Central banks worldwide continue to buy gold, and bullish sentiment persists.
Strong US economic data suppressed the rising gold prices this week, ultimately causing prices to fall to their lowest point in over two weeks, closing at $1958.97 per ounce. Although gold prices surged and then fell this week, the market is still full of bullish sentiment towards gold. Ryan McIntyre, managing partner of Sprott Inc., recently stated that there is no doubt that prices will start to rise again. "I've always considered physical gold to be an important strategic allocation, a constant in your portfolio," he explained. The Federal Reserve announced another 25 basis point interest rate hike on July 26th, raising the target range for the federal funds rate to between 5.25% and 5.5%, the highest level in 22 years. Sergio Rossi, professor of macroeconomics and monetary economics at the University of Fribourg in Switzerland, said this decision will lead to a "severe recession" in the US in the near future. Rossi stated that the Fed's rate hike was not unexpected, as the US has yet to reach its 2% annual inflation target. However, with the increasing number of non-performing loans at financial institutions leading to record-high debt, the rate hike "will have a negative impact on the US and the global economy." Rossi criticized that raising the federal funds rate to 5.25%-5.5% will increase inflation rather than curb it. Rossi analyzed that as bank loan interest rates are higher, more and more small and medium-sized enterprises will raise prices for goods and services, while higher interest rates will lead to a significant reduction in consumer loans, thus suppressing economic growth. The rate hike decision will further lead to an appreciation of the US dollar in the foreign exchange market, negatively impacting US exports. Rossi said that all these factors will lower the level of investment in the US economy by businesses, further negatively impacting employment and wages for middle-class workers in the US, leading to reduced consumption among the middle class. More seriously, it may lead to a "vicious" cycle, pushing the US into a "severe recession," which will inevitably spread to other Western economies suffering from inflation. According to reports, California Bank is acquiring PacWest Bancorp. In a statement, it said the transaction is an all-stock deal, and the combined bank will have approximately $36 billion in assets, less than PacWest Bancorp's total assets at the end of March. The transaction is expected to close by the end of this year or early 2024. JPMorgan Chase is reportedly buying nearly $2 billion in mortgages to help facilitate the acquisition. Separately, Bill Gross, the former chief investment officer of Pacific Investment Management Company, known as the "Bond King," said he is selling most of his regional bank stocks. Three months ago, he aggressively bought the dip after the banking crisis erupted in March. He said on Twitter on Wednesday that this investment decision "made a lot of money," and now it's "time for me to reduce my holdings by 80%." In the early hours of July 27th, Beijing time, the Federal Reserve announced its July interest rate decision, raising interest rates by 25 basis points. This is the 11th rate hike in this cycle since March 2022. After this rate hike, the target range for the US federal funds rate has risen to 5.25%～5.50%. Meanwhile, the pace of gold purchases by global central banks continues. A World Gold Council survey in May showed that 24% of central banks worldwide plan to increase their gold reserves in the next 12 months. Compared to the US dollar, central banks are more optimistic about the future role of gold, with 62% of respondents saying gold will account for a larger share of total reserves, compared to 46% last year. Hu Jie, a professor at the Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University, said that the momentum of gold purchases by central banks this year has not weakened overall. The direct driving factor is related to the persistently high inflation in some countries. Currently, the global economic situation, interest rate levels, and asset prices are still relatively volatile, and views are also quite divergent in some asset markets. This makes central bank reserve asset management more challenging. Appropriately increasing the proportion of gold is a reasonable choice for central banks at the current economic stage.
Time:
2023-07-31 09:27
Strong US economic data suppressed gold prices, which had been rising steadily throughout the week, ultimately falling to their lowest level in over two weeks. The price closed the week at $1958.97 per ounce.
Although gold prices surged and then fell this week, the market is still full of bullish sentiment towards gold. Ryan McIntyre, managing partner at Sprott Inc., recently stated that there is no doubt that prices will start to rise again. "I've always considered physical gold to be an important strategic allocation, never to be changed in your portfolio," he explained.
On July 26, the Federal Reserve announced another 25 basis point interest rate hike, raising the target range for the federal funds rate to between 5.25% and 5.5%, the highest level in 22 years. Sergio Rossi, professor of macroeconomics and monetary economics at the University of Fribourg in Switzerland, said this decision will lead to a "severe recession" in the US in the near future.
Rossi said the Fed's rate hike was not unexpected, as the US has yet to reach its 2% annual inflation target. However, with the increasing number of non-performing loans at financial institutions leading to record-high debt, the rate hike "will have a negative impact on the US and the global economy." Rossi criticized that raising the federal funds rate to 5.25%-5.5% will increase inflation rather than curb it. Rossi analyzed that because bank loan interest rates are higher, more and more small and medium-sized enterprises will raise prices for goods and services, while higher interest rates will lead to a significant reduction in consumer loans, thus suppressing economic growth.
The rate hike decision will further lead to an appreciation of the US dollar in the foreign exchange market, negatively impacting US exports. Rossi said that all these factors will lower the level of investment in the US economy by businesses, further negatively impacting employment and wages for middle-class workers in the US, leading to lower consumption levels among the middle class. More seriously, it could lead to a "vicious" cycle, pushing the US into a "severe recession," which will inevitably spread to other Western economies suffering from inflation.
It is reported that California Bank is acquiring PacWest Bancorp. In a statement, it said that the transaction is being conducted entirely in stock, and the merged bank will have approximately $36 billion in assets, less than PacWest Bancorp's total assets at the end of March.
The transaction is expected to close by the end of this year or early 2024. It is understood that JPMorgan Chase will purchase nearly $2 billion in mortgages to assist with the acquisition.
Separately, Bill Gross, the former chief investment officer of Pacific Investment Management Company, known as the "Bond King," said he is selling most of his regional bank stocks. Three months ago, he aggressively bought the dip after the banking crisis erupted in March. He said on Twitter on Wednesday that this investment decision "made a lot of money," and now it's "time for me to reduce my holdings by 80%. "
In the early hours of July 27, Beijing time, the Federal Reserve announced its July interest rate decision, announcing a 25 basis point rate hike. This is the 11th rate hike in this round of rate hikes by the Federal Reserve since March 2022. After this rate hike, the target range for the US federal funds rate has risen to 5.25% to 5.50%.
Meanwhile, central banks around the world are continuing their gold-buying spree. A World Gold Council survey in May showed that 24% of central banks globally plan to increase their gold reserves in the next 12 months. Compared to the US dollar, central banks are more optimistic about the future role of gold, with 62% of respondents saying gold will account for a larger share of total reserves, compared to 46% last year.
Hu Jie, a professor at the Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University, said that the momentum of gold purchases by central banks has not weakened this year. The direct driving force is related to the still high inflation in some countries. Currently, the global economic situation, interest rate levels, and asset prices are still relatively volatile, and views are also quite divergent in some asset markets. This makes central bank reserve asset management more challenging. Appropriately increasing the proportion of gold is a reasonable choice for central banks at the current economic stage.
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