Share:

Investors got some superficially good news on the economy this week. But it turned out to be bad news for markets.

Although they’ve bounced back a little today, equities and precious metals markets sold off on Thursday following government data showing that the economy grew faster than expected in the third quarter. GDP was revised upward to a 3.2% annual pace from July through September.

Of course, a lot has happened since then, including additional rate hikes by the Federal Reserve. It will be well into next year before the full impact of higher borrowing costs get reflected in the economy.

But the backward-looking positive GDP number makes it more likely that the Fed will hike again at its next meeting. And since markets are forward looking, they are now pricing in that likelihood.

Looking ahead to 2023, inflation risk, recession risk, and interest rate risk could continue to weigh on financial assets. In that environment, precious metals have the potential to emerge as appealing safe-haven assets.

Stock market bulls encouraged by government economic data see the potential for the U.S. economy to avoid moving into a deep recession next year. However, currency traders weren't too impressed with the officially reported 3.2% GDP growth. Instead of rushing in to bid up the U.S. dollar against foreign currencies, they showed little interest in buying Greenbacks.

The U.S. Dollar Index is trading slightly lower overall for the week. The massive spike in the Federal Reserve note's exchange rate seen earlier this year seems to be in a longer-term trend of reversing lower.

The U.S. government has leveraged the currency as a political weapon against Russia and other geopolitical foes. But hopes that cutting off Russia from the global financial system would bring it to its knees economically and force an end to the war in Ukraine appear to have been misplaced.

The war continues to drag on. And Russian President Vladimir Putin remains undeterred by economic sanctions and other forms of international pressure.

This week Ukrainian President Volodymyr Zelenksyy met with President Joe Biden and spoke before Congress to beg for billions more in aid. Although there is growing skepticism among the public about continuing to fund Ukraine's war effort, the Washington establishment seems intent on doubling down.

GOP Senate Leader Mitch McConnell said aid to Ukraine was the Republican party's number one priority. His priorities evidently don't include fiscal restraint or getting control over the ballooning national debt – which is set to become a lot more expensive to service in the coming years thanks to rising interest rates.

Deteriorating U.S. finances and escalating geopolitical tensions are driving many central banks around the world to divest from dollars to load up on gold. Central bank gold buying has surged dramatically this year – and not just by Russia, China, and other big players. Countries across Europe and the Middle East are also boosting their gold holdings.

Here's some of what top precious metals analysts including Lynette Zang are saying about these developments:

Lynette Zang: We've got global central banks that have now been accumulating more gold than they ever have historically, just through the third quarter of this year. What do they know? Well, first of all, gold is the primary currency metal. And when they do the overnight resets, this is what they reset it against.

Financial News Anchor: Central banks are stocking up on gold. You may remember JP Morgan himself once said, "Gold is money. Everything else is credit."

Lynette Zang: Yeah, they're loading up. Central banks are around the world are loading up on gold, the most gold that they've bought since 1967. You've got Qatar, you've got Turkey. I mean, you've got a number of central banks, some surprising ones, that are buying tonnage of gold.

Lynette Zang: They issue currency. They're basically saying, "You need to own gold as a hedge against what we're giving you." And when you realize, and even the Dutch Central Bank, a bar of gold always retains its value. Gold is the perfect piggy bank. It is the anchor of trust in the financial system.

The World Gold Council confirms that central bank gold buying in 2022 is running at its hottest pace in decades. On the flip side, though, individual investors and institutional traders have been pulling cash out of exchange-traded funds and other financial instruments tied to precious metals prices.

Speculative interest in gold and silver may not catch fire until there is more clarity about when the Fed will pause or perhaps reverse course on rate hikes. In the meantime, the supply and demand fundamentals for physical bullion are looking favorable heading into the New Year.

Share: Feed news

Money Metals Exchange and its staff do not act as personal investment advisors for any specific individual. Nor do we advocate the purchase or sale of any regulated security listed on any exchange for any specific individual. Readers and customers should be aware that, although our track record is excellent, investment markets have inherent risks and there can be no guarantee of future profits. Likewise, our past performance does not assure the same future. You are responsible for your investment decisions, and they should be made in consultation with your own advisors. By purchasing through Money Metals, you understand our company not responsible for any losses caused by your investment decisions, nor do we have any claim to any market gains you may enjoy. This Website is provided “as is,” and Money Metals disclaims all warranties (express or implied) and any and all responsibility or liability for the accuracy, legality, reliability, or availability of any content on the Website.

Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content


Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content

Editors’ Picks

AUD/USD bounces toward 0.6650 on China stimulus optimism

AUD/USD bounces toward 0.6650 on China stimulus optimism

AUD/USD is bouncing back toward 0.6650 on Thursday. The pair turns hopeful that the downbeat Chinese NBS PMI data would prompt China's authorities to ramp up stimulus measures. A subdued US Dollar performance is aiding the pair 's rebound ahead of key US PCE inflation data. 

AUD/USD News

EUR/USD remains capped below 1.1000, EU/ US inflation data eyed

EUR/USD remains capped below 1.1000, EU/ US inflation data eyed

EUR/USD is struggling below 1.1000, as the US Dollar clings to recovery gains in Asian trading hours on Thursday. Wednesday's softer-than-expected German and Spain inflation data weighed on the Euro. Investors await the Eurozone inflation data on Thursday for fresh impetus. 

EUR/USD News

Gold trades lower near $2,040 on downbeat China data

Gold trades lower near $2,040 on downbeat China data

Gold hovers lower around $2,040 per troy ounce during the Asian session on Thursday. The yellow metal has retreated from the six-month high it reached at $2,052 on Wednesday. The pullback in XAU/USD's price suggests a shift in market sentiment or profit-taking after the recent rally.

Gold News

FTX token FTT jumps 8% as exchange wins approval to start selling $744 Million in Grayscale and Bitwise assets

FTX token FTT jumps 8% as exchange wins approval to start selling $744 Million in Grayscale and Bitwise assets

FTX token (FTT) has jumped 8% following news that a US bankruptcy court of Delaware has allowed the now-defunct cryptocurrency exchange to move forward with a November 6 request.

Read more

Rates: The notable reset but careful what you wish for

Rates: The notable reset but careful what you wish for

US stocks are paring earlier gains even as Treasury yields continue to decline amidst signs of decelerating inflation. Still, investors are growing increasingly wary about what lower inflation means for growth. Inflation continues to show signs of decelerating in what could now be considered the 'careful what you wish for' category.

Read more

Majors

Cryptocurrencies

Signatures