GSI - How The Week Unfolded (End 5.12.23)

Anthony Anderson

Updated: May 22, 2023

yields real gold week

Google Trends Reveals Surge in 'How to Buy Gold' Searches

In the wake of a significant crypto crash, internet users are increasingly seeking information on traditional investment in gold, as revealed by Google Trends data. The phrase "how to buy gold" has reached its highest search volume in two decades, indicating a shift in investment strategies. Cryptocurrencies, after a period of extreme volatility, have seen a significant decrease in value, with Bitcoin losing approximately half of its worth since late 2021. This downturn has driven investors, who are seeking more stability, to consider gold, a commodity that has consistently held its value throughout history.

Gold's appeal is not just based on its stability, but also its tangibility and aesthetic appeal when compared to cryptocurrencies. Despite the fluctuations in the market, gold prices remained relatively steady and have even surged above $2,000 per troy ounce recently due to concerns over instability in the banking sector. As a result, sales of gold coins have also increased, as investors seek safer havens for their wealth. With a total estimated value of $14.5 trillion, as opposed to crypto's $1.2 trillion, gold is once again becoming a preferred choice for investors in uncertain times.


Inflation Shows Signs of Slowing: A Look at CPI and PPI

The latest reports on the Consumer Price Index (CPI) and the Producer Price Index (PPI) offer mixed but cautiously optimistic signals about the direction of the U.S. economy. The CPI, a gauge of the cost of goods and services for everyday consumers, rose by 0.4% last month, exactly as Wall Street experts had anticipated. This uptick was largely driven by increasing prices for housing, used cars, and gas. However, the annual inflation rate of 4.9% was slightly less than projected, hinting at a potentially slowing trend.

On the other side of the equation, the PPI – which measures the prices producers pay for their goods and services – increased by a modest 0.2%, slightly under the anticipated 0.3%. The yearly increase was 2.3%, the lowest since early 2021. Despite these positive signs, challenges persist, and the picture is nuanced. 


Gallup Poll: Americans' Confidence in Economic Leaders Declines

A recent Gallup poll highlights a decline in Americans' confidence in major economic leaders, including the president, Congress, and the Federal Reserve. The survey, conducted from August 3-18, 2021, found that only 45% of respondents expressed "a great deal" or "quite a lot" of confidence in President Joe Biden's economic leadership. Meanwhile, confidence in Congress hit a dismal 12%, while the Federal Reserve garnered 30% confidence. These figures showcase the growing concerns among Americans about the economy and their skepticism about the abilities of the nation's top economic leaders to effectively address the challenges.


Debt Ceiling Dilemma: A Tug of War with High Stakes for U.S. Economy

The U.S. could default on its national debt as soon as June 1st if Congress doesn't raise the debt ceiling, a situation that could trigger a global economic catastrophe. Talks between the White House and Congress began this week but ended without a deal. Democrats, who hold the majority in Congress, are pushing to raise the limit, while Republicans are demanding spending cuts first. The stalemate puts both parties in a precarious position. If the impasse continues, it could spook U.S. and global financial markets, potentially leading to a downgrade of the U.S. credit rating and a rise in interest rates. This impasse not only threatens the U.S. economy but also carries significant political risks for both parties with midterm elections on the horizon next year. The coming days will determine whether a compromise can be reached, or if the U.S. will face a potential economic crisis.


Gold Poised to Eclipse Silver, Platinum, and Palladium Amid Rising US Recession Risks

According to Bloomberg Intelligence's May outlook, gold is expected to outperform other commodities such as silver, platinum, and palladium this year, amid increasing risks of a U.S. recession. The gold-silver ratio, which currently stands at approximately 80, is projected to rise, indicating gold becoming more expensive compared to silver. Mike McGlone, senior macro strategist at Bloomberg Intelligence, suggests the ratio may surge to all-time highs if the U.S. slips into a recession. Silver is expected to recover towards the end of a recession, propelled by electrification trends. Meanwhile, gold is also anticipated to outperform platinum and palladium during the downturn. The report revealed gold has already risen by about 9% over the past year, while the Bloomberg Commodity Spot Index (BCOM) has decreased around 24% in the same period, further solidifying the bullish outlook for gold.

Meanwhile, the latest Gallup poll reveals that the approval of gold as the best long-term investment has almost doubled from 15% in 2022 to 26% in 2023 among American investors. This significant rise, the highest level since 2012, has seen gold overtake stocks to become the second-most favored investment, closely trailing real estate, which dropped from a 45% approval in 2022 to 34% in 2023. Factors contributing to this shift include higher interest rates and increased stock market uncertainty. Meanwhile, the preference for stocks/mutual funds fell from 24% to 18%. Savings accounts/CDs and bonds saw a slight increase in preference, while approval for the crypto market dropped to 4% following the collapse of FTX.


Looking Ahead to Next Week

The week of May 15 to May 19, 2023, will be a significant one in terms of economic data releases in the United States.

On Monday, May 15, at 8:30 am, the Empire State manufacturing survey for May will be released, showing a reading of 10.8.

The following day, Tuesday, May 16, is set to be a busy one with three major reports. The day will begin at 8:30 am with the release of U.S. retail sales data for April, which are expected to show a decrease of 1.0%. This will be followed at 9:15 am by the industrial production figures for April, which are predicted to show a growth of 0.4%, alongside the capacity utilization data for the same month, standing at 79.8%. The final report for the day, the home builder confidence index for May, is expected to come in at 45 and will be released at 10:00 am.

On Wednesday, May 17, the housing starts data for April will be announced at 8:30 am, with expectations set at 1.42 million.

The economic data for Thursday, May 18, will begin with the Philadelphia Fed manufacturing survey for May at 8:30 am, displaying a reading of -31.3. At the same time, the initial jobless claims for the week ending May 13 will also be released. The day will conclude with the announcement of April's existing home sales at 10:00 am, projected to be 4.44 million.

The week will wind down on Friday, May 19, with no scheduled data releases. This week's economic reports will provide critical insights into the current state of the U.S. economy and its potential trajectory.

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