The two-day meeting of the Federal Reserve ended on Wednesday. As expected, the Fed kept interest rates unchanged (the key Fed funds rate remains in a range between 5.25 and 5.50 percent). Just as importantly, the results from the labor market showed that the US labor market has started to cool down.

Summary of the US jobs report:

– The hot labor market is finally starting to cool down.
– The economy added 175,000 jobs in April, far below expectations of 238,000.
– The US unemployment rate rose by 0.1 percentage points to 3.9%.
– Wage growth is slowing down and stood at 3.9%, the lowest since June 2021.

The above data would suggest that the likelihood of the Federal Reserve starting to cut interest rates soon is increasing. Perhaps as early as the September meeting.

But what if the cuts don’t happen so soon?

If the Fed postpones rate cuts, it could cause the US economy to cool to the point where it could enter recession.

Source: Business Insider

Higher interest rates are already having an impact on economic strength, and delaying interest rate cuts could have serious economic impacts in the future. I believe the Fed is aware of this, but it is safe to assume that whatever the Fed does, it will have a major impact on our economies and on our wealth.

Japan and the yen

We have been talking a lot lately about Japan and its currency problems. In a period of four days, Japan is said to have carried out two interventions in the market, which have not been officially acknowledged, but traders have estimated the total value to be around 9 trillion yen (59 billion dollars).

The appreciation of the Japanese currency helped boost inflation, wage rises, and corporate profits, which Japan desperately needed to improve economic growth. However, the rapid depreciation of the currency and uncertainty about the future trend frightened consumers, who started to cut back on their spending. This also threatens the Bank of Japan’s efforts to normalize policy after years of keeping interest rates low. Households across Japan are now trying to save in various areas, such as foreign travel, food, and transport, as the currency exchange rate increases the cost of imported goods.

Source: Financial Times

Population aging in the western world is a very obvious problem

When we mention Japan and its problems, we cannot avoid comparing countries in terms of the proportion of the population over 65. The aging of the population in the Western world is a very obvious problem. Other countries, such as Italy, could potentially quickly follow Japan’s path, as the ‘gaming’ of interest rates has time and again quickly manifested itself in increased borrowing costs and constraints in the financing of public expenditure.

Source: Twitter

The risk assessment of the financial system in Slovenia has changed significantly

As the data shows, we do not need to worry about banks in Slovenia at the moment. In the past, banks were threatened by interest income and bad loans; now the risks have been transferred to the external environment. According to the Bank of Slovenia, banks are now most threatened by potential cyberattacks, climate change, and geopolitical tensions.

The problem for banks in the future is finding new sources of revenue to finance their operations and generate profits. The volume of lending is declining, and companies in particular are delaying planned investments and hoarding capital. Interest income will also fall as the era of high interest rates on which banks have made large profits is coming to an end in the euro area. Let us not forget the EUR 26 billion of Slovenian bank deposits.

Source: Bloomberg Adria

More information from the precious metals market

China plans to increase copper and gold mining in Serbia. Future investments will be directed towards the development of underground copper and gold mines, with estimated reserves of around 20 million metric tons of copper and 700 to 800 metric tons of gold.

Source: Rtvslo

Olivia Markham, who co-manages the BlackRock World Mining Fund, says copper needs to reach a price of $12,000 a ton—a 20% jump from the current week’s peak—to spur major investment in new mines. The metal’s price has hit a two-year high of close to $10,000, and further gains are needed to encourage miners to approve projects needed to prevent major shortages during the energy transition. “When I look at the price today, I think it’s significantly below the price levels we need to incentivize new production from scratch,” Markham says.

The value of the new copper investments foreseen will escalate in the coming years

Source: Bloomberg

India follows China. A surge in projected demand for solar panels in India. What does this mean for silver, a component of solar panels?

Source: Peter Krauth

The value of the S&P500 index expressed in gold price. Has the index reached its peak?

Source: Crescat

World gold production in 2023 shows an interesting picture of the relationship between the world’s superpowers. Some of them have been importing additional gold in recent years, especially from Europe.

Source: Visual Capitalist

But the UK will not be among these major gold-producing powers. The UK holds far less gold at the moment than it did a quarter of a century ago. In 1999, the then British Chancellor of the Exchequer, later Prime Minister Gordon Brown, announced the sale of almost half of the UK’s gold reserves, a move that caused considerable controversy and criticism. The sale took place between 1999 and 2002, with some 395 metric tons of gold being sold.

This move was criticized because gold prices were relatively low at the time, and after this sale, gold prices started to rise, leading many to criticize the decision to sell gold at low prices.

The sale of the British gold reserves was a big mistake. Look at the price of gold in pounds over the last 20 years.

Source: Goldprice