing of Russian central bank assets in 2022, following Russia’s invasion of Ukraine, according to Goldman Sachs Research.
Thomas also points out that central banks in developed markets have tended to have relatively high holdings of gold as a share of reserves. For instance, the US, France, Germany, and Italy have gold holdings that make up 70% of their reserves. Their emerging market counterparts, by contrast, have smaller shares. China, for example, reports to have 5% of its reserves in the metal. Seen that way, some central banks in emerging markets are catching up to their counterparts in developed countries.
Policymakers also appear concerned about the debt sustainability of the US, which has about $35 trillion of borrowing, amounting to 124% of GDP. Many central banks have the bulk of their reserves in US Treasury bonds, and policymakers may be increasingly concerned about their exposure to fiscal risks in the US.
With the US presidential election in focus, Western investors are returning to the gold market, according to Goldman Sachs Research. Gold may offer hedging benefits against potential geopolitical shocks, including potential rises in trade tensions, Federal Reserve subordination risk, and debt fears.
ETF holdings of gold may climb
Many Western investors have been nervous about chasing gold prices higher, Thomas says. Some think they’ve missed the rally and are wary of buying gold at all-time highs. Some are also struggling to make sense of gold prices, which in 2022 began to diverge from their traditional relationship with interest rates.
That said, Goldman Sachs Research expects gold holdings in Western exchange-traded funds to gradually increase as interest rates fall, which would be in line with their historical relationship. Even as central bank buying of gold may be moderating, there could be some competition for gold bullion between central banks and Western investors as gold ETF holdings begin to climb.
“Long-term investors are now interested in holding gold because rates are lower,” Thomas says. “At the same time, central banks holdings are probably still going to pile up.”
Read the full article HERE.
Gold continues to benefit from safe-haven demand as it reaches another record high ahead of the U.S. election next week.
The spot price of gold has risen to $2,766.52 per ounce, breaking a previous high set last week. The price of gold has now climbed by a third so far this year. Research conducted by Goldman Sachs has said gold could reach the $2,900 mark in early 2025, with several analysts previously telling Newsweek the $3,000 milestone isn’t far off.
Gold is considered a safe-haven investment, particularly during times of international turmoil, such as Russia’s ongoing invasion of Ukraine, the Israel-Hamas war and political uncertainty, with the U.S. presidential election less than a week away. According to a report by Reuters, gold prices have surged more than 34 percent in 2024 so far.
“Gold is very much being anchored on the U.S. election outcome. In the near term, spot gold will face resistance at $2,800, then followed by $2,826,” Kelvin Wong, OANDA’s senior market analyst for Asia Pacific, told Reuters.
Democratic nominee, Vice President Kamala Harris, and Republican pick, former President Donald Trump, are entering the final stretch of their campaigns for the White House, with the election on November 5. Recent polls indicate a win could be narrow for either candidate, with several key swing states currently too close to call.
A spike in gold prices during a time of significant geopolitical unrest comes as no surprise, Michael Martin, vice president of market strategy at TradingBlock, told Newsweek.
“Ongoing conflicts, such as the war in Ukraine and tensions in the Middle East, have driven investors toward safe-haven assets like gold,” Martin said. “Global tensions have historically coincided with spikes in gold prices. For example, during the 1979 Soviet invasion of Afghanistan, gold more than doubled in value.”
“Concern about the risk of financial sanctions is likely one of the reasons central banks have increased their buying of gold,” Goldman Sachs reported. “Emerging market central bank purchases of gold have risen notably since the freezing of Russian central bank assets in 2022, following Russia’s invasion of Ukraine.”
For example, China purchased a total of 29 tonnes of gold between January and April this year, according to a September report by the World Gold Council, although this buying spree has now eased off.
There has also been a surge of new buyers this year, Nick Fulton, managing partner at USA Pawn, previously explained to Newsweek.
“As a brick-and-mortar seller, we are seeing many first-time buyers. With gold seeing an increase of 25 percent in value in the last six months, it is attracting new investors,” Fulton said.
Read the full article HERE.
Putting “fun” back into low- and middle-income Americans’ budgets could be years away with most of their income barely covering the surge in costs for bare necessities, economists said.
Even with annual inflation last month cooling to the lowest level since February 2021 and wages rising faster than inflation, low- and middle-income Americans are just barely covering their essentials, which include groceries, shelter, utilities and gasoline, economists say.
That’s because when inflation slows, it only means prices aren’t rising as quickly, not that prices are declining. So, Americans continue to pay higher prices for everyday needs.
Low- and middle-income Americans were hit disproportionately harder than their higher-income peers because essentials account for a larger share of their budgets, and their discretionary spending, or spending on nonessential items like dining out, vacations and entertainment, is only just recovering, economists say.
“For a very large share of Americans, the bottom 60% are spending more on essentials than before the pandemic,” said Michael Pearce, Oxford Economics deputy chief U.S. economist. “The burden is hardest among the lowest income but also touches middle income. Spending patterns of low-income Americans will take years to recover.”
‘No financial progress’
Middle-income Americans’ purchasing power, after being sharply eroded during the 2021-2022 inflation shock, just recently moved above 2019 levels, according to the monthly Primerica Household Budget Index (HBI). HBI assesses whether families can get ahead financially or if they may fall behind based on the affordability of everyday necessities needed to manage their homes and changes in their earned income.
HBI in August was 102.2%, up from a low of 86.7% in June 2022 when inflation peaked at a 40-year high of 9.1%, and at the highest level since February 2021. Households are neither better nor worse off than they were in January 2019 when HBI was 100%, so the August reading means middle-income Americans were doing slightly better than they were in 2019 and much better off than when they were underwater in 2022.
However, “had the inflation wave not happened, the HBI would be about 112.5%,” said Amy Crews Cutts, economic consultant to Primerica. “This difference explains a lot about low consumer sentiment that even though conditions have improved, households have made almost no financial progress in 5.5 years of hard work.”
A Gallup poll this month showed 52% of Americans said they and their families are worse off today than they were four years ago. “Inflation likely underlies Americans’ perceptions that the economy is poor, even against a backdrop of generally low unemployment, steady economic growth, and record stock and housing values,” it said.
How many years will it take to return to normal?
It depends on wage growth and whether prices of essentials like gas or rent tumble, Pearce said.
The last time low-income Americans’ discretionary spending fell this much, which was during the Global Financial Crisis of 2007-2008, it took five to 10 years for spending patterns to return to previous levels, he said.
“And the reason was gas prices fell,” Pearce said. Global oil prices fell by about 70% between 2014-16, which pushed pump prices sharply lower and helped low-income Americans catch up.
“It’s harder to see some revolutionary cost saving (like that) on the horizon,” he said.
Sales and treats
Christa Engel, 58, continues to financially juggle.
To cope with sharply higher prices, Engel, the manager of a Dunkin’ store in Chicago, said she and her husband not only cut back on “treats” but still buy whatever they can on sale.
“For me, since we have two incomes, it’s not that bad,” she said. “I do try to get stuff on sale as much as possible… like crackers, frozen pizza. We have to cut back on eating out and nonessential small treats.”
Money for essentials must come from somewhere, so people end up “cutting out fun, not saving or spending some of their savings,” said Cutts. “Inflation blew up their budgets. I’m saddened because this is a boom economy, and we want to see people’s economic life quality rising because people have jobs, raises, and companies are doing well. What we’re seeing is a lot of weakness. It shows how powerful inflation is.”
Air conditioning, watering the garden and visiting family were “luxuries” Amy Aaroen, 63, cut back on last summer.
“We have not used the central air this year as much as in the past to keep the bill down,” said Aaroen, who is married and lives in Beloit, Wisconsin. “We were careful when watering the garden so we could keep the water bill down… It (also) costs me about $50 just to go visit my family who are only 1.5 hours away or two and three hours away. I feel like the economy had us traveling less and visiting family less.”
Will upcoming holiday spending be affected?
Low and middle-income consumers will probably still be bargain-hunting this holiday season, analysts said.
“We are continuing to see inflation’s impact on the middle-class consumer,” said Adam Davis, managing director at Wells Fargo Retail Finance. “Discretionary spending on larger ticket items is down, which could indicate holiday budgets may tighten, and certain consumers might even trade down on items, with many actively looking for bargains.”
Aaroen says that through belt-tightening during the year, “we’ve somehow managed to keep a budget that will probably not affect our coming holidays too much. We have 11 grandchildren and usually spend $25 to $30 on each of them. And we will probably this year as well. We may need to use the credit card though.”
And “yes, we will definitely see family for the holidays,” she said. “But not as often in between.”
Read the full article HERE.
Gold prices reached record highs and are up over 32% in 2024 so far
Gold prices reached new record highs this week amid uncertainty surrounding the upcoming election and the rising U.S. national debt.
Prices for gold futures have risen over 32% year to date and more than 38% in the past year and have set a number of new all-time highs in the process.
Gold reached new records of $2,738 on Monday and $2,760 on Tuesday, before paring back some of those gains and closing at $2,749 on Thursday.
Investors have turned to gold as a safe haven from a variety of geopolitical risks in the past year, including the ongoing conflicts in the Middle East and Ukraine. Uncertainty surrounding the direction of U.S. economic policy after the election, as well as the Fed’s rate cutting plans and long-term trajectory of the growing national debt have also bolstered investment in gold.
“What we’re really seeing is gold continuing to be viewed as a quintessential hedge against inflationary pressures along with the safe-haven demand and fund inflows, gold continues to be extremely well supported,” said David Meger, director of metals trading at High Ridge Futures.
“Uncertainty leading into the U.S. election is one additional pillar of support for the gold market, given the unease that the market may be feeling going into the election,”
ANZ said in a note that, “Concerns around the rising U.S. fiscal debt outlook is strengthening the investment case for gold.”
The federal government’s budget deficit topped $1.8 trillion in fiscal year 2024, which concluded at the end of September. That amounted to the third-largest budget deficit in history and trails only the FY2020 and FY2021 deficits that occurred amid elevated federal spending due to the COVID pandemic and related economic disruptions.
Deficits are projected to continue to rise in the years ahead, with the nonpartisan Congressional Budget Office (CBO) projecting that annual budget deficits will surpass $2 trillion a year starting in FY2030 and will be nearly $2.9 trillion just four years later.
Both Vice President Harris and former President Trump have released economic plans that are projected to cause the deficit to widen at a faster pace over the next decade than what would occur under the CBO’s projection. The CBO baseline has projected that the debt-to-GDP ratio, which compares the debt held by the public to the size of the U.S. economy, will break a record set in 1946 during the next four-year presidential term.
Continued federal spending and deficits as well as the Federal Reserve’s plan to address stubborn inflation have caused yields on another safe haven for investors, U.S. Treasurys, to rise despite the expectation the central bank will cut rates again in November.
Bob Haberkorn, senior market strategist at RJO Futures, said in a Reuters report Wednesday that while gold is “going to have a hard time moving higher given where yields are headed,” though he added that gold could reach $2,800 an ounce as early as the end of this week on safe-haven demand.
Read the full article HERE.
Nine out of 12 districts report flat or declining activity
The Federal Reserve’s latest Beige Book survey of conditions across the country continued to paint a weak picture, with nine out of 12 regional district banks reporting flat or a slight decline in activity.
Most districts reported declining manufacturing activity and consumers were reported to be on the hunt for bargains.
Housing activity continued to expand across the country, but uncertainty about the path of mortgage rates was keeping some homeowners on the sidelines.
The Beige Book is designed to give Fed officials a feel for conditions on the ground ahead of their next interest-rate policy meeting, set for Nov. 6-7.
Recent Beige Books have painted a weak picture and economists are a bit puzzled.
Analysts at LHMeyer, an independent monetary-policy research firm, noticed that there was a disconnect in September between what the Beige Book reported and how officials actually described conditions during their closed-door meeting.
While the Beige Book for September “sounded downright grim,” Fed officials told their colleagues that “their business contacts were optimistic about the economic outlook, though they were exercising caution in their hiring and investment decisions.”
“Given that Chair Powell has indicated that Fed officials are placing increased importance on the Beige Book and other anecdotal readings, the soft readings provide reason for the Fed to continue to ease monetary policy,” Bostjancic added.
The grim nature of the Beige Book reports hasn’t been matched by national economic data.
For instance, retail sales were stronger than expected in September, and the U.S. economy added 254,000 jobs in the month.
After all, the Atlanta Fed’s GDPNow tracking estimate sees the economy accelerating in the July-September quarter above the prior quarter’s 3% annual growth rate.
According to the latest Beige Book, employment did increase slightly and layoffs remained limited. Wages continued to rise “at a modest to moderate pace.”
The survey said that inflation continued to cool in most districts. Prices of some food products, like eggs and dairy, did rise sharply.
Consumers were seen as increasingly sensitive to high prices.
“In contrast to the sturdy employment and retail-sales reports for September, the anecdotal readings from Fed’s Beige Book depict little economic growth across much of the country,” said Kathy Bostjancic, chief economist at Nationwide.
Most economists continue to expect the Fed will cut rates by a quarter percentage point at their next meeting.
Read the full article HERE.
Gold and silver showed no sign of slowing their rise on Monday as investors continue to pour into precious metals.
Gold futures touched fresh records, rising as much as 0.8% to hover near highs of $2,750 per ounce. Silver futures gained more than 3% before paring gains, briefly topping $34 per ounce, the highest level in 12 years.
The two precious metals have outperformed the broader markets, with bullion rising 26% year to date and silver gaining 35% during the same period, compared to the S&P 500’s (^GSPC) gain of 19% since the start of 2024.
Gold purchases by central banks, which hit a record in the first quarter of 2024, have been one of the biggest drivers of the precious metal’s rise this year. BofA analysts estimate gold has surpassed the euro to become the world’s largest reserve asset, second only to the US dollar.
Investors have also flocked to physically backed gold exchange-traded funds, with inflow up three months in a row, according to the World Gold Council.
“I think it’s the declining inflation expectation and also the rotation of assets that tend to perform well with a more dovish Fed,” Phil Streible, Blue Line Futures chief market strategist, told Yahoo Finance on Monday morning.
The strategist sees gold reaching $2,850 by the end of the year.
Meanwhile, silver surged higher after gaining more than 6% on Friday. JPMorgan analysts cited sentiment at the recent London Bullion Market Association/London Platinum and Palladium Market conference, with attendees forecasting an average year-ahead price of $45 per ounce for the grey metal.
“This bullish view is driven by a sense that silver is undervalued vs gold, less crowded, and supported by multifaceted, versatile demand applications,” wrote JPMorgan analysts on Friday.
Silver is used across different industries, from electronics to fuel cells in automobile components and solar panels. The analysts see uncertainty ahead for the metal if former President Donald Trump were to win the presidential election.
“We are bullish silver ourselves, though for this strong silver outperformance to eventuate, we likely need to see industrial metals prices continue to rally in 2025, something that could get complicated under a Trump presidency and a hard line on tariffs early next year, despite Chinese stimulus,” said the note.
Read the full article HERE.
Buying of the precious metal reflects rising interest in alternatives to the dollar-based financial system
Something strange has happened to the price of gold over the past year. In setting one record level after the other, it seems to have decoupled from its traditional historical influencers, such as interest rates, inflation and the dollar. Moreover, the consistency of its rise stands in contrast to fluctuations in pivotal geopolitical situations. Gold’s “all-weather” characteristic signals something that goes beyond economics, politics and higher-frequency geopolitical developments. It captures an increasingly persistent behavioural trend among China and “middle power” countries, as well as others. And it is a trend that the west should be paying greater attention to.
Over the past 12 months, the price of an ounce of gold on international markets has increased from $1,947 to $2,715, a gain of almost 40 per cent. Interestingly, this march up in price has been relatively linear, with any pullback attracting more buyers. It has occurred despite some wild swings in expected policy rates, a wide fluctuation band for benchmark US yields, falling inflation and currency volatility.
Some may be tempted to dismiss gold’s performance as part of a more general increase in asset prices that, for example, has seen the US S&P index gain about 35 per cent in the past 12 months. Yet that correlation itself is unusual. Others will attribute it to the risk of military conflicts that have seen so many innocent civilians lose their lives and livelihoods, together with massive destruction of infrastructure. Yet the price journey suggests that there may well be a lot more going on.
Consistent foreign central bank purchases have been an important driver of gold’s strength. Such buying seems not just related to the desire of many to gradually diversify their reserve holdings away from significant dollar dominance despite America’s “economic exceptionalism”. There is also interest in exploring possible alternatives to the dollar-based payments system that has been at the core of the international architecture for some 80 years.
Ask why this is happening and you will normally get an answer that mentions a general loss in confidence in America’s management of the global order and two specific developments. You will hear about America’s weaponisation of trade tariffs and investment sanctions, together with its reduced interest in the rule-based, co-operative multilateral system that it played a pivotal role in designing 80 years ago.
You will also hear about Russia’s ability to continue to trade and grow its economy despite some of the country’s banks being ejected in 2022 from Swift, the international system that governs the vast majority of cross-border payments. It has done this by creating a clunky trade and payments alternative system that involves a handful of other countries. While inefficient and costly, this allowed Russia to bypass the dollar and maintain a core set of international economic and financial relations.
Then there is the aspect related to the conflict in the Middle East where the US is viewed by many as an inconsistent backer of both fundamental human rights and the application of international law. This perception has been amplified by how the US has shielded its main ally from a response to actions widely condemned in the international community.
What is at stake here is not just the erosion of the dollar’s dominant role but also a gradual change in the operation of the global system. No other currency or payment system is able and willing to displace the dollar at the core of the system and there is a practical limit to reserve diversification. But an increasing number of little pipes are being built to go around this core; and a growing number of countries are interested and increasingly involved.
What has been happening to the gold price is not just unusual in terms of traditional economic and financial influences. It also goes beyond strict geopolitical influences to capture a broader phenomenon which is building secular momentum.
As it develops deeper roots, this risks materially fragmenting the global system and eroding the international influence of the dollar and the US financial system. That would have an impact on the US’s ability to inform and influence outcomes, and undermine its national security. It is a phenomenon that western governments should pay more attention to. And it is one where there is still time to course-correct, though not as much as some would hope.
Read the full article HERE.