Record Imports of Gold and Silver

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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.


Overview

  • The central financial event of the week was the meeting of the U.S. Federal Reserve, where the FED reduced interest rates by 50 basis points. This marks the first rate cut since the early days of the COVID-19 pandemic.
  • This decision confirms that the FED believes inflation is under control and sets a new course that will impact stock markets, the housing market, national debt, and more.
  • Gold responded to the rate cut with a record-high value.
  • Meanwhile, Microsoft is looking to secure enough energy through nuclear technology. Nuclear power plants are once again becoming a vital source of green energy, as they are considered more reliable than solar and wind energy.

Why did the Federal Reserve cut interest rates?

Inflation in the U.S.: In August, inflation increased by only 2%, the lowest level since February 2021, bringing the 12-month inflation rate to just 2.5%.

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Employment in the U.S.: Recent interest rate hikes have slowed the labor market, with August employment data showing the smallest increase in three years. Additionally, there are fewer job openings than at any time since January 2021, indicating that interest rate hikes may have peaked.

 

What will happen to the stock market?

Lower interest rates typically stimulate growth, as companies can borrow more cheaply, increasing profits. However, history shows that the stock market tends to drop by more than 20% in the short term whenever the FED lowers interest rates. The FED only cuts rates when it notices warning signs of a downturn.

 

China shifts towards tangible investments

China holds significant investments in U.S. Treasury bonds and gold, reflecting its strategy to diversify reserves and protect against economic risks.

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There is currently a noticeable move away from paper investments, as China reduces its holdings in bonds. On the other hand, China has been increasing its gold reserves for 20 years, with quantities accelerating in recent years.

 

India and its record shift towards gold

Increased demand for gold from Indian consumers is driving up gold prices.
Indian gold imports rose by 221.41% in August, reaching $10.06 billion. This surge is due to high demand during the festive season and a reduction in import duties.
In the same month last year, gold imports were $4.9 billion. This reflects growing consumer demand for gold ahead of the festive season in a country where gold plays a significant role in cultural and religious celebrations.

 

Strong Indian demand for silver as well

Preliminary data from The Silver Institute shows that India’s silver imports from the beginning of 2024 to July increased by 715% compared to 2023, reaching 4,554 tonnes (146.4 million ounces).
India’s silver imports are expected to account for as much as 17% of the global primary supply projected for this year.

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Vir: Envato

 

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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