Weekly Digest: Gold Gains, Country Garden Crisis


10 minutes read

Sep 1, 2023

50 g PAMP Suisse gold bar

02/09/2023: Gold set for a second consecutive weekly gain as focus shifts to U.S. jobs data, China unveils sweeping economic support measures amid Country Garden's critical vote, Ukraine intensifies drone attacks on Russia. And more.

💡Quote of the week

Key takeaways from the Fed’s Jackson Hole meeting:

- Most key speakers (Powell, Lagarde) kind of steered clear of speaking about decisions in the months ahead but the muted message was “higher for longer” (“Although inflation has moved down from its peak – a welcome development – it remains too high. We are prepared to raise rates further if appropriate.” - Powell)

- Policymakers also swapped the angst over inflation last year for fears that the upheaval of the last 3 years has rewired the global economy ("You don’t have to throw out the old playbook, but you do need new models." - Lagarde).

- No, there won’t be higher inflation targets. Both Powell and Lagarde pushed back the idea of tweaking the inflation rate targets they aim for.

- Little urgency to hike in September. Several Fed officials and Powell signaled that another hike might be coming, but the Fed can be patient in making it. Keeps the “higher for longer” uncertainty over markets and rate-sensitive markets like gold. 

Nicky Shiels, Head of Metals Strategy, MKS PAMP

Investment news

A man climbing a tsack of gold bars

Gold rises for 2nd week as investor focus shifts to U.S. jobs data for rate hike clues. Gold prices saw an uptick on Friday, poised for a second consecutive weekly gain, bolstered by diminishing prospects of U.S. interest rate hikes this year.

The precious metal climbed 0.2% to $1,943.11 per ounce, following one-month highs earlier in the week. U.S. gold futures mirrored the trend, rising 0.2% to $1,969.90.

Meanwhile, spot silver recorded a 0.6% gain at $24.58 per ounce, while platinum showed an 0.8% increase at $975.53. Both metals are also set to conclude the week with gains. Palladium also joined the positive trend, rising by 0.6% to $1,222.00.

📉 Dollar's 6-week winning streak faces a hurdle as key U.S. jobs data looms. The U.S. dollar is poised to end its six-week winning streak against major currencies, with its fate hinging on the upcoming crucial U.S. jobs report. (CNBC)

A week filled with underwhelming economic data has contributed to doubts about further Fed rate hikes, causing a drop in two-year Treasury yields. The dollar's value against the yen has dipped during this period. Still, it has managed to hold its gains against the euro and pound after central banks expressed more dovish stances.

Meanwhile, the Chinese yuan has gained strength as China's central bank cut forex reserve requirements for the first time in a year. In the cryptocurrency world, bitcoin faced a setback, losing its weekly gains following an SEC decision delay on spot bitcoin ETF approvals.

😨 Country Garden's $6.7 billion loss sparks fresh fears of China's Evergrande redux. Chinese real estate giant Country Garden has reported a staggering $6.7 billion loss for the first half of the year, intensifying concerns of a potential financial catastrophe. With debts exceeding $150 billion and looming bond payment deadlines, Country Garden's precarious financial state mirrors the turmoil that preceded the fall of Evergrande, the world's most indebted property firm. (The Guardian)

As China's property sector continues to grapple with pandemic-related challenges and a slowing economy, Country Garden's woes pose a threat to the nation's financial stability. The outcome of its negotiations with creditors and looming bond payments in September will determine whether it joins Evergrande in the list of major Chinese real estate firms to crash, potentially sending shockwaves through China's economy and financial system.

🇨🇳 China unveils sweeping economic support measures amid Country Garden's critical vote. China has intensified efforts to bolster its ailing economy, with major banks primed for lending rate reductions and Beijing considering the relaxation of home-purchase restrictions. In a bid to prevent further deterioration in the property sector, authorities have also slashed foreign exchange reserve requirements. (Reuters)

These actions are seen as a response to the global spotlight on Country Garden's debt crisis, a developer whose struggles have raised alarms. Country Garden recently delayed a crucial creditor vote on a 3.9 billion yuan ($537 million) private bond, with the outcome being closely watched by markets.

A recent string of property easing measures and investor-friendly actions is expected to help restore market confidence and stabilize the sector. However, the immediate focus remains on the Country Garden vote, which carries significant implications for the developer's future and China's broader economic growth prospects.

💵 De-dollarization in global trade still a distant dream. While BRICS leaders explore the idea of a common currency, India's Oil and Gas Minister, Hardeep Singh Puri, says existing international payment systems have deep roots, making de-dollarization a prolonged endeavor. (CNBC)

“I wish the Indian rupee should be the lead currency in the world. But I’m also a realist. I mean, if I ran a $4 trillion economy and 50% of it is in the external sector, then I know that I only have $2 trillion of international transactions, whereas the U.S. and other countries [have more than me],” Puri told CNBC.

🤔 End of NFT hype? Once hailed as the future of digital assets, Non-Fungible Tokens (NFTs) are now grappling with a severe downturn, leaving investors and creators disheartened. After reaching dizzying heights of popularity in 2022, NFTs have experienced a dramatic decline, with monthly trading volume and sales figures plummeting, blue-chip NFT prices sinking to multi-year lows, and once-thriving platforms closing down. (Bloomberg)

The NFT market, once a poster child for crypto innovation, is now grappling with a severe downturn. Monthly trading volume and sales figures have plunged dramatically, and blue-chip NFTs like Bored Ape Yacht Club and CryptoPunks are at multi-year lows.

The closure of NFT platforms like Recur and Nifty's, along with plummeting sales volumes for existing platforms, reflects the dismal state of the market. A recent change by OpenSea to make secondary sales royalties optional has added to the industry's woes.

Fears of regulatory intervention further exacerbate the situation, and the overall sentiment is described as the "worst moment" since NFTs gained popularity. Despite the bleak landscape, famous creator artworks and low-value NFTs used in gaming remain resilient, offering glimmers of hope amid the market's downturn.

📸 Image of the week

A meme mocking the differences between Europeans and Americans


Modern Facade Building with Balconies

🇩🇪 🤒 An economic headache with no easy cure. As Germany grapples with a multifaceted economic challenge, its property and construction sectors are falling critically ill. A decade-long property boom driven by cheap financing has abruptly ended, leaving the nation facing a looming recession and a worsening housing shortage. (Bloomberg Opinion)

Germany's property and construction industries, once thriving, are now in turmoil as new construction and mortgage demand plummet, and developers face insolvency. This crisis threatens to drag Germany into recession and worsen its housing shortage.

While the government has introduced measures to stimulate the economy and address housing issues, the situation remains uncertain due to policy debates and bureaucracy. Germany's property market faces a challenging road to recovery, impacting both its economy and housing sector.

What else is happening

Predator Type Drone 3D artwork

🇺🇦 🇷🇺 Ukraine's drone warfare shifts focus. A surge in drone attacks on Russian territory is shaking up the dynamics of the Ukraine-Russia conflict, potentially altering the course of the war. As Kyiv increasingly deploys drones to strike western, central, and southern Russia, the conflict appears to be returning to haunt Moscow itself. The intensification of these aerial assaults is causing concerns in Russia and forcing a strategic shuffle in its defense. (CNBC)

These attacks, while not yet directly impacting the political establishment, have prompted Russia to reallocate its defense assets and may disrupt its military effectiveness against Ukrainian forces.

“With attacks in Crimea itself, and the land corridor and the Kerch bridge, and Russian shipping in the Black Sea coming under attack the clear message is that while the invasion was partially sold as an effort to improve Russian security, it has made Crimea and Russia less secure for Russian forces,” Timothy Ash, emerging markets strategist at BlueBay Asset Management, says.

Despite causing concerns in Russia, particularly the forced repositioning of defense systems, the attacks are unlikely to destabilize President Vladimir Putin's regime unless they target elite neighborhoods.

🇨🇳 🇮🇳 China's Xi to skip G-20 summit amid mounting tensions with India. The upcoming Group of 20 (G-20) summit in New Delhi is set to be marked by significant absences, with Chinese President Xi Jinping reportedly planning to skip the event. This move adds strain to already tense relations between China and India, potentially jeopardizing the issuance of a joint communique by G-20 leaders for the first time in the forum's history. (Bloomberg)

Tensions have risen between the two nations, with China blocking proposals related to emerging-market debt and Russia's Ukraine conflict. Additionally, disagreements have emerged between the G-7 nations and the broader G-20 regarding funding for UN-backed goals.

And finally…

Bright sun

🌞 Solar wind mystery. Intriguing insights into the origins of the solar wind have emerged from data collected by the Solar Orbiter spacecraft. This relentless flow of charged particles from the sun, known to trigger geomagnetic storms on Earth and awe-inspiring auroras, has long puzzled scientists. (Reuters)

Recent observations reveal the existence of “picoflare jets”, relatively small bursts of charged particles emanating from the sun's outer atmosphere, or corona. These jets, lasting just seconds, may serve as a significant source of mass and energy, fueling the solar wind that sweeps across our solar system. 


See you next week!


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