Both gold and silver prices have spiked dramatically higher over the last two weeks and accelerated their upward momentum over the last two days as per the gold dealers in Mumbai. Gold and silver prices have moved to new multiweek highs in response to two major events that have confirmed what the American public has been acutely aware of for some time. Firstly,
Recession – The outlook has darkened significantly since April. The world may soon be teetering on the edge of a global recession, only two years after the last one. Multilateral cooperation will be key in many areas, from climate transition and pandemic preparedness to food security and debt distress. Amid great challenges and strife, strengthening cooperation remains the best way to improve economic prospects and mitigate the risk of geoeconomics fragmentation.
These latest reports indicate that the Federal Reserve’s aggressive rate hikes have been ineffective in reducing “headline” and core inflation. Recent rate hikes by the Federal Reserve have taken the Fed funds rate from near zero to 2.25% leading to only one major accomplishment if you can call it that. They have effectively contracted the U.S. economy for the last two consecutive quarters.
It is emphatically clear that the United States economy has met the definition of a recession regardless of what the government wants us to believe. Therefore, yesterday and today’s extremely robust move in both gold and silver were highly warranted and long overdue.
Interest rate hike – after Fed is done with consecutive hikes of 0.75%, the markets now await PPE data which, for the month of July, is expected to be +0.5%. with US advance GDP data. There was a late rally in US markets which otherwise were flat during Friday. Gold emerged to be a winner after Fed Powell’s first word. These are the significant time for traders to capture unusual profits.
The US Federal Reserve on Wednesday raised interest rates by 75 basis points to 2.25-2.5% as markets expected. Fed Chair Jerome Powell sounded less hawkish in his press conference, saying the final rate hike decision at the September meeting will be determined by the incoming economic data
The global economy, still reeling from the pandemic and Russia’s invasion of Ukraine, is facing an increasingly gloomy and uncertain outlook. Many of the downside risks flagged in our April World Economic Outlook have begun to materialize.
Higher-than-expected inflation, especially in the United States and major European economies, is triggering a tightening of global financial conditions. China’s slowdown has been worse than anticipated amid COVID-19 outbreaks and lockdowns, and there have been further negative spillovers from the war in Ukraine. As a result, global output contracted in the second quarter of this year.