Investment news
The gold price increased, drawing support from escalating tensions between Beijing and Washington as well as a pullback in the U.S. Treasury yields.
“Nancy Pelosi’s visit to Taiwan hasn’t triggered a substantial reaction from Beijing (but) the situation remains tense and is supportive of gold due to its safe-haven status,” Ricardo Evangelista, senior analyst at ActivTrades said.
Here’s how the prices of gold, silver, platinum, and palladium have changed over the past week:
Want to know what other factors have the biggest impact on the gold price right now? Read our SPOTLIGHT.
The Bank of England raised interest rates by 50 basis points on Thursday, the largest single increase since 1995, and forecasted the U.K's longest recession since the global financial crisis. This measure will accelerate a historic tightening of monetary policy in order to stifle the worst inflation in 40 years. (CNBC)
BoE now expects headline inflation to peak at 13.3% in October and to remain high for much of 2023.
“The Bank is simultaneously forecasting a long recession starting later this year and an even higher peak in inflation. This is a toxic economic combination, which would be difficult for the central bank to navigate at the best of times, let alone when it is increasingly being dragged into the political spotlight,” Luke Bartholomew, a senior economist at ABRDN, said.
Read our SPOTLIGHT to see how central banks have been fighting skyrocketing inflation and learn from their experience.
No signs of inflation easing: the Fed is “nowhere near” finished with its fight against inflation, San Francisco Fed President Mary Daly said, rebuffing talks that the U.S. central bank will take its foot off the rate-hike pedal sooner rather than later. (Bloomberg)
Four Fed district bank presidents said there was no evidence of inflation easing. According to San Francisco Fed President Mary Daly, "we are still resolute and completely united" in our goal of getting inflation down around the 2% target.
Pelosi's visit has added to investors' concerns about a global slowdown and rising inflation. Some strategists warned against dismissing China's initial response too quickly — military exercises and some Taiwan trade restrictions — with markets vulnerable to any sign of deterioration in Sino-American relations. (Bloomberg)
“This issue will linger far longer than the market’s attention span will allow. Yet geostrategists are largely united in the view that we are still worryingly close to a potential Fourth Taiwan Strait Crisis,” said Michael Every, head of Asian financial market research at Rabobank.
A multimillion dollar hack: In the latest blow to the cryptocurrency market, hackers targeted the Solana ecosystem, affecting thousands of wallets. While the total value of the stolen assets was unclear, four Solana wallet addresses stole approximately $8 million from victims. (Bloomberg)
The security incident affected more than 7,000 wallets, draining them of their SOL tokens and USDC stablecoins, Binance Chief Executive Officer Changpeng "CZ" Zhao said on Twitter.
Following the news, Solana's token SOL fell 7.3% to $38.4, its lowest level in a week. Bitcoin was little changed around $23,000.
Eurozone retail sales fell more than expected in June as factory gate prices* continued to rise, according to data released on Wednesday, indicating a drop in consumer demand. In Germany alone, retail sales slumped 8.8% in June compared with the same month a year ago, marking the biggest drop since 1994. (Reuters)
Eurostat, the European Union's statistics office, reported that retail sales in the 19 eurozone countries fell 1.2% month-on-month in June, for a 3.7% year-on-year decline.
*The factory gate price is the price of the product available at the factory, excluding any transport and delivery charges.
Opinion
Team “transitory inflation” reappears: Although the Fed and other central banks abandoned the term "transitory" late last year, some argue that the post-pandemic inflation surge is primarily driven by supply chain shocks that will eventually normalize. (Reuters)
"My own guess is that, over time, much of the inflation plaguing the world now will eventually turn out to be 'transitory'...driven by supply-side factors that are not permanent, are beyond the control of central banks, and will most likely not contaminate long-run inflation expectations,” hedge fund manager Stephen Jen at Eurizon SLJ said.
What else is happening
German Chancellor Olaf Scholz blamed Moscow for delays in the return of a gas turbine for the Nord Stream 1 pipeline, which had been serviced in Canada but is now stranded in Germany amid the escalating energy dispute between Russia and the E.U. The standoff may push Germany into an energy crisis which could in turn spark a recession and force the government to ration gas. (Reuters)
"The turbine works. It can be transported and used at any time. The non-fulfilment of the gas supply contracts has no technical reasons whatsoever," Scholz said during a factory visit to Siemens Energy.
European governments have accused Russia of squeezing gas supplies under fictitious pretexts in retaliation for Western sanctions imposed following Ukraine's invasion.
Moscow denies this, citing turbine issues as the cause of lower gas flows through Nord Stream 1.
Geopolitical tensions are rising: The Chinese military has been placed on high alert and will conduct "targeted military operations" in response to US House Speaker Nancy Pelosi's visit to Taiwan, China's defense ministry says. The move could create ripple effects across global supply chains. (Bloomberg)
According to people familiar with the situation, gas suppliers are rerouting or slowing down some liquefied natural gas vessels currently en route to North Asia. Shipments to Taiwan and Japan might be affected this weekend.
🇬🇧 Foreign Secretary Liz Truss extended her lead over rival Rishi Sunak, with polls indicating she is on track to succeed Boris Johnson as U.K.'s Prime Minister. (Bloomberg)
According to a YouGov poll of Conservative Party members conducted for the Times newspaper, the foreign secretary is 34 points ahead of her opponent.
Global food crisis: Rice could become the next global food supply challenge as a lack of rain in parts of India, the world's largest exporter, has caused planting area to shrink to the smallest in about three years. Traders are worried India may restrict its rice exports. (Bloomberg)
The threat to India's rice production comes at a time when many countries are dealing with skyrocketing food prices and red-hot inflation. Due to a lack of rainfall in some areas, including West Bengal and Uttar Pradesh, which account for a quarter of India's rice production, total rice planted area has decreased by 13% so far this season.
And finally…
⭐Astronomers have discovered the most massive known example of a neutron star, dubbed a "black widow" for gobbling up the majority of the mass of a stellar companion stuck in an unhappy cosmic marriage. (Reuters)
According to the researchers, the neutron star, which spins at 707 times per second, has a mass about 2.35 times that of our sun.
Did you know that gold also comes from outer space? Read gold’s comic origin story.
See you next week!
