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.

The latest macroeconomic data show that the fear of an imminent recession, which emerged after unemployment in the US rose to 4.3% in July, is redundant. Investors were first cheered by lower inflation and then by encouraging retail sales growth, which was 1% and better than forecast. The likelihood of a soft landing for the US economy is again much higher, which encouraged stock buyers and brought a weekly high rise in the indices. But is this really the case?

Wednesday and Friday will be very interesting days this week. On Friday, Fed Governor Jerome Powell will again address the regular annual symposium of central bankers in Jackson Hole. Even earlier, on Wednesday, it will be interesting to see how the US labour market reacts. The US Bureau of Labor Statistics may revise downwards the April 2023-March 2024 jobs figures, which means that any “surpluses” from the previous year will actually be slips and that the US labour market is in much worse shape than the administration admits.

Gold breaks out again

If we note that the data and the situation in the world is deteriorating, then it is no wonder that gold has surpassed USD 2,500 per ounce and serves as an indicator of the situation.

The price of gold has risen by around 21% in 2024, while the S&P 500 has gained 16%.

Vir: Pexels

Central banks are hoarding gold faster than we have ever seen.

Indeed, central banks have become the main source of demand for gold as countries such as China, Turkey and India seek to diversify their reserves away from the US dollar, especially after witnessing how the West froze Russian dollar assets.

Ray Dalio, billionaire and former CEO of Bridgewater Associates on gold

Ray Dalio recommends gold because of its role as a buffer against risks stemming from higher inflation and a potential debt crisis that could hit the economy.

History and logic show that when there is a high risk that debts will either 1) not be repaid or 2) be repaid with money of diminished value, both debt and money become unattractive. When nations are deeply in debt, he said, central banks are likely to print more money to repay debts, which in itself is a problem.

Vir: Pexels

For reflection

• Slovenians keep most of their savings in banks. Household deposits in domestic currency have been growing steadily in recent years, peaking in January 2024 at €26.5 billion.
• Businesses in Slovenia held a record €11 billion in deposits in December 2023.

I can think of two things about the purchasing power of savings in banks…

1. The first is the “disruptive” power of inflation, which erodes the purchasing power of these savings.
2. The second thing is the “ignorance” of the possibility that a gold holding in a portfolio can at least allow the purchasing power of the assets to be maintained.

💡Gold is a form of money that is not backed by debt. It is like cash, but unlike cash and bonds, which are undermined by default or inflation risk, the price of gold is underpinned by debt default and inflation risks.

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.