• The first half of 2023 was record-setting for gold sales
• Gold demand is predicted to continue rising thru to 2024
• Demand is driven by gold’s safe haven qualities and the de-dollarization trend

Gold Continues Its Upward Trajectory

Gold is having a very good year and the trend is likely to continue to 2024. The global nature of the gold market has allowed different sectors and locations to support an overall rise in gold demand and prices. Central bank, investment, and jewelry demand are creating a supportive environment for gold prices. The London Bullion Market Association (LBMA) gold price averaged $1,976 during the second quarter – a record high. That’s 6% higher than last year and 4% higher than the previous record in 2020.¹

Jewelry

Jewelry consumption improved despite high gold prices with a 3% increase over 2022. The overall rise was attributed to rebounding sales in China and Turkey. Analysts foresee holiday related spending supporting a continued rise to the end of the year.²

Investment

Bar and coin investment increased by 6% in H1 (the first half of the year). The increase was largely due to markets in the US and Turkey. In the US, investment demand was fueled by the banking crisis and the volatile debt ceiling negotiations. Momentum carried the market through to the end of the first half of the year.³

Over the counter investment (buying directly from a dealer) jumped in the second quarter. Sales hit 335 tons, with gold coins leading the way in year-over-year retail growth. In China, bar and coin investment grew 32% from last year.⁴

Meanwhile, US investors continued to show a strong appetite for bars and coins. H1 demand was 65 tons, the strongest half-yearly total since 2008 (the year of Global Financial Crisis). The collapse of Silicon Valley Bank and Signature Bank created shockwaves that sent investors scrambling to buy physical bullion products. US Mint coin sales reflect this upsurge in demand. Sales of American Eagles and Buffaloes reached almost 1 million ounces by the end of June. Compare that with annual sales of 1.4 million ounces over the full year 2022.⁵

There is a sense that investment interest remains piqued. Demand will likely rise as we approach the 2024 presidential election campaigns and if any signs of banking instability re-emerge.

Central Banks

The World Gold Council’s latest Gold Demand Trends report shows that gold benefited from record central bank buying in the first half of the year. Central bank buying in H1 reached 387 tons. Buying slowed down in the second quarter, but a strong first quarter sealed the deal. Gold purchases are widespread among emerging and developed countries.

⁶

Massive central bank purchases are continuing the trend from last year. In 2022, central banks added an eye-catching 1,136 tons of gold, worth about $70 billion, to their stockpiles. According to World Gold Council data, it was the largest amount bought, until this year, since 1950.⁷

Analysts forecast central bank buying will remain strong thru to the end of the year. The global de-dollarization wave is pushing demand. Sanctions on Russia have other countries reducing their reliance on the dollar. They are turning to gold for reserves instead.

Chinese analysts noted that due to an accelerating global de-dollarization trend, the current “gold rush” shows no signs of stopping. It is expected to continue in the coming months. As of June 2023, gold reserves held by the People’s Bank of China (PBC) reached 1,926 tons. That marked an increase of 680,000 ounces compared to the previous month. This makes the eighth consecutive month of rising gold purchases by the PBC.⁸

The US Federal Reserve’s aggressive interest rate hikes since early 2022 have exerted significant devaluation pressure on non-dollar currencies. Under this circumstance, only increasing gold reserves can help other countries stabilize the exchange rates of their currencies, said Chinese bank analysts.

Rating agency Fitch Ratings’ recent downgrade of the US credit rating has also sped up the de-dollarization movement. This surge in investor risk aversion could further drive-up gold prices.

Louise Street, Senior Markets Analyst at the World Gold Council, commented:

“Record central bank demand has dominated the gold market over the last year and, despite a slower pace in Q2, this trend underscores gold’s importance as a safe haven asset amid ongoing geopolitical tensions and challenging economic conditions around the world.”⁹

China

For China, increasing gold reserves is also a means to help internationalize the yuan. Sufficient gold will give the yuan the backing and credibility it needs to become a dominant international currency. They aim to lure other central banks to start using the yuan for settling international trade instead of the dollar.

Recession

A looming global recession will also spur greater gold demand. Street said, “Looking ahead to the second half of 2023, an economic contraction could bring additional upside for gold, further reinforcing its safe-haven asset status. In this scenario, gold would be supported by demand from investors and central banks, helping to offset any weakness in jewelry and technology demand triggered by a squeeze on consumer spending.”¹⁰

Conclusion

The data clearly points to a potential continued upward trajectory for gold. The precious metal is sought by investors and central banks alike for its inherent safe haven qualities. You can take advantage of those qualities with a Gold IRA from American Hartford Gold. Contact us today at 800-462-0071 to learn more.

Notes:
1. https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q2-2023
2. https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q2-2023
3. https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q2-2023
4. https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q2-2023
5. https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q2-2023/investment
6. https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q2-2023/chart-gallery
7. https://www.globaltimes.cn/page/202308/1295753.shtml
8. https://www.globaltimes.cn/page/202308/1295753.shtml
9. https://finance.yahoo.com/news/gold-demand-trends-gold-continues-060000243.html
10. https://finance.yahoo.com/news/gold-demand-trends-gold-continues-060000243.html

• Despite trader optimism, economists point to strong recession indicators
• The recession has been delayed by stimulus money and rate hike effect lag
• The S&P 500 potentially faces more than a 30% drop

Indicators Still Point to Recession

When it comes to recession, bullish economists are eager to say, “I told you so,” pointing to low unemployment, strong consumer spending and an S&P 500 rally. But top Wall Street strategists believe now is not the time to gloat. A recession is on the way.

Forecasters began warning of recession and a stock market sell off back in April 2022. By October 2002, 65% of economists said recession would arrive in 12 months. They based this on the Fed’s rapid rate hikes. The Fed’s goal was to tame record inflation by contracting the economy. The Fed raised rates from near zero to 5.5%. This hiking cycle is the fastest and most aggressive since the early 1980s. Since World War 2, 80% of Fed hiking cycles have resulted in a recession.¹

As the bulls point out, the economy seems to have avoided the drop in earnings and rise in unemployment – so far. The reason for this, according to economists, is due to the lingering effects of the massive fiscal and monetary stimulus efforts during the COVID-19 pandemic. As well as the long lag time before the Federal Reserve’s rate hikes filter through to the economy. Even Fed chair Powell admitted as such. He said, “We have covered a lot of ground, and the full effects of our tightening have yet to be felt.”²

There was nearly $5 trillion in stimulus disbursed. It went to households and businesses, as well as state and local governments. The cushion allowed people to keep spending and ignore higher interest rates. But that is starting to change. Cash reserves are being used up. The number of Americans falling behind on credit card debt is on the rise. Credit card delinquencies have almost doubled since 2021. Auto loan and mortgage delinquencies are also on the rise.

And though inflation seems to have plateaued, prices haven’t come down. Consumers will soon be forced to cut back on spending. Tom Essaye is the founder of Sevens Report Research. He explains it this way – “People get very excited about CPI and say, ‘Hey, CPI went up only 0.1% over the past month and it’s only up 3% over the past year. Well, think about that in practical terms. If I go to buy my kids a bag of Skittles, in 2019 it cost $0.75. Now it costs $1.50. Am I supposed to get excited because next year it costs $1.55?”³

Another reason a recession is considered imminent is the lag time between rate hikes and their effects. This is visible in the manufacturing sector. Industrial production is starting to trend downward. The Institute for Supply Management’s Purchasing Managers Index shows there is widespread worry across the industry. The downward trend reflects dropping consumer demand. Manufacturing is considered a thermometer for the broader economy.

Another lagged effect of the rate hikes is the impact of tighter lending standards. A recent survey showed more than half of banks are making it harder for businesses to get loans. Banks are growing more concerned about borrower’s ability to pay them back. These loans are vital for companies to grow and pay employees. When the money stops, businesses contract and unemployment rises.

Reliable Recession Signal

Economists point to the Treasury yield curve as evidence that a recession is on the way. The Treasury yield curve measures the different interest rates that are paid out on various bonds issued by the US government. Usually, the interest rate on short-dated Treasuries is lower than yields on far-out bonds like the 10-year Treasury. But when that flips and interest rates on short-term Treasuries are higher than their long-term cousins, it is known as a yield-curve inversion. Since the 1960s, the indicator has a perfect track record of preceding recessions.

⁴

The message of an inverted yield curve is that while interest rates are high now, in the future, the rate of economic growth and inflation will be slower. Interest rates will then be lower. Historically, it has taken a recession to realize such a scenario. The extent of the current inversion is extreme by historical standards. It is at its widest gap since the 1982 recession.⁵

Recession Impact and Recourse

If the recession is mild, analysts see the S&P 500 likely falling as much as another 13%. But in the past 13 recessions, the S&P 500 has dropped an average of 32%, as noted by the Royal Bank of Canada.⁶

People can choose to remain optimistic and hope that there will be a soft landing with no recession. Or they can see the financial data and prepare for an economic downturn. methods One of preparation is shifting part of your portfolio into recession resistant assets like physical precious metals. In fact, the Gold IRA from American Hartford Gold is designed to shield portfolio value from recession. Contact us today at 800-462-0071 to learn more.

Notes:

1. https://www.businessinsider.com/us-economy-still-headed-for-recession-stock-market-crash-2023-8
2. https://www.businessinsider.com/us-economy-still-headed-for-recession-stock-market-crash-2023-8
3. https://www.businessinsider.com/us-economy-still-headed-for-recession-stock-market-crash-2023-8
4. https://www.businessinsider.com/us-economy-still-headed-for-recession-stock-market-crash-2023-8
5. https://www.morningstar.co.uk/uk/news/238448/wait-is-the-bond-markets-recession-indicator-broken.aspx
6. https://www.businessinsider.com/us-economy-still-headed-for-recession-stock-market-crash-2023-8

• Moody’s and Fitch Ratings downgraded the credit rating of the banking industry
• The downgrade was due to high interest rates and growing risk of bank failures
• Experts turn to physical precious metals as banks and the government become worse stores of wealth

Banking Industry Downgraded

The phrase “like money in the bank” is taking on a new meaning nowadays. The once secure banking industry is growing increasingly riskier. Bank stability is being challenged with high interest rates, rising deposit rates and slumping profitability. Now they can add a rating downgrade to their list of troubles. On the heels of a US credit downgrade, a depreciating financial industry threatens to undermine the broader economy.

Last week, Moody’s Investment Services downgraded the credit rating of 10 mid-sized banks by a single notch. They cited growing financial risks and strains that could erode their profitability. They also warned of a review of six other lenders and assigned a negative outlook to 11 other banks.

Moody’s actions come after a banking crisis that started in March with the sudden collapse of Silicon Valley Bank. Once the nation’s 16th largest bank, their depositors grew fearful of the bank’s solvency and made a classic bank run. Signature Bank and First Republic Bank soon followed, leading to more concerns about the banking industry’s stability.

Moody’s downgrade is on the heels of one from Fitch Ratings. In June, Fitch lowered the banking industry to AA- from AA. Fitch Ratings is now warning the banking industry could be downgraded again from AA- to A+. If that happens, Fitch would be forced to reevaluate ratings on each of the more than 70 banks it covers. Shares of JPMorgan, Bank of America and Citigroup fell on news of the warning.

Downgrade Meaning

Banks rely on bond sales to help fund their operations. A downgrade makes those issuances more expensive. That’s because Investors demand more return to own lower rated bonds. As a result, costs increase for banks and profits go down.

Impact of Fitch Downgrade

Another Fitch downgrade creates a new problem for banks. If the industry’s score is downgraded to A+, then it would be lower than some of its top-rated lenders. The country’s two largest banks by assets, JPMorgan and Bank of America, would likely be cut to A+ from AA-. This is because banks can’t be rated higher than the environment in which they operate. Which in turn triggers downward adjustments for their smaller rivals. Weaker lenders would be moved closer to non-investment grade status.

Tough Timing

Regulators want banks to issue more bonds as they become more expensive for the banks. The FDIC, Federal Reserve and Office of Comptroller of the Currency are trying to stop the long simmering banking crisis from boiling over. They want to prevent any future bank runs. Regulators want the banks to issue more long-term debt to stabilize them. The long-term debt is meant to absorb losses if the bank fails. It is meant to make it easier for banks to hold onto depositors and slow down a run.

Role of Interest Rates

The Federal Reserve rapidly raised interest rate to fight inflation. Rates went from almost zero to 5.5% within a year.

¹

Minneapolis Federal Reserve President said the risk is that if inflation is not completely under control, the Fed may have to raise rates further. Banks “might face more losses than they currently face today.” According to CME Group’s FedWatch Tool, market participants believe the Fed will hold interest rates near their current levels well into the first half of next year. They want to bring inflation down to the central bank’s 2% target.²

Prolonged higher interest rates could force Fitch to go through with the downgrade. Record high rates put extreme downward pressure on the industry’s profit margin. In addition, higher rates lead to more defaults. The more defaults, the more likely the downgrade is going to happen.

The collapse of the commercial real estate market is also threatening small and mid-size banks. They are the primary lenders in that industry. Small banks hold 67% of all commercial real estate loans. Developers typically only paid the interest on real estate loans. They would refinance when the principle came due. But high interest rates are making that unaffordable. As a result, there is an exponential increase in defaults. These nonpayments are hammering the bottom line of small banks. ³

Follows US Downgrade

Earlier this month, Fitch Ratings downgraded the credit rating of the United States from “AAA” to “AA+.” Fitch cited the nation’s growing debt and continued partisan standoffs over the debt limit. Fitch Ratings said these political standoffs have prompted spiraling national debt and a lack of confidence in the US government to manage it.

Moody’s and Fitch are exposing an unwelcome truth about the banking industry and the United States government. They are both becoming more unstable. Once solid secure repositories for investors, both banks and the US are becoming riskier and riskier investments. For those who are interested in securing their retirement funds, safe haven assets like precious metals offer a safer alternative. A Gold IRA from American Hartford Gold can preserve your wealth as the bedrock of the US (and world) financial system cracks. Contact us today at 800-462-0071 for a personalized gold solution.

Notes:
1. https://www.fool.com/investing/2023/08/15/moodys-downgrades-10-banks-heres-what-investors-ne/
2. https://finance.yahoo.com/news/why-bond-rating-downgrades-are-the-last-thing-banks-need-right-now-204145044.html
3. https://www.fool.com/investing/2023/08/15/moodys-downgrades-10-banks-heres-what-investors-ne/

• Credit Card debt hit a record-breaking $1 trillion
• High interest rates, increasing delinquencies and 401(k) hardship withdrawals signal a growing crisis
• Experts advise moving into secure long-term assets like physical precious metals

Credit Card Debt Hits Record Level

For the first time ever, American credit card debt has skyrocketed to a record-breaking $1 trillion. This alarming milestone sheds light on the increasing reliance on credit cards during these economically challenging times. Amidst rising living costs, credit cards have become lifelines for covering essential necessities such as food and fuel. The mounting debt has consequences for individuals and the country.

During the second quarter, credit card balances surged by a staggering $45 billion. They contributed to an overall household debt increase of $2.9 trillion since 2019. How consumers are managing debt is changing. A Bankrate.com analysis indicated that nearly 50% of individuals now carry debt from one month to the next. That marks a 39% increase from a year ago. The shift is tied to the surging cost of living. Credit cards are increasingly relied upon as a financial safety net.¹

²

This surge in debt is occurring s as interest rates reach a 22-year high. The average credit card is now charging an interest rate of over 20%. This figure marks a new record, surpassing the previous high of 19% set in 1991. Credit Karma has seen credit scores fall by an average of 13 points since the Fed started raising interest rates.³

Matt Schulz is the chief credit analyst for LendingTree. He emphasized the gravity of the situation. He said, “One trillion dollars in credit card debt is staggering. Unfortunately, it’s only going to go up from here. What’s driving it is inflation, higher interest rates and just generally how expensive life is in 2023.”⁴

As the cost of living continues to rise, Bank of America is reporting a surge in hardship withdrawals from their 401(k) accounts. They reflect the growing financial distress faced by individuals. This trend raises concerns about the sustainability of household financial situations. Schulz said, “There’s also only so much hard debt that people can handle before delinquencies really spike.”⁵

The latest New York Fed report highlights that new delinquencies are climbing after a period of historic lows. Credit card delinquencies have reached levels not seen since the first quarter of 2012.

The resumption of student loan payments is expected to add to the stress. A New York Fed research group wrote “rising balances may present challenges for some borrowers, and the resumption of student loan payments this fall may add additional financial strain for many student loan borrowers.”⁶

Impact of Credit Card Debt

While interest rates have reached unprecedented highs, it appears that more debt is languishing unpaid for months on end. As a result, personal debt is growing exponentially. It becomes harder and harder to pay off. Americans are becoming trapped in everyday debt with limited relief in sight. The rise in debt coincides with dwindling savings and the depletion of pandemic-era financial cushions. Cash balances in checking and savings accounts among around 9 million Chase customers have hit their lowest levels since April 2020.⁷

Economists anticipate a cutback in consumer spending as debt mounts. This can hasten the onset of a recession since 70% of the economy depends on consumer spending.

Influential figures like Elon Musk have voiced their concerns. Musk notes, “For a lot of people, they’re just really breaking even every month. In fact, if you look at the rise in credit card debt, they are, in fact, not breaking even every month, like credit card debt is — is looking kind of scary.”⁸

With credit card debt reaching unprecedented levels, surging interest rates, and depleting savings, the financial strain is evident across the board. This surge in debt unfolds amidst an ongoing banking crisis. The potential for massive defaults could further disrupt bank stability. The need for a balanced portfolio is becoming vital in these uncertain times. As individuals seek ways to preserve their wealth, many are turning to gold as a means of safeguarding their financial security. A Gold IRA can protect your funds from the nation’s growing debt crisis. Contact American Hartford Gold today at 800-462-0071 to learn more.

Notes:
1. https://www.cnn.com/2023/08/08/economy/us-household-credit-card-debt/index.html
2. https://www.cnn.com/2023/08/08/economy/us-household-credit-card-debt/index.html
3. https://www.foxbusiness.com/economy/credit-card-debt-hits-1-trillion-first-time-ever
4. https://www.foxbusiness.com/economy/credit-card-debt-hits-1-trillion-first-time-ever
5. https://www.foxbusiness.com/economy/credit-card-debt-hits-1-trillion-first-time-ever
6. https://www.cnn.com/2023/08/08/economy/us-household-credit-card-debt/index.html
7. https://finance.yahoo.com/news/elon-musk-warns-peoples-credit-150612177.html
8. https://finance.yahoo.com/news/elon-musk-warns-peoples-credit-150612177.html

• The “Buffet Indicator” is signaling that stocks are overvalued and due for a crash
• The crash could be caused by overvaluation, recession, and shrinking money supply
• Warren Buffet advises seeking safer long-term investments

Buffet Indicator Warning

As the Nasdaq saw remarkable gains exceeding 30%, and the S&P 500 has close to a 20% increase, an ominous warning emerged from the legendary investor Warren Buffett. His favorite market gauge, known as the “Buffett Indicator,” is flashing red signals. It is suggesting that stocks might be overvalued, and a potential crash is looming.¹

The indicator just hit 171%. It reflects the exuberance of investors betting on artificial intelligence, anticipated rate cuts, and a soft-landing scenario. Given Buffett’s endorsement of this gauge as “probably the best single measure” of stock valuations, his concerns have garnered attention. He is not alone in expressing caution about the stock market’s current state. As experts echo this warning, it becomes crucial to take appropriate measures to safeguard your retirement funds.

²

The indicator takes the total market capitalization of all actively traded US stocks. It then divides that figure by the official estimate for quarterly gross domestic product (GDP). Investors use it to compare the overall value of the stock market to the size of the national economy.

Buffet said stocks would be fairly valued at a 100% reading. You should aim at buying them at 70% or 80%. He warned it would be playing with fire to purchase them close to the 200% mark.

The gauge today is calculated using the Wilshire 5000 Total Market Index for the value of all traded stocks. The index jumped 22% this year. Market capitalization is now at $46.32 trillion.³ That was divided by the GDP estimate of $26.84 trillion from the Bureau of Economic Analysis. The result was a startling measure of 171%. The gauge proved accurate last year. It plummeted from over 210% in January 2022, to below 150% by September as stocks fell accordingly. ⁴

Reasons for a Crash

There are several reasons why the market could crash.

Overinflated valuations – as the Buffet Indicator show, stocks are expensive on an overall basis. Besides a period from 2020 to 2021, stocks haven’t been priced so high since the dot-com bubble in the early 2000s.

Recession forecasts – the Fed is saying a recession can be avoided and a ‘soft landing’ achieved. However, a recent Bloomberg survey found that 63% of economists still expect an economic downturn within the next 12 months. The stock market often begins to decline even before the economy does.⁵

Money supply – the M1 money supply includes all physical currency in circulation. The M2 money supply adds in deposits in savings or money market accounts. Since 1870, every single time the M2 money supply has fallen by 2% or more, a major economic downturn followed. In three cases, depressions occurred, including the Great Depression. As of now, the M2 money supply has dropped by more than 4%. If you believe history over economists, recession in on the way.

Warren Buffet and his namesake indicator aren’t alone in their negative forecast. John Hussman is President of Hussman Investment Trust and an asset-bubble expert. He thinks the S&P 500 risks a 64% collapse. This is due to extreme valuations and “unfavorable market internals.”

Hussman said stocks enjoyed an impressive rally in 2023. The S&P 500 has rallied 19% so far this year. That takes its gains since the end of 2008 – the year of the global financial crisis – to more than 400%. The price-earnings ratio of the index, one of the valuation metrics tracked by investors, has climbed to about 26 from last year’s lows near 19.⁶

Hussman attributes the rise to cooling inflation, fading recession fears, and growing interest in AI. He concludes a steep plunge in stocks is necessary to get market conditions back to normal. He summed up his prediction by saying, “Yes, this is a bubble in my view. Yes, I believe it will end in tears.”⁷

“Rich Dad, Poor Dad” author Robert Kiyosaki also warned about a collapsing market. He tweeted, “too many signs point to a severe stock market crash. If your future depends on stocks and bonds, please be careful, possibly ask for professional advice.” He continued, “Afraid depression coming.”⁸

What to Do

When it comes to protecting your financial future, forewarned is forearmed. Many are riding the current stock market wave, convinced good times are here again. But some of the world’s most preeminent investors are warning otherwise. Buffet says forget trying to time the market. He’s putting Berkshire Hathaway’s money in cash and long-term investments. The idea is to focus on the future. And one of the most secure long-term assets is physical gold. A Gold IRA from American Hartford Gold can protect the value of your portfolio from a crashing stock market. Contact us today at 800-462-0071 to learn more.

Notes:
1. https://www.fool.com/investing/2023/07/16/reasons-stock-market-sink-2nd-half-warren-buffett/
2. https://www.fool.com/investing/2023/07/16/reasons-stock-market-sink-2nd-half-warren-buffett/
3. https://markets.businessinsider.com/news/stocks/warren-buffett-indicator-ai-tech-stock-market-outlook-forecast-crash-2023-7
4. https://markets.businessinsider.com/news/stocks/warren-buffett-indicator-ai-tech-stock-market-outlook-forecast-crash-2023-7
5. https://markets.businessinsider.com/news/stocks/warren-buffett-indicator-ai-tech-stock-market-outlook-forecast-crash-2023-7
6. https://markets.businessinsider.com/news/stocks/stock-market-crash-sp-500-64-percent-john-hussman-bubble-2023-7
7. https://markets.businessinsider.com/news/stocks/stock-market-crash-sp-500-64-percent-john-hussman-bubble-2023-7
8. https://markets.businessinsider.com/news/stocks/kiyosaki-rich-poor-dad-stock-market-outlook-crash-economy-depression-2023-7