Weekly Digest: Stocks Climb After Big Loss, China Cracks down on Bitcoin

Investment news

Down then up! Gold prices rebounded more than 1% on Monday after their biggest weekly drop since March 2020, with demand boosted by a drop in U.S. Treasury yields and a pause in the dollar’s rally.

Spot gold rose 1.1% to $1,781.86 an ounce, while U.S. gold futures went up 0.8% to $1,782.90.

“We’ll see some consolidation here and correction to the upside. Gold needs to break at least above $1,800 and the real battle is probably more around the $1,820 level,” said Ole Hansen, head of commodities strategy at Saxo Bank.

U.S. stocks climbed on Monday as the market regained some of the steep losses caused by the Fed’s new economic projections and the announcement that rate hikes could come sooner than expected.

Triggered by the sell-off in stocks last week, the Dow dropped about 3.5%, while the S&P 500 and Nasdaq fell 1.9% and 0.2%, respectively.

On Monday, the Dow jumped nearly 1.8%, to post its best day since March 5, while Nasdaq was the relative underperformer with a 0.8% gain.

Bitcoin’s rollercoaster continues: China's central bank said on Monday it had called on some banks and payment firms, including China Construction Bank and Alipay, to crack down harder on cryptocurrency trading.

"Speculative trading in virtual currencies roils economic and financial order, spawns the risks of criminal activities such as illegal asset transfers and money laundering, and endangers people's wealth," the People's Bank of China said in a statement.

As a result, bitcoin fell to a two-week low to $32,350 following China’s announcement on cryptocurrencies.

“If, as I expect, the global buy-everything unwind continues this week, Bitcoin will feel those chill winds,” said Jeffrey Halley, senior market analyst at Oanda Asia Pacific Pte.

What else is happening

Powell goes on the grill🔥: the Fed Chair is about to be questioned U.S. lawmakers, and the elephant in the room will be whether he proceeds to the second term in office.

The visit comes after the Fed announced it was planning to increase rates in 2023 amid growing inflation concerns.

Will the dollar also get on the rollercoaster ride? After months of decreasing volatility that left the dollar almost immune to the Fed, the greenback seems to be facing a volatile week ahead of the Fed’s inflation data that will be out on Friday.

“Market participants will be interested in whether Powell and Williams indicate concerns about an inflation overshoot. Signs that the FOMC is growing less certain about the inflation outlook is important for the policy outlook, and can support the U.S. dollar,” according to a research note from Commonwealth Bank of Australia.

Qatar Economic Forum started on Monday, with high-profile names like Ray Dalio and Michael Bloomberg on speakers' list.

Economy and leadership in the post-pandemic world is the key focus of the forum.

Opinion

Gold disaster? Perhaps not. On the face of things last week looked pretty disastrous for precious metals. Gold fell by just over 6%, Silver by around 7.6%, Platinum by 9.6% and Palladium a whopping 11%.

The Fed appears to be standing firm on policy and there is no indication that it is much nearer to allowing interest rates to rise until 2023. In short the accommodative policy it has been conducting all-along is effectively unchanged, which is why the reaction to the post-meeting statement seems somewhat overdone. 

That's a mild suggestion that the possibility that the Fed might start tapering earlier than initially thought is considered ‘hawkish’, despite this projected date being two years into the future, is a little bizarre. 

Hence the opinion that the short-holding traders and bullion banks used the ‘hawkish’ views on the latest FOMC meeting to manipulate prices lower, continues to generates a strong following!

Michael Burry, the short-guru, is making predictions again, sort of. Burry issued a series of Tweets on Thursday warning individual investors about losses “the size of countries” were crypto and meme stocks to decline.

“All hype/speculation is doing is drawing in retail before the mother of all crashes,” Burry wrote on Twitter before the posts were deleted (a habit for him). “When crypto falls from trillions, or meme stocks fall from tens of billions, #MainStreet losses will approach the size of countries. History ain’t changed.”

And, finally…

As if 2021 couldn’t get stranger: it’s summer?? outside but toymakers are already in Christmas mode🎄. Hasbro, Mattel, and other toymakers are closely monitoring ongoing shipping and production delays in China.

The toy industry is grappling with the possibility of a product shortage, with current delays of two to four weeks due in part to COVID-19 and supply chain strains.

See you next week!

Photo credit: Kadellar