DAILY MARKET REPORT
Gold regained the initiative as we start the week after Friday’s modest drop – up $11 in the early going at $1229. Silver is up 18¢ at $14.76. Concerns that the China-U.S. trade war could escalate to a more generalized ‘cold war’ are playing a key role in gold’s turnaround that began last Thursday. Potential sanctions against Saudi Arabia and the implications for the oil market are also preying on investors’ minds. Underlying all, though, is the rising interest rate environment and its generalized effect on a number of markets ranging from emerging countries to global debt markets and U.S., Asian and European stock markets. Gold is trading at a 3-month high.
Quote of the Day
“Take some advice from two observers who have been around for awhile: The long term gets here before you know it. . . .Instead, we’d be dependent on foreign investors’ acquiring most of our debt — making the government dependent on the ‘kindness of strangers’ who may not be so kind as the I.O.U.s mount up. We can’t let that happen — not if we want an America that is able to provide growth and stability at home while maintaining global leadership. We would risk returning with a vengeance to stagflation — the ugly combination of inflation and economic stagnation that we tasted in the 1970s.” – Paul A. Volker and Peter G. Peterson
Chart of the Day
Chart note: Popular belief holds that foreign investors and central banks hold the lion’s share of the nearly $22 trillion federal debt. These charts from the St. Louis Federal Reserve tell the real story. Though it has not always been the case, private domestic investors now hold the largest share of the national debt at $13.1 trillion. Foreign investors are number two at $6.2 trillion. Federal Reserve banks are number three at $2.8 trillion. As you can see, federal debt held by private investors is on an ascending curve while both foreign and Federal Reserve banks’ purchases have leveled off. At present, private investors hold more than half the national debt (59.3%) as shown in the pie chart at the very top. Foreign investors hold 28.1% of the U.S. federal debt.