Overnight, President Trump proposed an additional 100 billion dollars in Tariffs against China. The news was released yesterday around 7 pm and immediately equities sold off 400 points.
Off the news the price of Gold rallied 5 dollars but since then the price of Gold has come off as the U S Dollar has rebounded.
Things seem to be heating up between the U S and China as China’s Finance Minister said, “China will fight to the end and will retaliate on any trade sanctions the U.S. imposes”.
An all-awaited March Job numbers report released at 8:30 est. today revealed it was up 103k jobs, well below the consensus of 178k jobs. Average hourly earnings up 0.3 percent.
After the number was released, Equities dropped a little, the U.S. Dollar softened up a bit and the price of Gold and Silver recovered from their intraday lows.
Debts All – Folks!
On Wednesday, NBC news released a story revealing that the majority of millennials are in debt, hitting a pause on major life events.
Credit card debt, rather than student loans, are the most prevalent type of debt among the group.
The NBC News report claimed three out of every four millennials in the U.S. have some form of debt.
A quarter of millennials, those 18-to-34 years old, are over $30,000 in debt, including 11 percent who are over $100,000 in debt. Only 22 percent of millennials are debt free. Credit cards, meanwhile, are playing an even bigger role than student loans.
Three-in-ten millennials have less than $1,000 in their personal savings, and only 1 percent have over $100,000 saved. A quarter, 24 percent, have no personal savings.
So even though many are working, this kind of debt limits their ability to buy homes and save for retirement.
Now let’s look at the overall consumer debt as reported by Bloomberg news: A healthy economy can be a dangerous thing.
Americans have a history of loading up on debt in good times, then paying dearly when the bills come due. Adding to the pain: A booming economy is often accompanied by rising interest rates, which make mortgages, credit cards and other debt much more expensive. As the U.S. Federal Reserve raises rates, there are signs that consumers could be putting themselves in peril. “When consumers are confident, or over-confident, is when they get into credit-card trouble.”
Spending on U.S. general purpose credit cards surged 9.4 percent last year, to $3.5 trillion, according to industry newsletter Nilson Report. Card delinquencies are also rising. U.S. household debt climbed in the fourth quarter at the fastest pace since 2007, according to the Federal Reserve.
So after reading these headlines, along with pondering that potential trade war with China, how in the world, with good conscience, can the Fed raise rates at the next Fed meeting as planned?
- Last three months inflation is at 1.8 percent
- Consumer overall debt at an all-time high at over 13.5 trillion dollars
- Consumer credit card debt up over 9.4 percent as delinquencies rise
- Country’s debt over 21 trillion.
Credit card debt is typically based on the prime rate that’s directly linked to the Fed fund’s rate. If the Fed rate increases just a quarter-point, your card’s rate will increase, adding more pain to pay off the balance.
And now, with the threat of a trade war with China hanging over us, I expect many CEOs to rethink their spending, possibly holding off any capital expenditures until this is all cleared up. In other words, holding on to the cash from the tax cuts for a so-called “rainy day.”
This is my argument for higher gold prices. If this all comes to fruition, rising interest rates will slow the economy causing consumers to curb spending. Companies will be hesitant to hire new employees and will also curb spending. So In the end, the economy will slow and the Feds will not have the data to raise rates four times as expected. Hence ,investors will flock to Gold as a viable investment.
So later this year, the patient gold investors will get their reward as investors will realize once again that a truly balanced portfolio must have a portion of physical precious metals in its content.
Have a wonderful Friday.
Disclaimer: This editorial has been prepared by Walter Pehowich of Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.