Central banks are on pace to buy over 1,000 tons of gold again
Despite the near-record annual purchases, it's worth noting that these institutions once held 80% of their balance sheet in gold Today, it's barely 20%. A return to the historical average of central banks holding 40% of their balance in gold could propel gold prices north of $3,000 based solely on that capital dynamic... Source: Tavi Costa, BofA
The Federal Reserve lent out roughly $200B in overnight cash on Wednesday through its standing repo facility
This is the highest amount since the onset of covid. What's going on? Is another repo crisis looming? Source: Win Smart, CFA
Odds of rate cuts beginning as soon as January 2024 are rising quickly
There is now a ~15% chance of rate cuts beginning next month. The base case shows a ~56% chance of rate cuts beginning in March 2024. Markets are currently expecting a total of FIVE 25 basis point rate cuts in 2024. Still, the Fed has yet to discuss the possibility of any rate cuts at all. Markets are fully bought in to the "Fed pivot." We believe that the economy will continue to slow down and that rate cuts will take place next year. However, a lot pof these cuts are already priced in. This could generate some volatility for bonds and stocks in case of disappoinment (aka macro data surprising on the upside). Source: The Kobeissi Letter
Liquidity continue to matters for stocks
Source: www.zerohedge.com, Bloomberg
Gold hit record high 2'135.39/oz in early trading hours
Gold surged to a new all-time high as growing expectations for US rate cuts early next year. This latest leg of gold's rally has been turbocharged by comments on Friday from Fed Chair Jerome Powell. Precious metal's strength has been underpinned buy other factors as purchases by governments and central banks as well as geopolitical uncertainty.
Interesting development highlighted by The Kobeissi Letter:
Is the slowdown in restaurant activity signalling that a FED pivot Indicators of restaurant activity continue to show signs of weakness in the US. Interestingly, this has been almost perfectly correlated with the Fed raising rates. Restaurant activity in the US hit an all time high in August 2021. Since the Fed started raising rates in March 2022, restaurant activity has moved in a straight line lower. As excess savings are depleted and inflation remains an issue, consumers are cutting back. And more credit card debt is not the solution here.
The Fed's preferred measure of inflation (Core PCE) moved down to 3.5% in October, the lowest since April 2021
The Fed Funds Rate is now 1.8% above Core PCE, the most restrictive monetary policy we've seen since 2007. Source: Charlie Bilello
Massive change over the past 5 weeks when it comes to what the market is pricing from FED
Source: TME, Bloomberg
