Weekly Digest: Hawkish Fed, Bitcoin Set for Worst Week
11/03/2023: Fed Chair Powell signals faster and larger rate hikes, Bitcoin is having its worst week since November, Xi Jinping handed third term as China’s president. And more.
💡Quote of the week
“Three years into Covid and the upheaval it unleashed, the supreme beings of the economy are still in “I don’t know” mode. They need to regain some of their omnipotence. Not hubris, but that former sureness of touch is needed now more than ever. Unfortunately, it's proving elusive.” Daniel Moss, Bloomberg Opinion Columnist
✈️ Up in the air. Fed Chair Jerome Powell reaffirmed his call for higher and potentially faster interest rate hikes, but said a decision would depend on data released before the Fed's policy meeting in two weeks. (Reuters)
"If - and I stress that no decision has been made on this - but if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes," Powell told the U.S. House of Representatives Financial Services Committee.
💡Read our SPOTLIGHT to learn more about rate hikes and their impact on the price of gold.
⬆️ Uptick in gold. The gold price rose on Friday as investors were anticipating the release of the U.S. payrolls report to assesss the likely path of the Federal Reserve's rate-tightening cycle.
Spot gold was up 0.1% at $1,832.24 an ounce, while the U.S. gold futures also rose 0.1% to $1,836.20.
😖 Hard times. Bitcoin is set for the worst week since the FTX crash as it dropped below $20,000 on Friday for the first time since November. (Bloomberg)
“The selloff in cryptocurrencies appears to be largely equity-market led,” said John Toro, head of trading at digital-asset exchange Independent Reserve.
🇬🇧 A rebound. The U.K.'s economy grew 0.3% in January, beating expectations as it continues to fend off what economists see as an inevitable recession. (CNBC)
“The services sector grew by 0.5% in January 2023, after falling by 0.8% in December 2022, with the largest contributions to growth in January 2023 coming from education, transport and storage, human health activities, and arts, entertainment and recreation activities, all of which have rebounded after falls in December 2022,” the Office for National Statistics found.
🇪🇺 More rate hikes. The European Central Bank is seen taking rates to the 3.75% peak, with 4 more hikes expected by July. (Bloomberg)
JPMorgan and Citi, meanwhile, say the ECB will probably stop at 3.5%.
📉 Likely sell-off. Goldman Sachs warns that higher Fed rates could lead to sharp sell-off in stocks, with analysts saying that it’s a “close call“ that the U.S. central bank is still more likely to approve a 0.25-point hike this month. (CNBC)
According to Goldman, a more aggressive Fed could have market impacts, with stocks dropping "more sharply" and commodities falling, plus the dollar going up.
🚀 To the moon! Gold is set to reach $5,000 per ounce by 2027, taking silver to $250 per ounce. (Kitco)
Gold and silver are going to rise as Western governments seek to "debase" their currencies because of excess fiscal spending, according to Rob McEwen, Executive Chairman of McEwen Mining.
"Hard assets will increase in value as the dollar drops in relative value to other currencies, because governments are irresponsible. They steal from their citizens by printing excess money and borrowing in ways they shouldn't… Look at the amount of the debt most of the Western world has right now, it's enormous,” McEwen said.
📸 Image of the week
What else is happening
🇺🇦 Ukraine war. Russia fired 81 missiles at Ukrainian territory on Thursday morning, including six “Kinzhal” hypersonic missiles, which Ukraine’s air force cannot intercept, Ukrainian officials said. (CNBC)
The mayor of Kyiv said the capital experienced a number of explosions that had damaged energy infrastructure and injured several civilians.
🇨🇳 Unprecedented third term. China's political elite officially endorsed Xi Jinping's third term as president on Friday, cementing his control and making him the country's longest-serving leader of Communist China since its founding in 1949. (CNBC)
After rising through the ranks of Chinese politics, Xi became president in 2013 and abolished term limits in 2018.
🪙 Viking-era treasure trove. An ancient gold disc unearthed by Scandinavian scientists in western Denmark has the oldest known inscription referring to the Norse god Odin. (The Guardian)
The disc is part of a trove containing about 1kg of gold, including medallions the size of saucers and Roman coins.
See you next week!