First interest rate cut in the U.S. after 4 years: Growing doubts about economic stability

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The newsletter is a roundup of financial news, investment status, and other financial trivia, giving you the insight you need to manage your money in any economic situation.


 

General overview

This Wednesday, the US Federal Reserve will meet and it looks like it will start a new cycle of monetary policy easing after four years. Expectations are focused on a 25 basis point cut in interest rates, with some hinting at the possibility of a larger, 50-point cut.

The European Central Bank, on the other hand, cut key interest rates by a quarter of a percentage point for the second time in a row last Thursday.

Lowering interest rates raises doubts that economies are in good shape, because otherwise, interest rate cuts would not be necessary.

What are the other indicators that things aren’t optimistic?

Is stagflation really coming?

At the Institutional Investors Council‘s fall conference in New York on Sept. 10, Jamie Dimon, managing director of JPMorgan Chase, one of the world’s largest banks, expressed concern about the possibility that stagflation — a damaging mix of economic stagnation and inflation — could spill over into the U.S. economy.

Dimon says: “The worst outcome is stagflation – a recession and higher inflation. And by the way, I wouldn’t rule it out.”

 

računanje obrestnih mer

Source: Freepik

 

Are the unrealized losses of US banks also the reason why the Fed needs to cut interest rates?

Banks’ losses reached $512.9 billion in Q2 2024. This marks the 11th consecutive quarter with unrealised losses on investment securities for banks, a streak that has never been recorded before.

The “famous” Goldman Sachs bank is also starting to talk positively about gold

Investment bank Goldman Sachs says gold is currently the best short-term investment and hedge against geopolitical and financial risks. Goldman Sachs research predicts that the price of gold will reach $2,700 by early next year, supported by Federal Reserve interest rate cuts and gold purchases by emerging market central banks. A further rise in the price of gold could be fueled by new U.S. financial sanctions or heightened concerns about the U.S. debt burden.

 

Saudi Arabia has a lot more gold than it wants the world to know.

According to analyst Jan Nieuwenhuijs, the Saudi Central Bank (SAMA) has secretly bought 160 tons of gold in Switzerland since the beginning of 2022, adding to the current gold bull market.

Although the Saudis played a key role in establishing the global dollar standard in the early 1970s, this time they could even become a key link in its “decline.”

Interestingly, Saudi Arabia had 152 tons of gold in January 2008, and a month later the stock was revised up by 180 tons.

Will it be similar this time?

 

zlate palice in zlatniki

Source: Freepik

 

Record gold price

25% gold growth in 2024 in both euros and dollars.

 

Silver price

Silver is 17% off the peak in euros (1,052 euros) and 53% off the record in the USD (1,531 euros).

 

We are expecting increasing volatility in precious metals as well. Before buying, we recommend consulting and preparing a buying strategy, as this way you will be able to make the most of the bull commodity cycle in which we find ourselves currently.

 

The newsletter “Financial insights and trivia” does not constitute an investment advisory service. Its content does not constitute recommendations to buy or offers to buy, but is intended to inform the public about developments in the financial field. Past returns are not a guarantee of future returns. Please consult a financial adviser for advice.

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Buy or sell of precious metals

Buy or sell precious metals easily and under the most favorable terms on the market

Saving plan Valores

Enter the world of precious metals with as little as 50 € and reach your financial goals