Gold Surpasses $1,910 for the First Time
Bloomberg | Aug 23
“Gold continues its upward surge, driven by a comparatively stronger U.S. dollar, robust treasury performance, and a demand for safe havens,” stated Peter Richardson, chief metals economist at Morgan Stanley Australia Ltd., during a phone conversation from Melbourne. “This trend indicates that investors are primarily focused on safeguarding their real purchasing power.”
Gold Futures Decline After Strong Rally
MarketWatch | Aug 23
Analysts at Citigroup have revised their gold price forecasts, citing the growing global financial tensions impacting the metal. They noted that concerns over sovereign defaults and currency devaluation have made many investors wary about shifting their assets from equities into government bonds, while cash remains an undesirable option in a climate of negative real rates. As a result, gold has emerged as the principal beneficiary amid these anxieties,” they remarked.
Risk aversion is dominating the market this month, as evidenced by the following analysis of ETF proxies for key asset classes. Bond prices are generally rising (with yields dropping) while there is noticeable selling activity in stocks, REITs, and commodities. In the week ahead, additional volatility may occur as investors assess upcoming economic reports: new home sales (Tuesday), durable goods orders (Wednesday), jobless claims (Thursday), and revisions of Q2 GDP along with the Reuters/University of Michigan consumer sentiment index (Friday). Federal Reserve Chairman Ben Bernanke is also slated to speak on Friday at the annual Jackson Hole conference. Given the recent wave of selling and ongoing uncertainty regarding the economy’s stability, the stakes are high. Will Bernanke unveil a new round of monetary stimulus? “If the Fed is indeed considering another unconventional policy route, they must embrace an approach of ‘shock and awe,’” advised Russell Jones, Global Head of Fixed Income Strategy at Westpac Institutional Bank, in an interview with CNBC. Meanwhile, let’s examine the notable movements across major asset classes.
● Extreme Money: Masters of the Universe and the Cult of Risk
By Satyajit Das
Review via The Globe and Mail
In light of concerns regarding the U.S. losing its triple-A credit rating, Satyajit Das, a global risk specialist based in Sydney and author of “Extreme Money: The Masters of the Universe and the Cult of Risk,” posits that the greater threat to the global economy lies in Europe. Das, well-regarded for predicting the collapse of toxic credit derivatives during the 2008 financial crisis, now warns of emerging dangers that jeopardize the future of the 17-nation euro zone.
I’ll be taking the remainder of the week off (my boss is quite generous), so regular updates may be limited. However, I will return to the Capital Spectator headquarters on Monday morning to resume our usual activities.
The debate surrounding the potential for a new recession in the U.S. is ongoing, fueled by mixed economic indicators from recent reports. Surprisingly, the most compelling reason for optimism lies in the labor market. Initial jobless claims, a crucial leading indicator, are once again trending in a favorable direction, despite being at high levels. As I noted last week, the annual percentage decline in the raw data does not typically correlate with widespread economic contraction, which is positive news. Nevertheless, confidence remains precarious, and the upcoming update will be monitored closely. A single negative report could send investors scrambling for cover again.
Following President Obama’s inauguration, many viewed him as a modern-day FDR. However, in today’s context, could the comparison to Hoover be more applicable? This perspective is gaining traction when viewed through the lens of monetary policy, according to one expert.
Texas Governor Rick Perry is campaigning for the presidency and is eager to highlight his state’s relatively robust economic performance. However, to what extent should we hold politicians accountable for economic outcomes? This question often elicits a warm but complex response, highlighting the intricate relationship between politics and economics. Politicians often bear the blame when the economy falters, but should they also share the credit when things go well?
Is the concept of a rebalancing bonus merely a myth? Several readers responded to a recent brief mention of the topic, asserting that the claim of rebalancing providing a guaranteed performance premium over a passive portfolio is indeed flawed. The truth is heavily dependent on the timing and the method of rebalancing, alongside the portfolio’s composition. While this caveat is not particularly surprising, it’s relevant in the quest for effective investment strategies. In finance, there are no certainties, largely due to the unpredictable nature of the future. Even “cash” carries its own inherent risks.
● Pinched: How the Great Recession Has Narrowed Our Futures and What We Can Do About It
By Don Peck
Interview with the author via Marketplace/NPR
In his work, author Don Peck delves into how the Great Recession has impacted Americans both financially and psychologically, and explores the long-term consequences of these changes on American society.
“The average duration of unemployment now exceeds nine months. Many individuals have faced unemployment for a year, two years, or longer. Peck argues that what Gus’s story illustrates is not just the financial ramifications of unemployment but also the psychological toll. Research indicates that being unemployed for six months or longer is one of the most detrimental experiences psychologically, comparable to losing a spouse. Currently, millions in the U.S. are in this predicament, with millions more potentially following suit as recovery remains elusive. One pressing question for the U.S. is not just how to achieve recovery but what strategies we can implement to reintegrate those who have become chronically unemployed, lost vital skills, and whose behaviors have transformed due to prolonged unemployment.”
Some analysts indicate that a recession may be on the horizon, but retail sales figures tell a different story. The latest report on consumer spending for July reveals surprising resilience. According to the U.S. Census Bureau, seasonally adjusted retail sales increased by 0.5% last month, marking the second consecutive month of growth. Aside from a minor dip in May, retail sales have not shown any declines for over a year.