U.S. stocks face a two-week stretch that could either extend the market’s impressive spring and summer rally or blunt its performance over the final months of the year.

The S&P 500 the broadest measure of U.S. blue-chip stocks, has notched 17 record closing highs so far this year. It has surged more than 30% from its early April lows as President Donald Trump has backed away from some of the most burdensome tariffs laid out in his so-called Liberation Day announcement.

A better-than-expected second-quarter earnings season has helped as well. Collective profits for the quarter for the S&P 500 are forecast to rise 12.7% from last year to just under $563 billion. That is around $27 billion ahead of estimates prior to the start of the reporting season.

Bets on looser monetary policy from the Federal Reserve have provided the third leg to the bull-market stool. Traders expect the central bank to resume cutting rates in September and have penciled in more reductions for before the end of the year.

Two of those positive factors —the corporate earnings and the potential for rate cuts—will be tested over the coming weeks, before the market looks back toward tariffs later in the year. The U.S. and China agreed last week to continue their trade talks for another three months, which suggests the market may be focusing on trade near mid November, if not before.

Action is likely to come sooner on the rate-cut front. Federal Reserve Chair Jerome Powell will deliver the keynote address to the central bank’s annual symposium in Jackson Hole, Wyo., on Friday. Powell’s remarks are likely to be crucial in setting the market’s expectation for a September rate cut. Prices of interest-rate futures now imply odds of around 85%, according to the CME Group’s FedWatch Tool.

James Smith, developed-markets economist at ING, thinks Powell will need to address the impact of tariffs on inflation pressures, the state of the job market, and the level of dissent to his “wait and see” stance from other Fed governors. Two members of the bank’s Board of Governors both voted against the bank’s late-July decision to hold rates steady, marking the first time since 1993 that two governors broke ranks at the same time.

“The Fed Chair is on the back foot —and not just because his boss is breathing down his neck,” Smith said, referring to Trump’s efforts to push Powell into cutting rates. “September’s meeting could be explosive.”

On the earnings side, big tech’s dominance over the second-quarter reporting season was impossible to ignore. Powered by advances in artificial intelligence, the communications services and information technology subsectors of the S&P 500 accounted for more than half of the benchmark’s earnings growth.

The biggest tech stocks have also delivered the lion’s share of the market’s overall advance. While the S&P 500 is up around 10% since the start of the year, just two stocks— Nvidia -199% and MicrosoftMSFT-1.12% —are responsible for about 40% of that move. Adding in Amazon.comAMZN-1.46%, AlphabetGOOGL-1.26%, and Meta Platforms takes that tally to around 52%.

Nvidia’s second-quarter results, scheduled for Aug. 27, will be closely watched for both confirmation that companies are still pouring money into AI and for the outlook for semiconductor demand over the final months of the year.

The market’s most important stock is now trading at 58 times the earnings Nvidia is expected to generate over the next 12 months. That is nearly three times the valuation of the S&P 500. With a valuation that high, and the stock’s 34% gain so far this year, the share price could fall if earnings aren’t better than expected and management doesn’t boost its financial forecasts for the near term.

Still, Richard Saperstein, chief investment officer at New York-based Treasury Partners, thinks the market’s valuation of big tech stocks, led by Nvidia, is justified by the “relentless expansion of the AI and data center ecosystem.”

“The powerful combination of stable inflation, ongoing economic growth and expectations of declining interest rates justifies current stock valuations,” he said. “Although multiples are elevated, stocks should continue to benefit from earnings growth into the end of the year.”

Read the full article HERE.

Ask almost any economist and they will tell you: US President Donald Trump has been running risks with the world’s largest economy.

They say his tariffs and crackdown on immigrants risk a return of 1970s-esque “stagflation”, when a sudden oil shock prompted stagnant growth and spiralling prices, except this time the crisis would be self-inflicted.

The White House has just as steadfastly dismissed those concerns, attacking the experts – and, in the case of the US Bureau of Labor Statistics commissioner, firing her.

Questions about how it will all play out have left the US central bank in a state of paralysis, as it waits for data to clarify what’s happening before making a move on interest rates.

But after a busy few weeks of company updates, data on jobs and inflation, we still don’t really know.

The labour market is sending clearly worrisome signals.

Job creation was almost non-existent in May and June, sluggish in July, and the ranks of discouraged workers are growing.

That 1 August jobs report sent the stock market sinking and Trump into a tailspin, prompting him to fire the BLS commissioner.

A few days later, Moody’s Analytics economist Mark Zandi declared on social media that the economy was “on the precipice of a recession”.

That’s not the consensus.

For sure, the economy has slowed, growing at an annual rate of 1.2% in the first half of the year, down one percentage point from 2024.

But consumer spending, despite weakening, has stayed more resilient than many had expected, despite downbeat assessments by some firms.

Shares, after the 1 August hit, quickly resumed their upward march.

“We continue to struggle to see signs of weakness,” the chief financial officer of JPMorgan Chase, America’s biggest bank, told investors last month. “The consumer basically seems to be fine.”

That has raised hopes that the economy might power through, as it did a few years ago, to widespread surprise, despite getting hit with the highest inflation since the 1980s and a sharp rise in interest rates.

On Friday, the US government reported that spending at retailers and restaurants rose 0.5% from June to July – and that spending in June had been stronger than previously estimated.

“Consumers are down but not out,” wrote Michael Pearce, deputy chief US economist at Oxford Economics, which is predicting a modest recovery in spending in the months ahead, as tax cuts and a stock market recovery boost confidence.

“With the sluggish yet resilient real economy, the labor market is unlikely to deteriorate sharply.”

Challenges remain in the months ahead.

For now, households haven’t seen a dramatic run-up in prices at the store that might force them to cut back.

Consumer prices rose 2.7% in July compared with a year ago, the same pace as in June.

But many forecasters had not expected higher prices to start appearing until later this year, especially after Trump delayed some of his most aggressive tariff plans until this month.

Prices for hard-to-substitute, imported staples,like coffee and bananas, have already jumped.

Forecasters expect price increases to widen in the months ahead, as firms sell down pre-tariff stock and raise prices, now that they have more confidence about what the tariff policies might be.

That’s why there was so much focus on the producer price index, which measures wholesale prices commanded by US producers before they hit consumers, offering a clue to what’s coming.

It accelerated at the fastest pace in more than three years in July.

And worryingly, both consumer and producer inflation show the uptick in prices is not limited to goods, suggesting stagflation might very well be staging a return.

Read the full story HERE.

U.S. national debt hit a historic high on Monday, surpassing $37 trillion, according to the Treasury Department

Debt owed by the U.S. rose above $37 trillion on Monday, according to a Tuesday report from the Treasury Department. The national debt tracks how much money the federal government owes from borrowing and interest accrued over time. 

The national debt was at $36.83 trillion on August 1. A year ago, the national debt amounted to a total above $35 trillion but was higher than $36 trillion by December.  

Since July, U.S. national debt has been growing at a sharper pace. According to a debt tracker maintained by Republican Congressman David Schweikert of Arizona — a member of the Joint Economic Committee — the national debt has grown $59,361.77 per second for the last year, based on Monday’s data. 

After President Donald Trump signed his ‘Big Beautiful Bill’ into law on July 4, the Congressional Budget Office revised its January projection for 2025. The U.S. federal deficit — a measure of how much the government spends compared to how much it receives in revenue — was originally projected by the CBO to be $1.9 trillion this year and $2.7 trillion by 2035. On July 21, its outlook changed, predicting a rise in the federal deficit to $3.4 trillion from 2025 to 2034 based on the president’s new megabill. The U.S. will decrease direct spending by $1.1 trillion, while also decreasing revenue by $4.5 trillion, according to the projection.

On June 30, President Trump said in a release that his bill would “flip” the primary deficit to a surplus — meaning the U.S. would bring in more money than it spends — by 2034, contradicted by the CBO’s later projection. 

The office had also reported in January that the national debt would rise from 100% of GDP this year to 118% of GDP in 2035. According to an analysis from the Pew Research Center, by the end of the second quarter this year, when the national debt stood at $36.2 trillion, it was already at 119.4% of GDP. 

Read the full article HERE.

US wholesale inflation accelerated in July by the most in three years, suggesting companies are passing along higher import costs related to tariffs.

The producer price index increased 0.9% from a month earlier, the largest advance since consumer inflation peaked in June 2022, according to a Bureau of Labor Statistics report out Thursday. The PPI rose 3.3% from a year ago.

Services costs increased 1.1% last month — the most since March 2022. Within services, margins at wholesalers and retailers jumped 2%, led by machinery and equipment wholesaling. Goods prices excluding food and energy rose 0.4%.

“While businesses have assumed the majority of tariff costs increases so far, margins are being increasingly squeezed by higher costs for imported goods,” Ben Ayers, senior economist at Nationwide, said in a note. “We expect a stronger pass through of levies into consumers prices in coming months with inflation likely to climb modestly over the second half of 2025.”

The report indicates companies are adjusting their pricing of goods and services to help offset costs associated with higher US tariffs, despite the softening of demand in the first half of the year. Stock-index futures declined and Treasury yields rose after the wholesale inflation data.

The extent to which companies pass the burden from tariffs on to consumers will be key in defining the path of interest rates. While Federal Reserve officials generally expect import levies to push inflation higher in the second half of the year, they’re divided over whether it will be a one-time adjustment or more enduring.

With consumer price data earlier this week pointing to a milder pass-through in July, and the labor market now shifting to a lower gear, Fed officials are widely expected to lower borrowing costs when they meet next month. However, the firm wholesale inflation data may give some policymakers pause that price pressures are rearing back up again.

“The question for policymakers, still to be resolved, is how much of these price increases are absorbed by wholesalers, retailers and resellers,” Carl Weinberg, chief economist at High Frequency Economics, said in a note. “This report is a strong validation of the Fed’s wait-and-see stance on policy changes.”

Economists pay close attention to the PPI report because some of its components are used to calculate the Fed’s preferred measure of inflation — the personal consumption expenditures price index. While health care categories came in soft, airline passenger services and portfolio management jumped. The latter was largely expected due to a rising stock market.

The BLS data showed food prices accounted for 40% of the advance in final goods costs, largely due to vegetables. A less-volatile PPI metric that excludes food, energy and trade services also rose from a month earlier by the most since 2022.

The PPI report showed the costs of processed goods for intermediate demand, which reflect prices earlier in the production pipeline, jumped 0.8% — the most since the start of the year and largely due to diesel fuel.

A separate report showed initial claims for unemployment benefits were little changed last week.

Read the full article HERE.

US Treasury Secretary Scott Bessent made his most explicit call yet for the Federal Reserve to execute a cycle of interest-rate cuts, suggesting the central bank’s benchmark ought to be at least 1.5 percentage points lower than it is now.

“I think we could go into a series of rate cuts here, starting with a 50 basis point rate cut in September,” Bessent said in a television interview on Bloomberg Surveillance Wednesday. “If you look at any model” it suggests that “we should probably be 150, 175 basis points lower.”

Fed policymakers kept their benchmark at a target range of 4.25% to 4.5% at their last policy meeting. Bessent reiterated his view that, had officials been aware of the revised data on the labor market that were released two days after that gathering, they might have cut rates. That may have also been the case for the June meeting, he said.

“I suspect we could have had rate cuts in June and July,” Bessent said — alluding to data released by the Bureau of Labor Statistics on Aug. 1 that downwardly revised payroll gains in May and June by 258,000.

Treasury secretaries have typically shied away from making specific calls on Fed rates, and Bessent himself for months has said he would only discuss the central bank’s past policy decisions — not their upcoming ones. President Donald Trump has repeatedly criticized Chair Jerome Powell for refraining from rate cuts this year.

Chair Nomination

Powell and many of his colleagues have said they want to see greater evidence about any impact on inflation and inflation expectations from the tariff hikes.

Bessent said that there are 10 or 11 candidates under consideration to succeed Powell when his term as chair concludes in May, without running through the names. He said there are both current Fed officials as well as private-sector individuals on the list.

He also said that he didn’t expect Stephen Miran, whom Trump has nominated to fill the existing opening on the Fed board, to stay at the central bank past January, when that term concludes.

Read the full article HERE.

Billionaire families are going beyond index trackers and vault holdings as bullion’s boom propels a trading revival.

In Asia’s ultra-wealthy circles, some family offices are now bypassing the middlemen and jumping into the gold business itself. They’re financing, shipping and flipping bullion like traders.

Take Cavendish Investment Corp., a multi-family office run by the former chairman of a Hong Kong jewelry company, which is allocating roughly a third of its portfolio this year to the physical gold trade, going a step beyond index trackers and vault holdings. Precious metals dealers J. Rotbart & Co. and Goldstrom are also trading with the region’s ultra-rich clans.

Cavendish sources gold from small-scale mines in Kenya and elsewhere in Africa, flies it to Hong Kong, refines it and sells it at market prices to wealthy clients across Asia and to Chinese strategic buyers. If this sounds like a 19th-century trading house, that’s about right.

“It’s a seller’s market,” said Jean-Sebastien Jacquetin, managing partner at Cavendish. He declined to disclose the firm’s assets under management or how much money in total it allocated to the deals. “We believe we have a window of about a year to capitalize on this opportunity.”

In the world of ultra-high-net-worth investing, gold had always served as a passive hedge against riskier trades. But in a moment when wars, inflation and central bank blunders are seeming more like fixtures, demand for gold has exploded.

Uncertainty over the status of gold in President Donald Trump’s sweeping tariff agenda has plunged the market into fresh turmoil in recent days. On Monday, Trump weighed in, saying on social media that imports of gold will not face US tariffs — though the market remains on edge, as the White House is yet to issue a formal policy update.

Wealthy investors in Asia have shown strong appetite. Those in Hong Kong more than doubled their allocation to the precious metal in a year, according to a 2025 HSBC survey. On the mainland, the shift was also dramatic — to 15% of portfolios from 7% a year ago, the survey of over 10,000 affluent investors in 12 markets showed.

“Asian families understand gold more intimately than Western families because it’s been part of the culture for so long,” said Joshua Rotbart, founder and managing partner at precious metals broker J. Rotbart & Co. “They know they need to make this investment as a business.”

Some have turned to leasing it. Billionaire families in the United Arab Emirates and Hong Kong are earning 3% to 4% returns by lending their physical bullion to local jewelers — adding a yield on top of the usual price appreciation, according to Rotbart and precious metals trader Goldstrom. They’re turning a safe-haven asset into a quietly compounding cash machine.

Others are entering profit-sharing ventures with Goldstrom and J. Rotbart & Co. Meanwhile, some are playing the arbitrage game, buying discounted bars in Dubai and flipping them for premiums in Hong Kong, where demand is especially high and logistics are streamlined. Wealthy families can also use their physical gold as collateral to borrow money for other investments such as stocks, crypto and real estate, executives at Goldstrom and Rotbart said.

“Anywhere you go in Asia, everyone buys gold in much larger proportions than they do in the West,” said Patrick Tuohy, executive director at Goldstrom. “People hold gold because they know they can always liquidate it on a rainy day.”

Rain, metaphorically speaking, is in the forecast. The US dollar has been wobbling under the weight of a ballooning US debt deficit and potential interest rate cuts from the Federal Reserve. That’s a scenario in which non-yielding gold’s haven appeal is likely to shine even brighter, while a weaker greenback makes the metal priced in US dollars cheaper for most buyers. Deutsche Bank sees bullion averaging $3,700 an ounce in 2026, while Goldman Sachs Group Inc. expects the rally to continue to as high as $4,000, up from around $3,375 on Aug. 11.

“The hedge against the Hong Kong dollar is actually getting physical metal gold because Hong Kong is basically out of control of its own currency,” said Quentin Mai, chief executive officer of West Point Gold, a mining exploration company.

For Hong Kong’s gold market, there’s also support from the mainland, the biggest consumer of the precious metal. China launched its first offshore gold vault in Hong Kong this year, making settlement easier for global players, and quietly reinforcing the city’s role as Asia’s bullion hub, just as Beijing intended. But there are limits to those efforts.

For one, compliance concerns persist. Of Hong Kong’s several refineries, only two are accredited by the London Bullion Market Association, an influential trade body that requires firms to screen for conflict-linked or environmentally harmful metal. Most of the world’s biggest bullion buyers — including central banks, institutional investors and luxury brands — only accept responsibly sourced gold from refineries on the LBMA’s Good Delivery List.

That can pose a challenge when dealing with supply from places like Kenya, which non-governmental organization SwissAid has singled out as a transit hub for smuggled bullion from other African countries. Earlier this year, the group said that the nation may have become a conduit for gold from Sudan, where a civil war has raged since 2023.

Cavendish is working with precious metal trader Ramco Ltd., which “does everything we can to source gold from quality sellers, ensuring we are compliant with Hong Kong law,” director Gavin Wyborn said.

Another consideration is that trading unrefined gold can be a very high risk strategy that requires not only a deep understanding of the gold market but also solid connections with legitimate players, said Tuohy.

“When you absolutely know what you’re doing, it’s mechanical and very lucrative,” Tuohy said. “But there is an enormous gap between not knowing exactly what you’re doing and having a working process that’s tried and tested. And that lack of experience can cost you thousands, if not millions, of dollars.”

There’s also the concern the party may not last. After a phenomenal rally in the last year, even the most enthusiastic gold bugs may find prices near-record levels increasingly difficult to stomach. Cost-sensitive buyers in the region may find themselves priced out of the market if the rally continues to reach new heights, with lofty prices already weighing heavily on demand for gold jewelry in China and India — the two biggest consumers of bullion.

“We anticipate that in about a year, the market will start to cool down” as geopolitical issues ease around the US midterms in 2026, said Jacquetin. “Demand will decrease.”

Yet, for now, the profits are alluring. Cavendish and its business partners, for instance, clears 5% to 10% premiums on each roundtrip shipment. Prior to shipment, the gold is pre-assayed to analyze the gold’s composition to enable export tax calculations. Then unprocessed gold arrives at a specialized cargo terminal at Hong Kong International Airport and moves swiftly to a local refinery for fire assaying. Days later, it’s headed to private vaults or across the border to mainland buyers, some of which are state-owned companies.

“Given the premiums people are willing to pay for gold, it’s going to attract more people and bigger players,” said West Point Gold’s Mai.

Read the full article HERE.

Federal Reserve governor Michelle Bowman said Saturday that she is looking at three interest rate cuts this year given concerns about the strength of the job market and the overall US economy.

Bowman said she sees a risk that further delays in cutting rates could “result in a deterioration in labor market conditions and a further slowing in economic growth.”

Bowman voted against the Fed’s decision to keep interest rates unchanged last month, preferring the central bank to lower its benchmark interest rate by 0.25%.

“A proactive approach in moving policy closer to neutral, from its current moderately restrictive stance, would help avoid a further unnecessary erosion in labor market conditions and reduce the chance that the Committee will need to implement a larger policy correction should the labor market deteriorate further,” Bowman said in a speech in Colorado.

Fed Governor Chris Waller joined Bowman in voting against the Fed decision on July 31. In recent days, San Francisco Fed president Mary Daly and Minneapolis Fed president Neel Kashkari have also made comments that set the table for cutting rates as soon as next month, citing concerns over a weakening job market.

Data from the CME Group at the end of the week showed investors placing a nearly 90% chance on the Fed lowering the target range for its benchmark interest rate to 4%-4.25% from 4.25%-4.5% at its September meeting. The next time investors expect to hear from Fed Chair Jerome Powell is on Aug. 22 at the Fed’s annual Jackson Hole Symposium.

Bowman noted job growth has slowed sharply to just 35,000 new jobs added to the economy per month over the past three months, indicating a “significant softening” in demand for labor. If demand in the economy continues to weaken, Bowman is concerned businesses may begin to accelerate layoffs.

At the same time, Bowman said that she believes increases in prices from tariffs are likely to have a one-time effect, an impact the central bank can look through.

“Because changes in monetary policy take time to work their way through the economy, it is appropriate to look through temporarily elevated inflation readings and therefore remove some policy restraint to avoid weakening in the labor market,” Bowman said.

Bowman also noted that the government’s monthly jobs data have become difficult to interpret, reflecting declining survey response rates and changing dynamics around immigration and net business creation.

“I remain cautious about taking too much signal from data releases, but I see the latest news on economic growth, the labor market, and inflation as consistent with greater risks to the employment side of our dual mandate,” she said.

Bowman’s comments cap a busy week for the Federal Reserve that also saw President Trump announce plans to nominate the current chair of the president’s Council of Economic Advisers, Stephen Miran, to the Fed’s Board of Governors. Miran is set to complete the term left vacant by Adriana Kugler, a Biden appointee, who resigned from the Fed Board on Friday.

US CPI data due Tuesday will help decide if the Fed will cut rates at its September meeting, following weak jobs numbers that sparked worries about a slowing economy.

“Tomorrow’s US inflation report will garner the most macro attention and should help to pave the way for a Fed rate cut in September,” Commerzbank strategists wrote in a note, adding that US tariffs were having a limited impact on prices so far.

Read the full article HERE.

U.S. gold futures surged to a record on Friday after a report that Washington has imposed tariffs on imports of 1-kg bullion bars, widening the spread between New York futures and spot prices.

December U.S. gold futures were up 0.7% to $3,476.70, after hitting a record $3,534.10. Spot gold was down 0.3% at $3,386.63 per ounce. Bullion is on track for a second straight weekly gain, up 0.7% so far this week.

The futures-spot spread widened to more than $100 after the Financial Times reported that the United States had imposed tariffs on imports of 1-kg gold bars, citing a July 31 Customs and Border Protection letter.

The letter said 1-kg and 100-ounce gold bars should be classified under a customs code subject to higher duties.

“Given the volatility of U.S. trade-related decision-making, it is difficult to make longer-term predictions, but assuming a scenario in which tariffs remain in place … one would expect spot prices to be affected and to rise, narrowing the spread relative to the futures,” said Ricardo Evangelista, senior analyst at ActivTrades.

Switzerland is the world’s largest gold refining hub and the major exporter to the United States.

U.S. President Donald Trump’s higher tariffs on imports from dozens of countries kicked in on Thursday, leaving major trade partners such as Switzerland, Brazil and India hurriedly searching for a better deal.

“All developments … for now solidify the London spot price as the most reliable source telling us what the real value of gold is,” said Saxo Bank’s head of commodity strategy, Ole Hansen. “Spot prices remain stuck in a range since April, with a break above $3,450 needed to change that.”

Gold, a traditional safe-haven asset, is also drawing support from expectations that the Federal Reserve will cut interest rates next month.

Weaker U.S. payroll data last week pushed CME Group’s FedWatch Tool, opens new tab to price in an 89% chance of a 25-basis-point cut in September.

Elsewhere, spot silver was steady $38.31 per ounce, platinum fell 0.5% at $1,326.91 and palladium was down 2.3% at $1,124.93.

Read the full article HERE.

Americans filing for unemployment insurance on an ongoing basis reached the highest level since November 2021 at the end of July.

In the week ending July 26, 1.974 million continuing claims were filed, up from 1.936 million the week prior and the highest level seen since November 2021, according to data from the Department of Labor released Thursday morning. Economists see an increase in continuing claims as a sign that those out of work are taking longer to find new jobs.

Meanwhile, weekly filings for unemployment benefits increased to 226,000 in the week ending Aug. 2, up from 221,000 the week prior. Oxford Economics lead economist Nancy Vanden Houten wrote in a note following the release that the level of weekly jobless claims is “consistent with a low pace of layoffs.”

Thursday’s data comes less than a week after the July jobs report showed hiring in the US labor market has slowed more than initially expected. The July jobs report showed the US economy added 73,000 jobs while the unemployment rate moved higher to 4.2%.

But the portion of the release that sent markets stumbling was “larger than normal” revisions to previous reports, according to the Bureau of Labor Statistics. Changes to May’s and June’s reports showed more than a quarter million fewer jobs were added to the economy over those months. May’s job gains were revised down to 19,000 from 144,000, while June’s additions were cut to just 14,000 from the 147,000 initially reported.

“The rise in continued claims since April — a sign that unemployed persons are finding it tough to find new jobs — makes even more sense after the sharp downward revisions to job growth in May and June,” Vanden Houten wrote Thursday.

Following recent labor market data, the probability of a September interest rate cut from the Fed has surged to 91%, up from just 38% a week prior, per the CME FedWatch Tool.

Read the full article HERE.

A years-long supply crunch in platinum has come to a head, with banks scrambling for dwindling stocks in London as buyers in China and the US hoover up much of the available metal.

The market tightness has made platinum one of the best-performing commodities this year and fueled sky-high borrowing costs for the precious metal. Tariff fears have funneled large volumes to US warehouses, while Chinese imports continue to exceed estimated domestic consumption.

The upshot is a shortfall in the trading hubs of London and Zurich, pushing traders to guard supplies. Industry experts broadly agree on where the metal has gone, but the absence of reliable inventory data for London makes it impossible to accurately assess just how low stockpiles are.

“When a market tightens like this — whether it’s for good reasons, bad reasons, idiosyncratic reasons — it should pull material out of the shadows,” said Jay Tatum, who runs a metals fund at commodities-focused Valent Asset Management and has been bullish on platinum for about two years. Lease rates suggest the “acute tightness” isn’t over, he said.

The implied one-month lease rate remains above 10% — down from a spike to more than 35% in July, but much higher than the normal level of close to zero. The number reflects the annualized returns that holders of platinum in London or Zurich vaults can get by loaning their metal out on a short-term basis.

Gold, copper and other metals were shipped to the US as traders sought to capitalize on price dislocations sparked by tariff fears. But the resulting tightness in platinum markets has been exceptional.

While investors have dumped about 215,000 ounces from exchange traded-funds so far this year, in the last three weeks alone New York warehouses soaked up almost 290,000 ounces of the metal.

China scooped up a record 1.2 million ounces in the second quarter. The world’s largest consumer imports most of its metal but those shipments have been consistently higher than estimated domestic demand, according to data from Standard Chartered Plc.

Officials in Beijing have imposed strict export restrictions on precious metals, and, again, there is little visibility on stockpiles.

Most purchases are done by China Platinum Co., a state-owned company that’s the only entity allowed to import the metal without paying a 13% value-added tax. That makes it hard to discern the real buyers behind every purchase.

While China has shown a willingness to stockpile metals and control exports of commodities key to its economy, it’s unclear how much of the inflows end up in state inventories.

A further boost to the nation’s demand may come from the imminent introduction of the country’s first platinum futures.

Borrowing Pain

The biggest consumers of platinum are the auto and jewelry sectors, but the high cost of borrowing has been a particular problem for manufacturers that use the metal to produce goods ranging from chemicals and glass to laboratory equipment. Industrial users often go for the less capital-intensive option of leasing, rather than buying the commodity outright.

At times, liquidity has evaporated entirely as leasing rates surged into the double digits, pricing most borrowers out of the market, according to several traders at bullion banks and commodity trading houses who asked not to be be identified discussing private information.

“When you saw the lease rates spike at almost 40% at one point, that’s a crazy level for people who are borrowing metal, where that’s been their business strategy,” said Ed Sterck of the World Platinum Investment Council. “Pretty much every market participant has got some level of exposure to lease rates, on one side or the other.”

An average of roughly $2 billion of platinum was traded daily in London on a spot basis in recent weeks, less than a 50th of the gold market, according to April data from the London Bullion Market Association. That means speculative investors and hedge funds with sizable positions can potentially exert considerable pressure on the market.

Forecast Deficits

Platinum’s 45% gain this year came after it spent most of the past decade rangebound between $800 and $1,100 an ounce, as the rapid rollout of electric vehicles hit the outlook for consumption in catalytic converters, which still account for more than a third of demand. It was last near $1,320.

Sentiment has improved as the market heads for a third consecutive annual deficit, according to data collected on behalf of the WPIC. Soaring costs and supply disruptions in South Africa — by far the biggest producer — have also added to the bullish case.

The price recovery means that about 90% of the mining industry is now making money, compared with just 60% at the end of last year, according to Craig Miller, chief executive officer of Valterra Platinum Ltd. But that’s not enough to stimulate output.

That, according to Marwan Younes, president of Massar Capital Management — a commodities hedge fund that manages about $1.6 billion in assets, can set the stage for “violent rallies.”

“Trying to figure out which spark is going to light up the market can be a little bit besides the point, because the structural conditions are such that there’s a lot of dry tinder,” he said, adding that the recent jump in Chinese imports was a key impetus behind this year’s price surge. “We’ve been very bullish on platinum.”

Like gold, the more scarce platinum is, the more people want it, said Thomas Roderick, a portfolio manager at hedge fund Trium Capital LLP.

“When the price was going lower, it was kind of a self-fulfilling decline, and now we have a genuine shortage,” Roderick said.

Read the full article HERE.