📖 Your Q2 Earnings Guide: Discover the Stocks ProPicks AI Highlights to Jump Post-EarningsRead more

House Speaker Johnson Is Accused of Caving on Spending Cuts

Published 01/12/2024, 01:39 PM

By Mike Gleason, Money Metals Exchange

As inflation comes in hotter than expected and the federal deficit comes in higher than ever, investors face rising risks in financial markets.

On Thursday, the Labor Department reported that the Consumer Price Index for December rose by 0.3%. That was a bigger increase than forecasted. It represents an annual rate of 3.4%.

Rising food, energy, and shelter costs contributed to the CPI's jump. Since the index doesn't fully capture these components, millions of households are experiencing cost of living increases that are much higher than what’s reported officially.

The Federal Reserve obviously cannot now claim victory over inflation. Not with their stated 2% target still nowhere in sight. And certainly not with inflation now threatening to accelerate.

Fed Chairman Jerome Powell had struck a dovish tone last month, leading to widespread expectations of a pivot toward rate cuts by March.
This week’s CPI report could dissuade policymakers from shifting toward easing. But not necessarily.

Regardless of whether the economy needs lower interest rates, the world's biggest debtor does. The U.S. government is struggling to service its rapidly expanding debt load.

On Thursday, the Treasury Department reported that the federal budget deficit widened in December to more than $129 billion for that month alone. That’s up from $85 billion in December 2022.

The current fiscal year which began in October is on pace to produce a record annual deficit. The three months so far of accumulated red ink total $510 billion, up from $421 billion in the same period of the previous fiscal year.

Fiscal conservatives are demanding that Congress hit the brakes on spending. But Speaker of the House Mike Johnson is moving forward with a Democrat-backed budget deal that would increase outlays and do nothing to shrink the deficit.

Critics accuse Johnson of capitulating on spending in the same way that his predecessor Kevin McCarthy did. The more things change in Washington, the more they stay the same.

Republicans may have a majority in the House of Representatives. But advocates of fiscal restraint, balanced budgets, and sound money are a small minority on Capitol Hill.

Fiscal recklessness will weigh over time on the creditworthiness of the U.S. government and the value of the U.S. dollar. In such an environment, gold and silver stand to shine as safe havens.

But for now, precious metals markets are taking a back seat to the stock market. The S&P 500 traded at a record high this week.

Meanwhile, gold prices drifted lower through Thursday’s close. But the monetary metal is getting a bump here today and currently checks in at $2,064 an ounce – now showing a slight 0.4% gain for the week. Silver is lagging and is off 3.7% on the week to trade at $23.50 per ounce. Platinum is giving up 4.3% to come in at $932. And finally, the palladium market is posting a weekly loss of 4.6% to come in at $1,016 per ounce as of this Friday morning recording.

Metals markets are losing momentum in the early goings of 2024. But their underlying fundamentals are strengthening. They face supply shortfalls and have the potential to garner massive safe-haven buying when confidence in stocks, bonds, and fiat dollars turns down.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.