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But experts say the new system could lay the groundwork for the infrastructure needed for a potential central bank digital currency (CBDC) in the U.S.
“This is a payment system, not a digital token or a CBDC, but it is something that can be used to facilitate the creation of a CBDC,” said Jim Bianco, president of Bianco Research.
“If FedNow does indeed become a programmable CBDC, then it could theoretically be used to block payments for items the government doesn’t favor or to cut out people from the financial system who are seen as threatening in some way to governing authorities, aka, political opponents,” said Dave Weisberger, CEO and co-founder of CoinRoutes said. “In that situation, things could get dystopian very quickly.”
“Cynics see the launch of Fednow to be a move toward an eventual central bank digital currency and a cashless society,” Luorio said. ”They argue that the government having access to every transaction opens the door to authoritarianism and abuse.”

The U.S. Federal Reserve denies that its new instant payments service, FedNow, is in any way tied to the digital asset space.

But experts say the new system could lay the groundwork for the infrastructure needed for a potential central bank digital currency (CBDC) in the U.S. And so this week’s announcement has led to a fresh airing of warnings about potential privacy and control risks around a digital dollar.

The Fed on Thursday officially launched the service, which makes the process of sending payments in the U.S. almost instant, as opposed to the few hours or days that sending money from account to account currently takes.

Some crypto enthusiasts saw the release as a form of validation because the FedNow project adopts a key goal of the digital asset industry: moving money around easily and quickly, and at any time of day or the week, even if banks are closed. FedNow will operate 24 hours a day.

“This is a payment system, not a digital token or a CBDC, but it is something that can be used to facilitate the creation of a CBDC,” said Jim Bianco, president of Bianco Research.

But the FedNow might be prone to some of the same concerns shadowing CBDC development.

Some lawmakers and political leaders, especially among Republicans, have expressed concerns that a CBDC might be prone to surveillance by authorities, or that they might be able to censor transactions. Current Florida Governor and GOP presidential hopeful Ron DeSantis, for example, has repeatedly said that he would ban a CBDC if elected president as he sees it as a form of “government-sanctioned surveillance.”

“If FedNow does indeed become a programmable CBDC, then it could theoretically be used to block payments for items the government doesn’t favor or to cut out people from the financial system who are seen as threatening in some way to governing authorities, aka, political opponents,” said Dave Weisberger, CEO and co-founder of CoinRoutes said. “In that situation, things could get dystopian very quickly.”

Officials at the Fed have been studying the potential for a government-issued digital currency, and Fed chair Jerome Powell himself has repeatedly vouched for the exploration. As preparation for the G20 Summit in India earlier this week, The Bank of International Settlement published a report laying out central banks’ efforts to prepare for a CBDC and the benefits of such.

“The problem of course is that the government is going to have to bit ways over the digital token and they’re going to be able to permission them and censor them for certain types of people in certain types of ways, or certain types of transactions,” said Bianco.

Even banks themselves are skeptical about FedNow, criticizing the lack of leadership structure or a clear business plan, all while the system is financed through taxpayer money, the Bank Policy Institute (BPI), wrote in a blog post. Other experts have point out that some banks benefit from slow payments and make it part of their business model.

It may be a case of strange bedfellows – with banks and blockchain purists – incumbents and disruptors – united in their skepticism of FedNow.

Jim Luorio, managing director of TJM Institutional Services and a veteran futures and options trader, noted that bitcoin (BTC) was invented partly as an alternative to the heavily regulated and monitored traditional financial system.

“Cynics see the launch of Fednow to be a move toward an eventual central bank digital currency and a cashless society,” Luorio said. “They argue that the government having access to every transaction opens the door to authoritarianism and abuse.”

Story by Helena Braun 7-22-23 Redacted shorter to keep to important points and bullet points added by HGG https://www.coindesk.com/business/2023/07/21/federal-reserves-fednow-launch-triggers-fresh-speculation-over-digital-dollar/

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Silver gained strong upside momentum as gold/silver ratio declined from 84 to 78.50.
The Fed may soon make its last rate hike in this cycle, so demand for precious metals could grow as traders prepare for future rate cuts.
A combination of positive catalysts could push silver towards the $30 level.

Falling gold/silver ratio, rising demand for precious metals, and technical factors may push silver towards multi-year highs.

Silver has recently rallied towards the $25 level as the gold/silver ratio declined below 79. The significant decline in the gold/silver ratio served as the main catalyst for silver’s rally as there were no big moves in gold markets.

Back in May, I highlighted a bullish scenario for silver, which implied a gold/silver ratio of 75. At this point, it looks like the gold/silver ratio is ready for a serious test of the important support near the 78 level. A successful test of this support level will push the gold/silver ratio toward the yearly lows at 75, which will be bullish for silver. From a big-picture point of view, the gold/silver ratio is moving towards the levels that were seen at the start of the year.

The Fed may soon make its last rate hike in this cycle, which will be bullish for precious metals as traders will start to prepare for future rate cuts in 2024. High-interest rates are bearish for precious metals that pay no interest. However, demand for precious metals stays strong despite rate hikes, which shows that fundamentals are bullish.

From the technical point of view, silver’s attempts to develop an upside trend were stopped in the $25 – $26 range in 2022 and 2023. A combination of positive catalysts, including the continuation of the current trend in the gold/silver ratio and the end of the rate hike cycle, could push silver above $26. Such a move will likely trigger a buying wave that may push silver toward the 2020 highs near the $30 level.

Story by Vladimir Zernov - Redacted shorter to keep to important points and bullet points added by HGG https://www.fxempire.com/news/article/silver-price-may-test-30-this-year-1361864

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Central banks worldwide are buying more gold to protect themselves from high inflation and financial risks.
The fear of sanctions similar to those imposed on Russia has prompted nations to bring their gold reserves back home.
While paper-gold ETFs & miners have experienced significant outflows in recent years… demand for physical gold has surged pushing the gold price higher.

Gold, the timeless symbol of wealth, power, and stability, is making a huge statement in today's uncertain world. Central banks worldwide are buying more gold to protect themselves from high inflation and financial risks. This trend not only serves as a financial strategy but also sends a message about geopolitics. The metal offers a respectable hedge against inflation, with the added benefit of circumventing sanctions.

Gold has always been a reliable safeguard against inflation, market volatility, and geopolitical unrest. Central banks are now acquiring more gold to navigate global uncertainties. The fear of sanctions, similar to those imposed on Russia, has prompted nations to bring their gold reserves back home.

As we face a changing world, The World Gold Council states that 68% of central banks now prefer to keep their gold reserves within their own borders, a significant increase from 50% in 2020. This percentage is expected to rise to 74% or more in the next five years due to escalating global tensions. Central banks and individual investors are moving away from gold derivatives and exchange-traded funds (ETFs) in favor of physical gold, prioritizing safety and control over convenience.

This shift of countries bringing their gold reserves back on shore is a step towards financial independence and financial caution. It is a response prompted by the desire for self-preservation, triggered by events such as the G7 sanctions on Russia's central bank. The rising demand for gold from central banks and retail investors alike has added to its allure.

While paper-gold ETFs & miners have experienced significant outflows in recent years, countries like Singapore, India, and those in the Middle East have joined the gold rush, contributing to its demand and higher prices of the real physical asset.

This shift in gold reserves from foreign repositories to domestic vaults marks a new era in central banking. It also impacts the gold lending market, as central banks lend less to other countries’ repositories in order to ‘hold at home’.

In summary, central banks worldwide are bringing their gold reserves back home as a strategic response to uncertain times. This shift towards reclaiming their gold reflects concerns about geopolitical risks and a desire for self-preservation. While the gold market experiences fluctuations, the trend of bringing gold back to their own countries continues, reshaping the landscape of central banking.

Story by Harvard Gold Group Sources: World Gold Council & MSN

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41% of surveyed central banks and sovereign funds expect to increase gold holdings in the next three years.
Sweeping sanctions against Russia that expelled the country from the US dollar-dominated global financial system spooked other countries so much that they are now lining up backup currencies for trade.
But central banks appear to be less willing to keep their physical gold assets in storage overseas, with just under 70% of respondents now keeping the reserves at home. This percentage is up from 50% in 2020, per the survey.
Central banks snapped up a record 1,136 metric tons of gold in 2022.

(Market Insider) Central banks and sovereign wealth funds are increasingly calling their gold assets back home amid concerns that their assets abroad could be frozen — in a situation similar to Russia after it invaded Ukraine — according to a survey of central banks published on Sunday.

About 41% of survey respondents expect to increase gold allocation in their portfolios over the next three years, according to asset manager Invesco, who surveyed 85 sovereign investors and 57 central banks between January and March.

Of this group, two in five said this is because they are concerned about their assets being frozen — as demonstrated by Western sanctions against Russia.

Central banks around the globe snapped up a record 1,136 metric tons of gold last year, marking a 12th straight year of increasing in gold purchases, the World Gold Council said in a February report.

But central banks appear to be less willing to keep their physical gold assets in storage overseas, with just under 70% of respondents now keeping the reserves at home. This percentage is up from 50% in 2020, per the survey.

An unnamed central bank in the West told Invesco that the institution increased its gold holdings eight to 10 years ago and used to hold it in London. "But we've now transferred our gold reserves back to our own country to keep it safe — its role now is to be a safe-haven asset," said the central bank.

Central banks' increased purchase of gold also follows a global shift away from the US dollar as the world's reserve currency.

The US dollar has been the world's reserve currency since the Second World War, playing a crucial role in the world's trade and financial system. But sweeping sanctions against Russia that expelled the country from the US dollar-dominated global financial system spooked other countries so much that they are now lining up backup currencies for trade.

Still, central banks generally agree there is no clear alternative to the greenback as the world's dominant reserve currency, according to the Invesco survey.

The Chinese yuan isn't really the answer in the short-term too, the survey indicates. Just 18% of respondents said they think the yuan will become a "true reserve currency in five years" — down from 29% last year who agreed with the stance.

"People have been looking for alternatives to the dollar and euro for a long time and they would've gone to them already if there were any suitable alternatives," an unnamed central bank in an emerging market told Invesco.

Story by Huilend Tan Redacted shorter to keep to important points and bullet points added by HGG https://markets.businessinsider.com/news/currencies/dedollarizatioin-countries-central-banks-invesco-survey-gold-assets-repatriation-safekeeping-2023-7

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Gold has been gearing up for its breakout to $2,500 for the past 12 years, and it must now break the final resistance level to open up its "phenomenal" upside…
“All it takes for gold is to break through this $2,070 level ... From $1,920, gold can rally $600 in the next six to eight months easily."
From a technical perspective, gold can reach $2,500 an ounce quickly and then advance to $3,500 and $5,000. "This formation has been 12 years in the making … The upside is phenomenal,"
"[Collapse] is the final outcome in any fiat money system … The only question is how long it takes,"

(Kitco News) Gold has been gearing up for its breakout to $2,500 for the past 12 years, and it must now break the final resistance level to open up its "phenomenal" upside, according to Florian Grummes, Managing Director at Midas Touch Consulting.

"Since 2011, gold has been in some form of consolidation pattern," Grummes said. "All it takes for gold is to break through this $2,070 level ... From $1,920, gold can rally $600 in the next six to eight months easily."

The key question for the market is when gold will breach the $2,070 an ounce, Grummes told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News.

This could take anywhere between a few months to a year. "But it will catapult gold much higher over the next two to three years," Grummes noted.

From a technical perspective, gold can reach $2,500 an ounce quickly and then advance to $3,500 and $5,000. "This formation has been 12 years in the making … The upside is phenomenal," Grummes said.

On the downside, Grummes does not see gold falling much below $1,800 an ounce, adding that a move to the downside would not be larger than $50 is the most likely outcome.

At the time of writing, August Comex gold futures were trading at $1,914.70, down 0.64% on the day.

Pressure from the Fed

Gold's rally stalled in the second quarter of the year as the Federal Reserve turned out to be more hawkish than expected in the face of sticky inflation data. Gold came under pressure after Fed Chair Jerome Powell promised at least two more rate hikes and took rate cuts off the table for this year.

Grummes disagreed with the Fed's stance that more tightening would be needed. "At the end of the third or fourth quarter, the Fed would be forced to pivot … You are going to see more and more problems cracking up in the real economy over the next few months," he said. "And at some point, they will be forced to lower rates again."

Grummes also weighed in on the outlook for the U.S. dollar amid what he sees as a crack-up boom happening in the U.S. stock market.

"[Collapse] is the final outcome in any fiat money system … The only question is how long it takes," he said. "It's obvious that we have a break between the East and the West. There is a new cold war already going on, and the BRICS countries are trying to move away from the dollar. Things are accelerating, but it's a process that might take the next ten years."

Story by Anna Golubova & Michelle Makori Redacted shorter to keep to important points and bullet points added by HGG https://www.kitco.com/news/2023-07-07/This-catapults-gold-to-2-500-and-then-5-000-by-2026-Midas-Touch-Consulting-s-Florian-Grummes.html

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The Fed’s interest rate hikes have already precipitated a financial crisis.
The central bank created an economy that depends on artificially low interest rates and periodic quantitative easing. It simply can’t function in a high-interest-rate environment.
An economist at the Fed - According to their analysis, more than one-third (37%) of non-financial US companies are in financial distress.
Distressed means close to default. In other words, a deep recession.
To put this situation into perspective, consider the fact that there are more significantly distressed firms today than there were when the Fed tightened monetary policy prior to the financial crisis and the Great Recession.
The paper concludes that the high number of over-leveraged firms in distress “is likely to have effects on investment, employment, and aggregate activity that are stronger than in most tightening episodes since the late 1970s.”
In other words, the impacts of this tightening cycle could be worse than the Great Recession.

(SchiffGold) A note recently published by two Federal Reserve economists reveals a looming catastrophe.

The Fed’s interest rate hikes have already precipitated a financial crisis. The central bank managed to paper over that problem and get it out of the headlines with a bailout program. But it didn’t solve the problems. Banks continue to tap into the bailout loans as they struggle in this high-interest-rate environment.

And there are even bigger problems on the horizon.

As Peter Schiff put it, the Fed has screwed up everything that is a function of interest rates. With more than a decade of easy money, the central bank created an economy that depends on artificially low interest rates and periodic quantitative easing. It simply can’t function in a high-interest-rate environment. I have been saying that it’s only a matter of time before something else breaks.

It appears that economists at the Federal Reserve know this too.

In a note, Ander Perez-Orive and Yannick Timmer reveal that an unprecedented number of distressed companies could collapse due to the recent increase in interest rates.

According to their analysis, more than one-third (37%) of non-financial US companies are in financial distress.

The share of nonfinancial firms in financial distress has reached a level that is higher than during most previous tightening episodes since the 1970s.”

Distressed means close to default.

What does this mean for the economy?

Our results suggest that in the current environment characterized by a high share of firms in distress, a restrictive monetary policy stance may contribute to a marked slowdown in investment and employment in the near term.”

To put this situation into perspective, consider the fact that there are more significantly distressed firms today than there were when the Fed tightened monetary policy prior to the financial crisis and the Great Recession.

The paper concludes that the high number of over-leveraged firms in distress “is likely to have effects on investment, employment, and aggregate activity that are stronger than in most tightening episodes since the late 1970s.”

In other words, the impacts of this tightening cycle could be worse than the Great Recession.

This is a problem of the Fed’s own creation.

More than a decade of artificially low-interest rates coupled with massive stimulus injected into the economy during the pandemic incentivized companies to load up on low-interest debt. That was fine and dandy as long as rates were near zero. But with interest rates now pushed up to over 5%, many companies can’t service their massive debt loads. Many will undoubtedly go under.

According to the Fed paper, this will likely have “substantial effects on investment and employment.”

The paper also notes the typical lag between a change in monetary policy and its impact on the economy, noting we may not start seeing a wave of defaults until next year.

This shouldn’t come as a shock. The Fed has addicted the economy to easy money. When you take an addict’s drug away, he goes into withdrawal. The economy already has the shakes. It’s just a matter of time before it goes into full DTs.

Story by Michael Maharrey Redacted shorter to keep to important points and bullet points added by HGG https://schiffgold.com/commentaries/fed-economists-warn-of-looming-disaster-due-to-high-interest-rates/

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Fed economists just rang the alarm on the historic percentage of distressed US companies.
Around 37% of firms are in major trouble, which could worsen the fallout from the Fed's rate hikes.
Investment, employment, and economic activity could all take a significant hit, researchers said.

(Markets Insider) Federal Reserve economists just said a historic surge in the percentage of distressed American companies could worsen the fallout from the US central bank's fight against inflation.

"The share of nonfinancial firms in financial distress has reached a level that is higher than during most previous tightening episodes since the 1970s," Ander Perez-Orive and Yannick Timmer said in a recent note.

The upshot is that the Fed's hikes to interest rates — intended to curb the pace of price increases by raising borrowing costs — threaten to have a magnified influence on business investment, employment, and economic activity.

That's because debt-ridden companies will likely balk at spending money on new equipment or facilities, hiring more people, and ramping up production.

The percentage of troubled US firms stands at about 37%, the pair of researchers said. That could lead to the Fed's rate hikes having some of the most devastating effects of any of its tightening cycles over the past four decades, they added. The full extent of the damage should become clearer over the next 18 months, they said.

The Fed has already hiked interest rates from nearly zero to north of 5% since spring 2022 in an effort to curb inflation, which spiked to a 40-year high of more than 9% last year. After 10 consecutive rate hikes, the central bank has helped bring inflation down to about 4%.

Fed Chair Jerome Powell and his colleagues skipped a rate hike this month, against a backdrop of cooling inflation and emerging cracks in sectors such as banking and commercial real estate. But they've signaled they could raise rates a couple of more times in the months ahead.

The prospect of further hikes has some investors worried that the Fed is going overboard in its fight against inflation and might tip the economy into recession unnecessarily.

Story by Zahra Tayeb 6-28-23 at 5:04 AM PDT https://markets.businessinsider.com/news/stocks/fed-distressed-companies-monetary-policy-interest-rates-economy-inflation-unemployment-2023-6

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Markets appeared to shrug off the dramatic events in Russia over the weekend…
Putin is still in office and in control of the military as he continues his assault on Ukraine. But his grip now looks shaky…
bad things can happen amid disorderly change. Imagine what would happen to the price of crude if disruptions were more than a worry…
The uncertainty could spill over into the markets, according to Clocktower Group’s chief strategist Marko Papic. Traditional safe-havens such as gold and the U.S. dollar could see a near-term pop and oil prices could move.

(Barron’s) Markets appeared to shrug off the dramatic events in Russia over the weekend, when a group of mercenaries headed for Moscow, only to call off a potential revolt in a last-minute deal.

On the surface, the levers of power remain as they were before—President Vladimir Putin is still in office and in control of the military as he continues his assault on Ukraine. But his grip now looks shaky, and it’s only a matter of time before something or somebody else comes along to threaten his authority.

It creates a lot of uncertainty, and markets tend not to like that. When Russia invaded Ukraine in February 2022 oil prices spiked on concerns that production would be hit, rising to almost $140 the following month.

The disruption never came—despite Western sanctions, Russia’s oil continued to flow to Asia and global markets continued to function. Prices are now around $70 a barrel.

Russia has every incentive to keep the oil flowing, whoever’s in charge. But bad things can happen amid disorderly change. Imagine what would happen to the price of crude if disruptions were more than a worry—if the global oil market really did suddenly face a drop in supply.

The potential for another energy price spike would upend the Federal Reserve’s and other central banks’ forecasts that show inflation steadily marching back toward their target. The Bank for International Settlements on Sunday warned that the battle to put the inflation toothpaste back in the tube is far from won, now that it has seeped into wage demands and companies’ price setting.

Much of the drop in inflation is, in fact, due to “supply chains easing and commodity prices falling,” the BIS said. “The last leg of the journey to restore price stability will be the hardest.”

Indeed. The latest events in Russia could make it even harder.

Brian Swint

‘Cracks’ in Putin’s Grip: Blinken

The central figures in the weekend revolt in Russia—President Vladimir Putin and Wagner Group paramilitary leader and Putin protégé Yevgeny Prigozhin—remained out of the spotlight on Sunday. Prigozhin’s advance on Moscow and sudden retreat still left questions about Putin’s grip on power.

Secretary of State Antony Blinken said Prigozhin’s actions showed “real cracks” in the regime in Moscow, where Putin has held power for two decades. Blinken told CBS’s Face the Nation the “distraction” creates an opportunity for Ukraine’s counteroffensive to Russia’s war there.
President Joe Biden talked with Ukraine President Volodymyr Zelensky on Sunday about the counteroffensive and events in Russia, the White House said. China’s foreign minister met with Russia’s deputy foreign minister in Beijing on Sunday, Bloomberg reported. China has boosted ties with Russia.
The uncertainty could spill over into the markets, according to Clocktower Group’s chief strategist Marko Papic. Traditional safe-havens such as gold and the U.S. dollar could see a near-term pop and oil prices could move.
Helima Croft, the head of commodity strategy at RBC Capital Markets, said in a note on Sunday that the risk of further civil unrest in Russia, one of the biggest oil producers, must now be factored into the firm’s oil analysis for the second half of 2023.

What’s Next: How the crisis shakes out longer term is something officials are monitoring closely, Blinken said Sunday. “We can’t speculate or know exactly where that’s going to go. We do know that Putin has a lot more to answer for in the weeks and months ahead.”

—Liz Moyer

Story by Brian Swint & Liz Moyer 6-26-23 at 6:39 AM ET Redacted shorter to keep to important points and bullet points added by HGG. http://www.barrons.com/articles/what-to-know-today-8d108bad

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Emerging central banks are gearing up for a new monetary regime in which gold will play a vital role as a settlement mechanism, according to Goehring & Rozencwajg.
"The U.S. dollar might be on the verge of losing its reserve currency status,"
"A change in the dollar's reserve currency status would be the most impactful market shock of the last forty years."
After last year's record amount of 1,136 tonnes purchased, central banks added 228 tonnes to their global gold reserves during the first quarter of 2023.
"The monetary regime changes in 1930, 1968, and 1998 were hugely stimulative for commodity prices, and we believe the monetary regime change that will take place this decade will be no different," Goehring said.

(Kitco News) Emerging central banks are gearing up for a new monetary regime in which gold will play a vital role as a settlement mechanism, according to Goehring & Rozencwajg.

"The U.S. dollar might be on the verge of losing its reserve currency status," Goehring & Rozencwajg managing partner Leigh Goehring told Kitco News. "A change in the dollar's reserve currency status would be the most impactful market shock of the last forty years."

Recently central banks have stepped up gold allocation, boosting their reserves, led by emerging economies such as China, India, Turkey, Egypt, Qatar, and Singapore. After last year's record amount of 1,136 tonnes purchased, central banks added 228 tonnes to their global gold reserves during the first quarter of 2023.

This aggressive gold buying is keeping gold supported above the $1,900 an ounce level in the face of a hawkish Federal Reserve, Goehring said.

"We will break through the triple top that we put in place at the $2,000 an ounce level," he said. "We will blow through it, and the central bank buying will be the big push."

Central banks have not only been a massive source of demand in the last two years, but they are also the driving force for this whole decade.

And this could be connected to a monetary regime change Goehring & Rozencwajg is forecasting. "The monetary regime changes in 1930, 1968, and 1998 were hugely stimulative for commodity prices, and we believe the monetary regime change that will take place this decade will be no different," Goehring said.

The idea that the U.S. dollar is losing its reserve currency status has existed for years. But it has been nothing but noise. So what makes this time different?

There is a growing amount of evidence of countries moving away from the greenback, including Saudi Arabia talking about settling their oil in renminbi, all sanctioned Russian oil sales being paid in renminbi, Brazil wanting to settle its agriculture trade with China in renminbi, and France's TotalEnergies willing to sell their LNG to China and accept renminbi.

But these efforts cannot be classified as a monetary regime change because China's got a closed capital account, and the countries trading in renminbi cannot exchange it, Goehring pointed out.

This is where gold comes in. "How in the world would you ever be able to exchange renminbi? They're talking about eventually settling it all up with gold," Goehring said. "Any move by China to displace the U.S. dollar as a reserve currency must include some degree of gold convertibility. Foreign holders could then convert some portion of their trade surplus from renminbi into gold via the Shanghai gold exchange."

This could be why all these central banks are buying gold. For example, China has gotten serious about increasing its gold reserves, buying gold for the seventh consecutive month in May. Since November, China has purchased 144 tonnes of gold, with the central bank's total stockpiles now at about 2,092 tonnes.

"Are we trying to set up this system by being able to trade in commodities outside the dollar? And if we get a capital imbalance — we got too much renminbi, or we need more renminbi — we can now settle it on gold," Goehring said. "Are we exploring this idea of trying to undermine the dollar reserve status and settle things in local currencies and be able to eventually take out capital imbalances through gold? It's an interesting idea."

Goehring & Rozencwajg is bullish on gold for the rest of this year, projecting a break through $2,100.

Story by Anna Golubova 6-20-23 at 16:15 Redacted shorter to keep to important points and bullet points added by HGG. https://www.kitco.com/news/2023-06-20/Cantral-banks-are-preparing-for-a-new-monetary-regime-with-gold-playing-a-key-role-says-Goehring-Rozencwaig.html

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Gold's value compared to equities and bonds makes it the perfect portfolio diversifier.
It’s only a matter of time before gold prices push well past $2,000 an ounce as the world continues to deal with higher interest rates, rising inflation pressures, and the global economy drowning in debt.
"Gold relative to money supply itself is also absurdly cheap,"
His research has noted that not only is the yield curve at its most inverted in recent history but 90% of the curve is inverted.
"When you look at history, when 70% of the entire yield curve becomes inverted, you basically stop everything and buy gold and sell the S&P 500," he said.

(Kitco News) - The perfect storm is building in the gold market as the Federal Reserve maintains its hawkish bias and continues to push the economy closer to a recession. According to one market strategist, gold's value compared to equities and bonds makes it the perfect portfolio diversifier.

In a recent interview with Kitco News, Tavi Costa, portfolio manager at Crescat Capital, said that it's only a matter of time before gold prices push well past $2,000 an ounce as the world continues to deal with higher interest rates, rising inflation pressures and the global economy drowning in debt.

Costa said that he sees three risks for the global economy that will support gold prices. The first risk is that the U.S. government default on its debt; he added that while this risk is extremely low, it is still not out of the realm of possibilities. However, a recession caused by the Federal Reserve tightening or U.S. debt levels causing a bond market selloff are two real threats looming.

Costa has sounding recessionary alarms through most of 2023. His research has noted that not only is the yield curve at its most inverted in recent history, but 90% of the curve is inverted, meaning across the spectrum, short-term yields are higher than long-term rates.

"When you look at history, when 70% of the entire yield curve becomes inverted, you basically stop everything and buy gold and sell the S&P 500," he said.

Costa's recession outlook comes as the U.S. Treasury starts new bond auctions after Congress resolved its debt ceiling crisis. According to some analysts, the U.S. government will have to issue roughly $1 trillion in debt to replenish its depleted funds.

However, according to his research, the number of foreign buyers of U.S. debt is currently at its lowest point in 19 years.

"I'm not here to say this is the end of the U.S. That this is the beginning of a move in interest rates that will kill everything, I would put a very low probability on that," he said. "The more likely scenario is that as rates move higher, given the three risks as I laid out and this excessive amount of supply, at some point, the Fed will ultimately be responsible for being the buyer of less resort. When that's the case, it's hard to believe that tangible assets, including gold first and foremost, would be trading at only $2,000 an ounce."

While investors continue to shy away from the precious metals market, Costa noted that gold continues to benefit from solid demand from central banks. He said central bank gold buying has fundamentally transformed the precious metals market.

"What's happening today with central banks buying gold is that re-emphasizes this sort of chess game being played around these de-globalization trends and the need to own neutral assets," he said. "With interest rates around the world moving higher, we are going to see a lot more volatility in foreign exchange markets. In this environment, central banks will need to enhance their reserves over time by owning more precious metals."

In his research, Costa noted that historically gold represented about 40% of all global reserves; in the early 1980s, gold represented more than 70% of foreign reserves. He said that if central banks' gold holdings returned to historical averages, they would need to buy $3.2 trillion of the precious metal.

Not only is gold an attractive safe-haven asset, but Costa noted that it is still significantly undervalued compared to the rest of the market. Even as gold prices trade 6% down from their record highs above $2,000 an ounce, the precious metal's value is near historic lows compared to the S&P 500.

"Gold relative to money supply itself is also absurdly cheap," he said. "If you want to claim gold is expensive, you also need to claim that the debt problem is getting better, not worse, but that is not my belief."

Along with gold, Costa said that investors need to create more balanced portfolios in a world of growing uncertainty and risks. He noted that 2022 was a wake-up call for many investors who saw the worst performance in their traditional 60/40 portfolios in nearly 100 years.

In this new environment, he said he would hold about 30% in equities because the market is extremely overvalued. At the same time, he would own about 20% in fixed income, 30% in gold, and 20% in a broad commodity basket.

Story by Neils Christensen For Kitco News Redacted shorter to keep to important points and bullet points added by HGG. https://www.kitco.com/news/2023-06-20/The-gold-market-remains-the-superior-safe-haven-as-the-world-deals-with-rising-debt-high-inflation-and-recession-risks-Crescat-Capital-s-Tavi-Costa.html

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