Weekly digest: Gold Vs. U.S. Dollar, Biden Vs. Putin


5 minutes read

Dec 9, 2021

Presidents Putin and Biden attending a summit in Geneva to discuss bilateral ties, Ukraine

09/12/21: A bullish view on gold for 2022, Bitcoin in a flash crash, the uncertain future of cash, Biden calls Putin. And more.

Investment news

The gold price went up 0.20% to $1,782.39 an ounce Tuesday as investors turned their attention to the U.S. inflation data due this week, which could impact the pace at which the Fed raises interest rates, one of the key factors influencing the gold price. (Reuters)

"It seems to be more of a consolidation move right now," said Craig Erlam, senior market analyst at OANDA, adding that the market is keeping an eye on the Fed meeting this next week, seeking more clarity on interest rates amid uncertainty around the Omicron coronavirus variant.

Among other precious metals, platinum rose 1.7% to $953.06 an ounce, palladium added 0.5% to $1,845.45 and the silver price increased 0.6% to $22.49.

Asked about which of gold or the U.S. dollar will be hitting new record highs in 2022, Tim Hayes, Ned Davis Research's chief global investment strategist, picked gold, adding that he’s bullish on the yellow metal’s performance. (Kitco)

"The dollar made a high right after the COVID-19 crisis in March. And on the question of which one is more likely to make a new high — gold or the dollar — I'd say gold. I'm currently neutral on the dollar, which sort of implies that it stays in its trading range. But I'm bullish on gold," Hayes said.

Unlike the U.S. dollar, gold has a solid setup going into next year and is “likely to hit new record highs as long as this environment remains," he added.

Read our SPOTLIGHT article about massive money printing and how it is currently devaluating paper money, including the U.S. dollar.

A Biden-Putin phone call took place earlier this week. An event closely followed by physical gold investors ⁠as any major geopolitical uncertainty would support the gold price, according to Jim Wyckoff, a senior analyst at Kitco Metals.

  • The talks lasted for a few hours as the two leaders sought to ease tensions over Russia amassing troops along its border with Ukraine.
  • The U.S. has reportedly said its intelligence assessments showed Russia may invade Ukraine.
  • Biden warned that the U.S. and its allies would respond with "strong economic and other measures" if there was a military escalation.
  • Putin, in turn, blamed NATO for increasing tensions through its "dangerous efforts" to expand into Ukraine and boost its military potential on Russia's borders.

BTC flash crash: Bitcoin lost as much as 21% of its value in a matter of hours over the weekend. And while it has managed to recover some lost ground, Bitcoin is still down more than 20% from the record high it reached about a month ago. (Bloomberg)

The crash happened as high inflation is forcing central banks around the world to tighten monetary policies.

“It’s important to remember that these kinds of pullbacks are part and parcel of a market that is increasingly hungry for excessive risk. Every once in a while, the riskiest parts of the market, in this case mostly meme coins and metaverse tokens, do need to be washed out,” Mati Greenspan, founder and CEO of Quantum Economics, wrote in a note.

Crypto is set for a big selloff in 2022, a Natixis study of money managers says. It shows digital assets are the top contenders for a "major correction" next year. Almost three-quarters of institutions polled said digital assets are “not an appropriate investment for most retail investors.” (Bloomberg)

Still, 28% of all institutions surveyed have invested in cryptocurrencies — and of those, nearly a third said they plan to increase their crypto allocations in 2022.

Goldman got gloomier on U.S. growth, blaming the new omicron Covid variant. It lowered its forecast for this year’s GDP expansion from 4.2% to 3.8%., and its 2022 estimate was cut from 3.3% to 2.9%. (Bloomberg)

“While many questions remain unanswered, we now think a modest downside scenario where the virus spreads more quickly but immunity against severe disease is only slightly weakened is most likely,” said economist Joseph Briggs.

Monday was a bad day for Elon Musk. Though Tesla’s shares regained most of their earlier losses, the stock fell as much as 6.4% in morning trading. This was the result of some troubling news for the electric carmaker, including a report of a new investigation by the U.S. Securities and Exchange Commission. (Bloomberg)

Reuters reported Monday that the commission is looking into whistle-blower claims on solar panel defects, while Tesla engineers reportedly questioned the safety of the company’s Autopilot system.


Is cash dying? Maybe, but we’re not ready to ditch it yet: “Convenience is one thing but consumers are likely to lose government protection if money is suddenly electronic and privatized,” Bloomberg columnist Andy Mukherjee writes.

“If all the money in circulation is private, controlled by e-commerce and social media platforms, authorities won’t be able to protect consumers from being exploited. Which is why even in countries where technology has turned it into an anachronistic appendage, cash can’t be allowed to die. Not before CBDCs are ready,“ he said in an article.

CBDCs are Central Bank Digital Currencies, a Central Bank’s take on cryptocurrencies.

What else is happening

It’s a deal: Republicans and Democrats in Congress have agreed on a plan to break an impasse and raise the government’s debt ceiling likely next year, pulling the U.S. away from the brink of default. (CNBC)

Democrats’ plan would raise the debt ceiling by about $2 trillion, enough to carry the U.S. through the 2022 midterms, a source said.

Billionaires’ wealth surged to record highs during the Covid-19 crisis, according to the Global Inequality Lab. About 2,750 billionaires now control 3.5% of the world's wealth, up from 1% in 1995. (Bloomberg)

Meanwhile, the poorest part of the planet's population owns about 2% of its riches.

a bloomberg graph showing wealth disparities across the globe

And finally…

New evidence emerges for dark-matter free galaxies. An international team of astronomers led by the Netherlands has found no trace of dark matter in the galaxy AGC 114905, despite using state-of-art telescopes in a thorough research that lasted for forty hours. (Phys.org)

"This is, of course, what we thought and hoped for because it confirms our previous measurements. But now the problem remains that the theory predicts that there must be dark matter in AGC 114905, but our observations say there isn't. In fact, the difference between theory and observation is only getting bigger,” researcher Pavel Mancera Pina said.


See you next week! 

Photo credits: kremlin.ru


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