Last Duty of a Central Banker is to Tell Us the Truth

The fiat Federal Reserve raised its benchmark interest rate another quarter of percent this week to its highest level in 22 years.

Payments on the Federal Governments now near $33 trillion debt level is nearing $1 trillion annually.

And while bankruptcy filings for US companies with $50 million or more in liabilities are now spiking to levels not seen since the 2008 Global Financial Crisis and 2020 economic shutdown.

Jerome Powell had the following to say in terms of the coming potential of a recession in the USA.

Meanwhile the bond market thinks the opposite and this is a current New York Federal Reserve chart illustrating that.

This is the Yield Curve Indicator and it helps calculate the probability of a recession in the United States 12 months ahead. The term spread is defined as the difference between 10-year and 3-month Treasury rates. When short term rates are much higher than long term rates and the chart line dips, it rings recession alarm bells for anyone able to critically think for themselves.

Typically any dip below the red 0 line over the last 64 years meant recession was inbound. Last month June 2023, the Yield Curve Inversion spread was a drastic -1.5508

As of last month, the NY Fed had the probability of a US recession by June 2024 at 67.3054%. 

A famous quote by a former vice chairman of the Federal Reserve, reminds us that before the eventual Fed pivot and the next rate cut cycle returns, the last duty current Chairman Jerome Powell has, is to tell us the truth.

The precious metals markets were enjoying positive trading weeks until upbeat GDP data afforded large algorithmic selloffs in the derivative markets and spot prices slid down waterfall price declines.

Rallying to close the week the spot silver price finished above the 24.30 oz bid, and the spot gold price closed near $1960 oz bid.

The spot gold silver ratio slid upwards to close the week at 80.

In domestic bullion industry news, this week the US Mint announced they will be doubling production of 1 oz Silver American Eagle Coins through this coming November 2023. While on pace to break sales records in gold bullion coin sales, the US Mint's silver bullion coin sales and market share have diminished given outrageously high price premiums consistently over the last few years.

As a consequence of this US Mint silver bullion coin production ramp news combined with slower summer bullion demand volumes, premiums have been coming down on virtually all silver and gold bullion products in the physical precious metals market.

Late Friday is often the time for bad news dumb as authorities hope to sidestep the news cycle.

It was just announced that a 5th bank in the USA has just failed and been taken over by bank regulators at the FDIC.

Moving on to global bullion related news.

India and the UAE have an ongoing 10 year agreement of lessening silver bullion import duties into India from the UAE. The import duty discount is currently at +9% vs the typical +15% tax slapped onto silver bullion imports from common sources such as the UK, China, among others. 

This India UAE silver bullion import tax lowers down throughout this decade into next, to eventually there being no import duties on silver bullion into India from the UAE by 2032.

You can therefore expect more silver bullion refinery capacity to begin being built out in the UAE alongside their growing gold refining capacity. As well, many coming silver bullion imports destined to India to briefly pass through the UAE in order to skimp on what would be higher import duties.

In a related de-dollarization note, India and the UAE announced two weeks ago that they have agreed to settle trade in fiat Indian rupees instead of fiat US dollars in an effort to cut down on typical transaction costs associated with interbank fiat US dollar currency conversions.

So bullish future Indian silver bullion demand, bearish longer term fiat US dollar demand.

Meanwhile physical gold demand in China is up both in terms of gold jewelry and sharply in gold bullion bar demand compared to the same period last year 2022.

As well the Chinese central bank has officially added gold bullion for eight months straight to the tune of an additional 103 tonnes since November of 2022 through last month June 2023.

After a now two decade trade leading baton hand off from the USA to China, more de-dollarization news out of China this week.

The fiat Chinese yuan now exceeds the fiat US dollar as payment settlement in China's bilateral trade for the first time. Nearly now half of China's trade is settled in fiat yuan and has eclipsed their international overall use of US dollars for the first time.

Looking at gold prices in fiat yuan terms, they are on the cusp of again breaking out to fresh record price highs. In other words, the lowest levels of fiat yuan values versus gold will continue coming. Meanwhile in China, silver prices are still just over half of their 2011 price high levels.

Finally the Bank of Japan made news this week signaling their policy of yield curve control could be weakening and rates in the land of the rising sun will be rising in a controlled fashion. 

Japan has huge international investments which may begin further reshoring if local interest rates begin to be more competitive versus massive foreign market bond holdings.

A final look at the fiat yen in terms of its ongoing devaluation versus gold and we see on the left here, that it's already broken out and climbing seemingly higher each and every year to new record fiat yen gold prices.

And as the moon follows the sun, there is silver in Japanese yen terms still currently valued just above 1/3rd of its 1980 price high.

If indeed in secular bullion bull markets gold leads, and then silver follows and eventually outperforms. Just look how far silver in Japan has to move to merely mimic what gold has already done there. Now imagine how silver's typical outperformance might look in an eventual future mania move to come.

That is all for this week's SD Bullion Market Update.

As always to you out there, take great care of yourselves and those you love.

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James Anderson
James Anderson
Senior Market Analyst & Content

A bullion buyer years before the 2008 Global Financial Crisis, James Anderson is a grounded precious metals researcher, content creator, and physical investment grade bullion professional. He has authored several Gold & Silver Guides and has been featured on the History Channel, Zero Hedge, Gold-Eagle, Silver Seek, Value Walk and many more. You can pick up Jame's most recent, comprehensive 200+ Page book here at SD Bullion.

Given that repressed commodity values are now near 100-year low level valuations versus large US stocks, James remains convinced investors and savers should buy and maintain a prudent physical bullion position now, before more unfunded promises debase away in the coming decades...