Savings-Rate Revisions Wipe Out $140B In Wealth As Inflation Jumps (week ending 11.29.24)

A Daily Journey Through the Week's Market

Monday - 11.25..24: Gold prices experienced a significant decline, dropping nearly 2% due to profit-taking after a five-session rally and the announcement of Scott Bessent as President-elect Donald Trump's pick for U.S. Treasury Secretary. This appointment suggested a potential reduction in tariffs and a decrease in U.S.-China trade uncertainties, influencing market sentiment. Spot gold fell to $2,664.53 per ounce, while U.S. gold futures decreased to $2,666.40.

Tuesday - 11.26..24:. Gold prices held steady after a previous slide, supported by President-elect Trump's proposal to impose tariffs on all imports from Canada, Mexico, and China. Spot gold was at $2,624.41 per ounce, recovering from initial losses, while U.S. gold futures rose 0.2% to $2,624.70. Analysts noted that the resilience of gold indicated a demand for safe-haven assets amid ongoing market uncertainties.

Wednesday - 11.27..24: Gold prices rose 0.3% to $2,639.30 per ounce as the dollar softened, boosting demand for the metal. Investors awaited U.S. inflation data, with markets pricing a 63% chance of a Federal Reserve rate cut. Geopolitical developments, including a ceasefire between Israel and Hezbollah, also influenced market sentiment. 

Thursday - 11.28.24: US Market Closed - Thanksgiving Holiday

Friday - 11.29.24: Gold and silver prices are higher in early U.S. trading Friday, driven by safe-haven demand amid ongoing geopolitical tensions, a weaker U.S. dollar, and lower Treasury yields. Geopolitical concerns include escalating rhetoric from Russia, deepening military ties between Moscow and North Korea, and renewed tensions in the Middle East despite a recent cease-fire.

Americans Say $5.3m Net Worth Equals Financial Success

The big picture: A recent survey by financial planning firm Empower reveals that Americans view financial success as requiring a net worth of $5.3 million and an annual salary of $270,000. Yet, many feel they’re far from achieving this standard.

By the numbers:

• National averages:
  • Average annual salary (2023): $66,621 (Social Security Administration).
  • Average net worth (2022): $1.06M (Federal Reserve).
• Perceptions of success:
  • 50% of respondents say they are not better off than their parents.
  • 34% consider themselves financially successful.

Why it’s hard to get there:
Respondents cited several barriers to financial success:

• Insufficient or irregular incomes.
• Poor financial planning or lack of clear goals.
• Overspending and high debt.
• Rising costs due to inflation.

The inflation squeeze:

• A 2023 Federal Reserve report found that the share of Americans doing “at least okay financially” fell from 78% in 2021 to 72%.
• Inflation continues to be a top concern for all income groups, including high earners.
  • High-income stress:
    • 20% of households earning over $150K live paycheck to paycheck (Bank of America).
    • 48% of earners over $100K report tight budgets due to insufficient income (PYMNTS).

What’s next:
Republicans, led by President-elect Donald Trump, aim to tackle inflation with measures like boosting energy production and cutting federal spending. However, critics warn that proposed policies, such as cracking down on immigration, could harm industries like homebuilding and the broader economy.

Why it matters:
As inflation and economic uncertainty persist, Americans’ high expectations of financial success highlight growing disparities between perceived and attainable wealth.

Continuing Jobless Claims Hit 3-Year High, Despite Drop In Initial Claims

The big picture: The U.S. labor market is sending mixed signals as continuing jobless claims climb to their highest level in three years, even as initial jobless claims fell to a seven-month low.

By the numbers:

• Initial jobless claims:
  • Dropped to 213,000 last week, down from 215,000—the lowest since April 2024.
  • Non-seasonally-adjusted claims rose to a four-month high, led by increases in California.
• Continuing jobless claims:
  • Rose to 1.907 million, marking the highest level since 2021.

The state breakdown:

• California saw the largest rise in new claims.
• New Jersey posted a modest decline in claims.

Why it matters:

• The labor market appears to be at a crossroads:
  • Hot: Low initial claims suggest a resilient job market.
  • Cold: Elevated continuing claims indicate longer-term struggles for many workers.

What’s next:
With diverging signals, economists will watch closely for further data to determine whether the job market is cooling or simply recalibrating amid broader economic uncertainty.

Savings-Rate Revisions Wipe Out $140b In Wealth As Inflation Jumps

The big picture: Inflation is back in the spotlight as the Fed's preferred measure, Core PCE, surged to a six-month high of 2.8% in October, erasing rate-cut hopes and exposing a $140 billion hit to Americans’ savings.

By the numbers:

• Core PCE: +2.8% YoY (up from 2.7%), the highest since April.
• Headline PCE: +0.2% MoM, lifting the annual rate to 2.3% (up from 2.1%).
• Supercore PCE (Services ex-shelter): +3.51% YoY, signaling persistent inflation pressures.

What’s driving inflation:

• Rising Services and Durable Goods costs are fueling the rebound.
• Despite growing incomes (+0.6% MoM), spending increased more modestly at +0.4% MoM.

Savings shock:

• Revised data erased $140B from Americans’ personal savings.
• The savings rate, adjusted down sharply, follows upward revisions made in September that inflated GDP.

Why it matters:

• Higher inflation dampens expectations for Fed rate cuts.
• The sudden loss of savings highlights vulnerabilities in consumer financial health amid persistent price pressures.

The bottom line: With inflation ticking higher and Americans facing revised savings shortfalls, economic uncertainty looms large as we head into the holiday season.

Gold Holds Steady Above $2,650 As Q3 Gdp Grows 2.8%

The big picture: The U.S. economy shows resilience as GDP growth in Q3 remains steady at 2.8%, according to the Bureau of Economic Analysis' second estimate.

By the numbers:

• Q3 GDP: Unchanged from the first print at 2.8%, slightly below Q2's 3% growth.
• Consumer spending: Up 3.5%, modestly revised down from the initial 3.7%.
• Inflation:
  • Core Price Index (excluding food and energy): +2.1% (down from 2.2%).
  • Headline Price Index: Steady at 1.5%.

What’s driving the economy:

• Growth is supported by consumer spending, which continues to be a key driver.
• Upward revisions in private inventory and nonresidential fixed investment offset weaker exports and consumer spending.
• A drop in imports also played a role in boosting GDP.

Zoom in:
Gold prices have remained stable despite the latest economic data.

• December gold futures are trading at $2,651.50/oz, up more than 1% on the day.
• This marks a recovery from the week's earlier selling pressure.

What they're saying:

• “The changes in this revision are immaterial. It's a healthy economy that's being led by consumption,” said Adam Button, Chief Currency Strategist at Forexlive.com.

Why it matters:
The steady GDP and stable inflation reinforce a picture of a robust, consumer-driven economy, while gold prices hold firm, reflecting limited market reaction to the data.

Corporate Bitcoin rush: Jiva Technologies and Rumble bet big on BTC

The big picture: The corporate adoption of Bitcoin continues to gain momentum, with Canada-based Jiva Technologies and video-sharing platform Rumble making significant allocations to the cryptocurrency.

Driving the news:

• Jiva Technologies:
  • Announced up to $1 million in Bitcoin investments to strengthen its treasury.
  • CEO Lorne Rapkin cited Bitcoin's scarcity and inflation-resistant qualities as key reasons for the move.
  • The company plans to monitor Bitcoin holdings closely to align with market conditions and cash flow needs.
  • Jiva’s stock surged 36.4% to $0.33 after the announcement.
• Rumble:
  • Allocated up to $20 million of excess cash reserves to Bitcoin.
  • CEO Chris Pavlovski called Bitcoin a strategic inflation hedge and praised its resistance to dilution from money printing.
  • The move aligns with Rumble’s expansion into the cryptocurrency space.

Zoom out:
Other companies are following suit:

• MicroStrategy: Added 55,000 Bitcoin, boosting its holdings to 386,700 BTC worth $5.4 billion.
• Hoth Therapeutics: Allocated up to $1 million to Bitcoin, citing its potential as a treasury reserve asset.
• Genius Group: Adopted a “Bitcoin-first” strategy, committing 90% or more of its reserves to BTC, with an initial purchase of 110 BTC for $10 million.

Why it matters:
The corporate Bitcoin trend reflects growing confidence in the asset as a hedge against inflation and a treasury reserve. Recent developments, such as Bitcoin ETF approvals and rising institutional interest, are accelerating adoption.

What’s next:
Expect more companies to follow as Bitcoin gains legitimacy as a key asset class amid shifting economic and regulatory landscapes.

Reinventing Government? Musk and Ramaswamy's DOGE Gambit Explained

The big picture: President-elect Donald Trump is creating a new "Department of Government Efficiency" (DOGE), led by Elon Musk and Vivek Ramaswamy, to slash federal spending and regulations. While skeptics abound, the initiative is drawing significant public attention and could spark a cultural shift toward smaller government.

What’s happening:

• The mission: Musk and Ramaswamy will draft actionable plans to cut government waste, inspired by Reagan’s Grace Commission and Clinton’s "Reinventing Government" initiative.
• Key proposals:
  • Eliminate federal regulations deemed illegal under recent Supreme Court rulings.
  • Relocate federal agencies outside Washington, D.C.
  • Require remote federal workers to return to the office.
  • Cut funding to the Corporation for Public Broadcasting.
  • Overhaul federal procurement and target fraud and waste.

The cultural opportunity:

• Crises have historically driven sweeping changes in government and society, from Wilson’s WWI-era speech controls to the Fed’s COVID-19-era money printing.
• Upcoming crises—whether geopolitical conflicts, economic downturns, or domestic terrorism—could force Americans to confront the failures of government intervention.
• DOGE could serve as a counterweight, rallying public awareness and enthusiasm for reducing government power.

The challenge:
Critics argue DOGE is too reliant on politicians with little incentive to implement meaningful cuts. Even if Musk and Ramaswamy succeed in crafting robust plans, political and institutional barriers remain steep.

Why it matters:

• Public enthusiasm for DOGE highlights a potential shift in the cultural tide. Musk and Ramaswamy, inspired by libertarian Ron Paul, are amplifying their message through podcasts and public outreach.
• Countering government propaganda and increasing public awareness of government failures are critical to seizing opportunities for reform when crises hit.

What’s next:
While the road to meaningful reform is uncertain, DOGE’s visibility and grassroots excitement could position it as a catalyst for cultural and political change. As Connor O’Keeffe puts it, "We’re closer to a turning point than many realize."

Dow Hits All-Time High, On Track For 47th Record Close

The big picture: The Dow Jones Industrial Average continued its climb on Wednesday, hitting a fresh record high as it edges closer to the 45,000 milestone. This marks the index’s 47th record close of the year, while the S&P 500 and Nasdaq Composite posted slight declines, remaining up 19% and 26% for the year, respectively.

Driving the news:

• Among the Dow’s top performers were Travelers (+1.31%), UnitedHealth (+1.18%), and Walgreens (+3.04%), while Salesforce (-3.99%), Intel (-3.55%), and Microsoft (-0.93%) lagged.
• Fresh inflation data showed the Fed’s preferred gauge, the personal consumption expenditures index, rose 2.3% year-over-year in October, aligning with expectations but remaining above the Fed’s 2% target.

Zoom out:

• The Dow has gained over 19% in 2024, with a 7% bump since President-elect Donald Trump’s victory. Investors are optimistic about the incoming administration’s pro-business policies, including potential extensions of Trump-era tax cuts.

Trump’s cabinet picks:

• Kevin Hassett, former economic adviser, was nominated to chair the National Economic Council.
• Scott Bessent, fund manager and Treasury secretary nominee, pledged to make the 2017 Tax Cuts and Jobs Act permanent.
• Howard Lutnick, Cantor Fitzgerald CEO, was tapped to lead the Commerce Department.

What’s next:
Markets will pause for Thanksgiving, with trading resuming on Black Friday for a shortened session. Investors remain focused on Trump’s economic team and its impact on policy heading into 2025.

Next Week’s Key Events

Monday, Dec. 2

• 9:45 am: S&P Final U.S. Manufacturing PMI (November)
• 10:00 am: ISM Manufacturing (November)

Tuesday, Dec. 3

• 10:00 am: JOLTS Report (October)

Wednesday, Dec. 4

• 8:15 am: ADP Employment (November)
• 8:45 am: St. Louis Fed President Musalem speaks
• 9:45 am: S&P Final U.S. Services PMI (November)
• 10:00 am: ISM Services (November)

Thursday, Dec. 5

• 8:30 am: Initial Jobless Claims (for week ending Nov. 30)

Friday, Dec. 6

• 8:30 am: Employment Situation Summary (November)
• 10:00 am: Consumer Sentiment (prelim, December)
• 10:30 am: Chicago Fed President Goolsbee speaks
• 3:00 pm: Consumer Credit (October)

IMPACT ON PRECIOUS METALS MARKETS

Manufacturing and Services Data (S&P and ISM Reports)

Manufacturing and services data, such as the S&P and ISM reports, provide crucial insights into economic growth. Stronger-than-expected results from these reports often indicate a healthy economy, reducing the safe-haven demand for gold and silver as investors seek higher-yielding assets. However, weaker data can raise concerns about an economic slowdown, which tends to boost the appeal of precious metals as protective investments.

JOLTS Report (Job Openings and Labor Turnover Survey)

The JOLTS report measures labor market tightness and worker demand, offering a snapshot of economic health. A high number of job openings generally signals a strong economy, which can diminish interest in gold and silver. In contrast, weaker results may indicate underlying economic struggles, driving investors toward precious metals for safety.

ADP Employment and Employment Situation Summary

These reports are key indicators of labor market health and often influence the broader economic outlook. Strong job growth reflected in these reports can boost the U.S. dollar, making gold and silver less attractive as they are non-yielding assets. Conversely, weak employment data tends to increase economic uncertainty, enhancing the appeal of precious metals as a hedge.

Initial Jobless Claims

Initial jobless claims measure weekly changes in unemployment filings, providing real-time insights into labor market stability. Higher-than-expected claims may signal a slowing economy, which often supports gold and silver prices as safe havens. Conversely, low claims suggest labor market resilience, potentially reducing the demand for these metals.

Consumer Sentiment (Prelim)

Consumer sentiment gauges public confidence in the economy and serves as an indicator of future spending patterns. High confidence often reflects economic strength, decreasing the demand for gold and silver. In contrast, low sentiment can raise concerns about economic instability, driving investors to these metals as a hedge against uncertainty.

Consumer Credit

Consumer credit reflects borrowing activity and overall financial health. Rising credit usage can signal economic optimism, which may temper demand for gold and silver. However, increased borrowing may also raise concerns about debt sustainability, indirectly supporting precious metals as a hedge against financial instability.

Fed Speeches (Musalem, Goolsbee)

Speeches by Federal Reserve officials provide insights into monetary policy outlooks, which can significantly impact gold and silver markets. Hawkish commentary, such as support for higher interest rates, tends to pressure precious metals by strengthening the dollar and raising yields. Conversely, dovish remarks favoring rate cuts or loose monetary policy often boost the appeal of gold and silver as hedges against inflation and currency devaluation.