Weekly Digest: Stock Rally Fizzles, Recession Risk


4 minutes read

Jun 23, 2022

a man looking at the graph indicating an approaching economic recession and stagflation.

23/06/22: The stock market dropped as recession fears grow, UK inflation hits a new 40-year high, Bitcoin could plunge to a low of $13,000. And more.

Investment news

As the dollar edged up and the Fed chief vowed to keep up the fight against inflation, the gold price dipped lower on Thursday, but saw a 0.12% increase over the week.

Here’s how the prices of gold, silver, platinum, and palladium changed over the past week:

a table showing how the prices of gold, silver, platinum, and palladium have changed over the past week.

Stock market rally fizzles: After a strong rally on Tuesday, the stock market has declined as recession fears grow and Fed chair Jerome Powell gets ready to address Congress. (CNBC)

The Dow Jones Industrial Average futures contracts dropped 343 points, or 1.1%, while the S&P 500 futures fell 1.3%. Nasdaq 100 futures fell by 1.6%.

Stock prices have recently been affected by growing concerns that the economy will enter a recession. The Federal Reserve last week increased interest rates by 0.75%, which was the largest rate increase by the institution since 1994.

Want to know how gold has performed so far compared to stocks? 😉 Read our SPOTLIGHT to find out.

According to an analysis by the European Central Bank, economic experts do not anticipate that the region will experience stagflation, which was common in the 1970s and characterized by rapidly rising prices in the face of output that either barely increases or even decreases. (Bloomberg)

“Current expert forecasts remain far from a stagflation scenario. However, uncertainty has increased,” analysts said.

What is stagflation? Here’s what you need to know.

As the country's cost-of-living crisis continues to worsen, the UK's inflation rate reached 9.1% year over year in May, hitting a new 40-year high. (CNBC)

Housing and household services, particularly gas, electricity, and other fuels, as well as transportation, made the biggest upward contributions to the inflation rate.

the building of Deutsche Bank which said the possibility of the global economic recession is growing bigger.

Recession risk: Deutsche Bank AG’s chief executive officer warned the global economy may be headed for a recession as central banks step up efforts to curb inflation, joining a growing chorus of executives and policymakers who are painting a pessimistic picture. (Bloomberg)

“At least I would say we have 50% likelihood of a recession globally. [In the US and Europe], “the likelihood of a recession coming in the second half of 2023, while at the same time the interest rates go up, is obviously up versus the forecasts we had before the war [in Ukraine] broke out,” Christian Sewing said.

Here’s what a recession could mean for precious metals investors.

According to consultant Wood Mackenzie Ltd., if Russia's supplies via the crucial Nord Stream pipeline completely stop, Europe runs the risk of running out of natural gas reserves in the middle of peak winter demand. (Bloomberg)

“Even considering counter measures, it might be inevitable that some rationing of demand will need to take place,” Massimo Di Odoardo, vice president for gas and LNG research at WoodMac, said.

the flags of Uganda flying in the sky after the country said it’s looking for investors to help grow the gold industry.

Uganda stated on Wednesday that it has gold ore deposits totaling about 31 million tons and is looking to attract major investors to help grow the industry, which has previously been dominated by small wildcat miners. (Reuters)

The country’s Ministry of Energy and Mineral Development said the 31 million tons of ore could yield an estimated 320,158 tons of refined gold.


Gold to rally? According to leading mining company Newmont, the floor price of gold is rising, as the battle to control inflation takes the place of years of stimulus. (Bloomberg)

The floor used to be around $1,200 but is now probably closer to $1,500 or $1,600, Newmont Corp.’s CEO Tom Palmer said.

a cartoon picture symbolizing a possible Bitcoin crash

💥 Bitcoin could plunge even further to a low of $13,000, a strategist warns. The cryptocurrency market is tense as investors consider how higher interest rates will affect assets that thrived during a time of ultra-loose monetary policy. (CNBC)

Such a drop in 2022 “would take you back to about $13,000,” a “key support area” for Bitcoin, according to Ian Harnett, co-founder and chief investment officer of Absolute Strategy Research.

What else is happening

Alarm stage: After Russia cut gas deliveries by roughly 60% through a crucial pipeline, Germany is allegedly preparing to initiate the second stage of a three-step emergency gas plan - the "alarm" stage. (Bloomberg)

If the second stage is triggered, the law might be changed to allow energy companies to pass cost increases on to consumers' homes and businesses. To reduce gas consumption, additional coal-fired power plants may be turned on. The government is still reviewing the actions.

Taboo broken? For the first time since the invasion of Ukraine, Switzerland imported gold from Russia, indicating that attitudes toward the country's precious metals may be softening. (Bloomberg)

the flags of Switzerland and Russia put together after news came out saying Switzerland bought some of Russia’s gold which has been a taboo since Russia’s invasion of Ukraine.

According to data from the Swiss Federal Customs Administration, more than 3 tons of gold were shipped to Switzerland from Russia in May. Since February, that is the first shipment between the two nations.

After the invasion of Ukraine, Russian gold became taboo.

A new front in the tensions between Russia and NATO has opened up after one of the NATO members, Lithuania, prohibited the transit of some goods from Russia to its Baltic Sea exclave Kaliningrad. (CNBC)

In response to Lithuania's "hostile actions," Russia has threatened retaliation and warned of "serious" repercussions. NATO allies have reaffirmed their support for Lithuania.

And finally…

the remains of an ancient creature know as Elasmosaurus were discovered off the Chilean coast.

🦖 A group of neighbors discovered some strange remains while strolling along Los Tubos beach on the central Chilean coast. These remains turned out to be the fossils of an ancient marine reptile that lived in the nearby sea millions of years ago. (Reuters)

Andrea Galvez and other locals of the town of Algarrobo, located about 95 kilometers (60 miles) east of Santiago, Chile's capital, discovered several fossils that belonged to the long-necked sea creature known as Elasmosaurus from the Upper Cretaceous period.


See you next week!


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