Weekly Digest: Gold Goes Up, Nasdaq Off 10% Below Record

Investment news

The gold price increased to its highest level in three months to $1,843.94 an ounce on Wednesday, supported by a weaker U.S. dollar. Meanwhile, traders are awaiting clues on the pace of interest rate hikes from the Fed’s policy meeting next week. (Reuters)

Despite hawkish signals from the Fed, gold is doing well and it looks like investors think this sudden hike in interest rates to curb inflation could eventually weaken growth prospects, according to Stephen Innes, the managing partner at SPI Asset Management.

The Russia-Ukraine situation may further fuel the gold rally, with investors looking for safe-haven assets to hedge against geopolitical tensions, analysts say.

Among other precious metals, the silver price increased 0.1% to $24.15 an ounce, platinum went up 0.1% to $1,022.50, and palladium was flat at $2,001.91.

The tech-heavy Nasdaq Composite dropped on Wednesday, falling 10% from its November all-time high as investors are dumping tech shares ahead of planned interest rate hikes. (CNBC)

The rate spike has hit Nasdaq disproportionately as tech stocks’ future earnings look less attractive to investors when rates are on the rise.

If the Fed wanted to curb unruly inflation, which hit a near 40-year high in December, it would need to hike rates to nearly 6%, an expert says. (Yahoo Finance Live)

"I am worried about high interest rates because the Fed is talking about raising rates to 1% or even 2%. Inflation is 7% — 1% or 2% doesn't mean anything. If they really wanted to stop inflation, they would have to raise rates to 4%, 5%, 6%," Interactive Brokers founder Thomas Peterffy said.

👀 Read our SPOTLIGHT to see what interest rate hikes could mean for consumers.

ECB's Lagarde says inflation drivers, such as surging energy prices and supply bottlenecks, will ease gradually this year: "This will stabilize and ease gradually in the course of 2022.” (Reuters, Politico)

While the E.U.’s headline inflation rate is running at 5%, there are huge regional differences. Eastern Europe is being hit particularly hard by runaway food prices. In Belgium, about one million people might struggle to pay energy bills, and the steep spike in energy costs is threatening to hurt Europe's manufacturing capacity in sectors ranging from aluminum to confectionery.

👀 Read our SPOTLIGHT to learn more about the supply chain troubles. 

China cut mortgage lending benchmark rates as authorities seek to step up efforts to boost the slowing economy, after a fresh data pointed to a worsening outlook for the country's troubled property sector. (Reuters, South China Morning Post)

China’s financial and real estate markets have been on shaky grounds lately, with the Evergrande crisis capturing investors' attention for months.

China’s GDP growth in the fourth quarter slowed to 4% year on year, down from 4.9% in the previous three months, hinting at more struggles coming in 2022.

👀 Read our SPOTLIGHT to learn how the crisis in China’s property sector can affect the global economy.

Mastercard said Tuesday it inked an NFT payment deal with Coinbase as part of a recent flurry of partnerships between payment and cryptocurrency giants. (CNBC)

Coinbase customers will be able to use Mastercard cards to make purchases on the crypto exchange’s upcoming NFT marketplace that will let users mint, collect and trade NFTs, or nonfungible tokens.

Opinion

🍪 Omicron ate your cookies: the latest Covid variant made supply issues even worse, with consumers getting back to panic buying and stocking up on baking supplies. (Bloomberg Opinion)

Some U.S. supermarkets said last week that omicron put a “dent” in their expectations about improved supply chains, as staff shortage continued to disrupt food manufacturing and distribution.

Meanwhile, consumers are returning to such pandemic habits as comfort eating, with U.S. grocers seeing runs on baking supplies, pasta, cookies…

What else is happening

Russia-Ukraine tensions hit a boiling point: the U.S. says Russia could invade Ukraine “at any point,” but Moscow denies it; high-level talks between Sergei Lavrov and Antony Blinken will take place in Geneva on Friday. (Bloomberg, Euronews)

Blinken will press Russia to de-escalate tensions on the border with Ukraine, where Moscow has massed more than 100,000 troops and military equipment.

Although Russia has rejected accusations that it’s planning to attack Ukraine, the Kremlin has demanded guarantees that NATO won’t expand farther east and will roll back its military presence to positions held in 1997. U.S. and NATO officials have rejected that demand as a non-starter.

It’s happening: Boris Johnson has announced the end of all Covid measures introduced to combat the Omicron variant in the U.K., including compulsory mask-wearing on public transport and in shops. (The Guardian)

The announcement comes amid the Downing Street parties scandal that put Johnson in trouble, with some U.K. politicians calling for his resignation.

And finally…

🤔 Israeli team trains goldfish to drive. (Reuters)

The team at Ben-Gurion University developed a fish-operated vehicle, fitted with a remote sensing technology that uses laser light to collect data on the vehicle’s location and the fish's whereabouts inside a water tank.

See you next week!