The dots are connecting faster…

It seems to be getting easier to connect the dots these days. Unfortunately there are a few reports that have recently been released that when the dots are connected the picture isn’t pretty for the US economy. The question is, who’s numbers can you trust?

By now I am guessing you are familiar with the International Monetary Fund (IMF), the Bank of International Settlements (BIS) and the World Gold Council (WGC).  

The first two (BIS and IMF) make the world go round and the last keeps up with where the world’s gold could be and how much gold there could be.  I say “could” because some countries are very keen on not reporting everything that they dig up or buy.

These aforementioned organizations do put out some very important reports, two of which that have recently been revised and re-released, I need to make sure you know about.

Before I get in to these reports, I also want to remind you that the Federal Reserve is meeting (or met depending on when you read this) July 25-26. Odds are by the time you read this they will have already had their press conference and the markets would have reacted. For the record, based on the reports I’m going to show you in a moment, I’m guessing that there will not be any more interest rate increases anytime soon.  If there is (or was – again depending on when you read this) and increase we have other serious issues we need to address.

The reason the Feds can not afford to increase interest rates again is partially based on the economic forecasts generated by the various branches of the Federal Reserve and other organizations, one being the IMF.

The IMF just came out (this past Sunday) with a revised forecast of a report that they call the “World Economic Outlook”. I am posting the link at the end of this post to the entire IMF report so that you can read it for yourself.

Here’s the news that I think could trigger some market moves in the near future and more so as we near the 4th quarter of this year.

For starters the IMF lowered its economic growth forecasts for the US for 2017 and 2018!  In a revision/update of the IMF’s World Economic Outlook, the IMF cut our gross domestic product (GDP) forecast for 2017 from 2.3% growth to 2.1% and cut the 2018 outlook from 2.5% growth to 2.1%. We’ve been downgraded for the world to see.

I know what you are thinking a 0.2% and 0.4% reduction isn’t that big of a deal and I would agree under normal circumstances. You lower or increase my mortgage by 0.2% and I’m not thrilled nor in despair. Our GDP for 2016 was 18.57 Trillion, a 0.2% and more so a 0.4% move is a lot of lost money.

As a reminder our GDP is the total value of everything that is produced by all the companies/businesses within our borders.

Here is what the IMF said the biggest factor(s) behind growth revisions: “is the assumption that fiscal policy will be less expansionary than previously assumed, given the uncertainty about the timing and nature of U.S. fiscal policy changes…”.

There are others who got a downgrade, we weren’t the only ones, the UK got knocked down too (not a big surprise).

Guess who got an upgrade?

If you said China and Russia, you are correct.  Hmmmm, I wonder why? Could it be for the same reason as the subjects of my last couple of posts?  And/Or could it be that the World Gold Council has recently came out saying that China (based only on what is traceable and what China wants the WGC and the world to know) remains the largest gold market on the planet and Russia is increasing their gold reserves?  I’d say that has some barring.

To give you an idea of China’s gold advancements, the WGC reported that the global demand for gold in the 1st quarter of 2017 was 480.9 metric tons, China accounted for 176.5 metric tons of that global demand. That give China a nearly 37% stake in all of the global demand for gold.

Where are we (the US)?  The WGC says the US accounted for 22.9 metric tons or 4.7% of the global demand. Get this, that 22.9 tons is the highest first quarter numbers for the US since 2010.  Do you remember what happened with gold and silver in 2010 and 2011?  Let me remind you, gold and silver hit record highs! Gold reached $1900 an ounce and silver hit $49 an ounce back in 2011.  Are there dots to connect here?  May be.  Both metals did retract over the next few months after hitting those highs but remained well above their averages up to that point.  Had you invested in the first quarter of 2010 (which was the last time the US had as high of a gold demand as we had first quarter 2017) and you were still holding on to that gold, you would still be up over $100 per ounce today.

Here is the link to the IMF’s report I have been referencing:

http://www.imf.org/en/Publications/WEO/Issues/2017/07/07/world-economic-outlook-update-july-2017 

It is plain to see that there is something big brewing. The dow is breaking records everyday, including today, while at the same time gold jumps over $10 an ounce today. Odd to see both going up like that on the same day. All while the dollar has fallen to (at the time I’m typing this) 93.48, we haven’t seen the dollar this low on the index since February 2015.

It looks like a financial storm is coming our way, the question is, do you have financial insurance to protect you?

 

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