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Separating Fact from Fiction: The Real Story Behind China’s Controversial Social Credit System

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Separating Fact from Fiction: The Real Story Behind China's Controversial Social Credit System

Imagine a world where your social standing is dictated by a government-controlled formula that constantly monitors and judges your every move and utterance, imposing instant penalties for any perceived misstep. This Orwellian scenario is precisely what's conjured up by the term "Social Credit System." For years, mainstream media in the West has painted a dire picture of China's social credit system, warning of a dystopian future where citizens live in fear of being penalized for their words and actions.

The Social Credit System is a very real policy in China, yet many may not clearly understand its nature and functioning. This article aims to distinguish between reality and misconceptions surrounding the system, clarify its true essence, and assess the level of concern it warrants.

This article presents a thorough and impartial overview, drawing on the expertise of graduates from Germany's esteemed Mercator Institute for China Studies (MERICS). Additionally, it incorporates valuable insights from Vincent Brussee's 2023 publication, "Social Credit: The Warring States of China's Emerging Data Empire," ensuring a well-rounded perspective.

As geopolitical tensions escalate, it's essential to approach the following information with a healthy dose of skepticism. The Chinese government is exerting increased control over the narrative, while Western media outlets often display a strong bias against China. It's crucial to scrutinize all information critically and acknowledge that our understanding is likely limited. That being said, the social credit system is relatively transparent and accessible, unlike China's secretive defense research endeavors. With a development history spanning approximately 25 years, a wealth of information is available for analysis.


Source: Mercator Institute for China Studies 

The Social Credit System (SoCS) Origin

The subject of the social credit system in China is vast and complex. It's also a misnomer because there isn't one integrated system. Instead, it is a general term used to represent a diverse collection of policies and initiatives implemented by various levels of government in China, central and local. Despite this diversity, these initiatives align with their fundamental principles and objectives, which become more apparent when examining the issues the government seeks to address.

From Beijing's perspective, the absence of transparency, ethical standards, and a robust legal framework stifles economic and social growth. A prime illustration of this issue is the frequent disregard for court rulings. Such problems create an unfavorable business environment, as the inability to enforce court decisions renders contracts ineffective. In essence, agreements are reduced to verbal assurances, which can be precarious, particularly for smaller companies entering into contracts with larger, more powerful entities that may exploit their vulnerability.

Beyond these issues, the government acknowledges that inadequate law enforcement has led to a multitude of ongoing concerns, including devastating industrial accidents, breaches of food and medicine safety, bogus financial claims, the proliferation of fake goods, tax avoidance, false insurance claims, academic dishonesty, and other such illicit activities that continue to plague the system despite repeated prohibitions.

The social credit system was launched as a comprehensive solution to address many challenges. As a result, its reach goes beyond the traditional concept of creditworthiness in the marketplace, as seen in other nations. In defining the social credit system, the Chinese government has traditionally employed sweeping and ambiguous language, deliberately avoiding specificity. This approach allows for adaptability in policy-making, which is a top priority.

At first glance, Beijing may seem to be granting itself the unlimited authority to control the Chinese populace, which is a concerning prospect. Yet, surprisingly, the social credit system is quite dispersed and lacks centralized control. Local authorities have been afforded significant autonomy to respond innovatively to Beijing's vague objectives and develop their own unique iterations of the social credit system.

Due to the social credit system's complex and constantly shifting nature, it can be more productive to clarify what it is not rather than attempting to define what it is. A good starting point would be to debunk the prevalent myths surrounding this system and then work backward to better understand its true nature.

Debunking the Myth of a Nationwide Social Credit Score

One widespread misconception about China's social credit system is that the government assigns a numerical score to every citizen. However, this is not the case. In reality, no centralized scoring system is in place, and most initiatives under the social credit system do not involve numerical ratings. The few that do are limited to experimental programs introduced and managed by local city administrations. These pilot cities played a significant role in shaping the social credit system in the 2010s, with many emerging and disappearing over the past decade.

The initiatives ranged from the ordinary to the foreboding and the bizarre. What they all shared, however, was an air of innovation, as the social credit system remains a developing project with much still to be ironed out. It was the city-based trials that generated the most alarming news stories about China's social credit system, which were then picked up by Western media outlets, perpetuating a sense of unease about China's social credit system.

Rumors have circulated about draconian measures proposed by local authorities to penalize citizens for minor infractions, such as crossing the street illegally, failing to honor reservations at hotels or restaurants, or blasting loud music on public transportation. While most of these harsh initiatives stalled in the planning phase, the few that made it through sent a disturbing message.

The City of Rongcheng in Shandong province stands out as the most egregious violator, exemplifying the most extreme application of the social credit system on record. According to Adam Knight, a PhD candidate at the University of Leiden who researched Rongcheng's social credit initiative, the city's system evaluates businesses, government agencies, and individuals across a staggering 570 criteria, assigning scores that reflect their performance.

People could earn credits for virtuous acts such as donating to charity or giving blood, while they may lose points for negative actions like littering or engaging in public fights. If an individual's rating falls too low, they might face restrictions on purchasing transportation tickets for up to a year. Moreover, they could be publicly exposed and humiliated on a billboard. On the positive side, the initiative led to the dismissal of corrupt local officials and a significant reduction in grievances about misbehaving taxi drivers.

The positive development is that China's state media openly criticized rating systems incorporating punitive measures, such as the one in Rongcheng. The China Youth Daily aptly noted, “People should have rated government employees, and instead, the government has rated the people.”  Following this, the central government prohibited scoring systems that penalize individuals. They are now more akin to a loyalty rewards program rather than resembling something from a George Orwell novel.

By 2022, at least 62 cities had implemented their own social credit initiatives. Participation in these programs was optional, and not all utilized rating systems. Residents of these areas must proactively request a government-issued score, as it is not automatically assigned. The incentives offered to high-achieving individuals differ by location, ranging from discounted public transportation fares to priority parking and marginal tax breaks.

On the other hand, having the lowest score in the area would have no significant impact. A more appealing option is to opt out of participating in such initiatives altogether. The latter choice is widely favored in China. Involvement in these programs has been minimal, with many individuals unaware of their existence.

According to a study conducted by Genia Kostka, a professor specializing in Chinese politics at the Freie Universität in Berlin, a mere 7% of participants were aware of a social credit system within their local government. Additionally, the research highlighted that the primary focus of social credit systems in China is on evaluating the creditworthiness of government entities and businesses rather than individual citizens.


Source: Mercator Institute for China Studies 

The Target Audience of the Social Credit System

The primary objective of the social credit system is to enhance governance and foster a favorable business climate in China. Consequently, most of the central government's resources have been dedicated to developing the corporate social credit system. This emphasis is evident on the government's Credit China website, which offers a comprehensive overview of the social credit system. The website's content primarily focuses on businesses and public entities, reflecting the system's main priorities. Furthermore, data on enforcement actions undertaken under the social credit system confirms this bias towards corporate entities.

From 2014, when the city pilot programs began, to 2020, 73% of enforcement measures were aimed at businesses. Government agencies were the next most targeted group, accounting for 13% of these actions; 10% focused on individuals, with the remaining percentage focused on non-governmental organizations. While social credit's significance for individuals may increase in the future, its primary focus is on evaluating and impacting private companies rather than personal reputations.

Government Watchlists: A Powerful Tool of Control

Regardless of their penalty points, individuals and businesses can be subject to government pressure by being placed on a specialized register. This registry, comprised of "blacklists" and "redlists" (the government's term for trusted or "white lists"), plays a crucial role in the social credit system. These two lists are highly fragmented and uncoordinated across central and local governments. 

The Supreme People's Court oversees the most influential blacklist on a national scale. This registry documents entities and individuals legally mandated to settle outstanding debts yet deliberately choose not to despite having the financial capability to do so. Before establishing this black list, the court lacked the authority to enforce its decisions, leading to a widespread phenomenon of individuals disregarding its judgments.

Ever since the blacklist was established in 2013, it has evolved into a fundamental component of the social credit system and a valuable instrument for the judiciary. Individuals on the blacklist face limitations on indulging in lavish expenditures, such as purchasing plane and high-speed train tickets, staying at high-end hotels, enrolling in expensive private schools, and acquiring luxury vehicles.

Before inclusion on the list, the court must inform the affected individual or business of its ruling and its justification. Parties that have been blacklisted have the opportunity to have their names stricken from the list and sanctions revoked, provided they consent to settling their outstanding debt and committing to lawful behavior going forward.

In addition to the above, the Civil Aviation Administration and the National Railway Administration maintain no-fly and no-ride lists. These are lists of individuals prohibited from flying or taking the train. Disruptive behavior, such as physically harming transportation employees or fellow travelers, disregarding safety protocols, using counterfeit tickets, or smoking onboard, can land you on one of these lists. As a consequence, you may be barred from purchasing new tickets for a period of six to twelve months. Notably, being placed on this list has no broader implications for your personal or professional life.


Source: AIES Conference 

Regardless of one's stance on the infractions and penalties detailed, the centralized government's blacklists appear to possess a certain level of consistency and well-defined boundaries. In contrast, certain pilot cities' ad hoc blacklists lack uniformity and coherence, with no clear-cut parameters or limitations.

Various cities had numerous black and red lists, with their content and emphasis differing significantly from one city to another. To illustrate, in a particular inner Mongolian county, parents who sought to remove their children from local schools teaching Mandarin were allegedly intimidated by the prospect of being placed on a blacklist.

Amid the pandemic, certain cities put citizens on a blacklist for not adhering to mask-wearing regulations in certain urban areas. In Anqing, a resident was even ostracized for allegedly "spreading panic" after sharing footage of an ambulance transporting a person suspected of having contracted the virus. Mainstream Chinese media outlets have denounced these actions, deeming them capricious and unrelated to the principle of "social creditworthiness."

In Zhengzhou, the city authorities indiscriminately red-listed all hospitals handling pandemic victims, commending them for simply fulfilling their obligations. In Rongcheng, 75% of red-listed individuals earned their prestigious status due to their exemplary tax compliance. Similarly, roughly 75% of distinguished entities in Putian were red-listed for meeting food safety standards. 


Source: Mercator Institute for China Studies 

Beijing seemed dissatisfied with the situation and consequently released a policy document in 2020 aimed at enhancing the standardization of social credit and limiting the abuse of power by local officials. The updated guidelines emphasized that blacklists should be reserved for cases of significant harm, focusing on safeguarding information security and privacy. Additionally, the document underscored the importance of widespread agreement before implementing social credit measures, discouraged the arbitrary creation of new blacklists, and highlighted the need for a transparent process for black-listed entities to restore their credit standing.

A Rudimentary System In The 21st Century

One could easily view China's social credit system as an expansion of the surveillance state. The government could monitor and manipulate citizens with precision and ease through algorithms, artificial intelligence, massive data collection, and numerous cameras. This dystopian scenario appears plausible, given the government's penchant for control and access to the technological tools necessary to implement such a system on a massive scale.

Despite the prevailing notion, the facts don't support this assessment. It's striking that a government with extensive surveillance infrastructure relies on an astonishingly rudimentary social credit system, which relies more on antiquated technologies like fax machines and paper-based documentation rather than cutting-edge machine learning applications.

The social credit system's level of digital maturity is evident in official government documents, which repeatedly emphasize the necessity of building comprehensive databases and platforms that facilitate seamless information sharing. A notable challenge, however, is the lack of standardization in data presentation, with cities submitting reports in varying formats, including spreadsheets, news articles, and even JPEG images.

The pilot city initiatives gathered data through manual efforts, utilizing basic tools like Microsoft Excel and WeChat, resulting in inconsistent and uneven data quantities. For instance, in Anqing, a single department was responsible for a staggering 90% of all data accumulated under the social credit system. In contrast, in a metropolis with a population exceeding 9 million, numerous departments contributed a mere trickle of data, with fewer than 100 weekly entries.

The social credit system has taken the concept of big data to a new level, mainly due to the rampant inflation and the motivations of local officials to exaggerate their statistics. Impressive figures can boost a team's reputation and even lead to career advancement. However, a curious phenomenon has been observed: the more data collected, the fewer individuals are actually penalized, suggesting an inverse relationship between the two.

Initial obstacles have hindered the government's efforts to transition to digital systems. This slow progress is attributed to the absence of standard guidelines, a centralized data storage system, ambiguous credit classifications, and disparities in data collection practices across regions and institutions. Consequently, it's unsurprising that the capital has recently prioritized standardization and digitization.

However, suppose you believe this enables them to suppress individuals more effectively. In that case, it is essential to note that the disorganized, chaotic, and outdated execution of the social credit system has led to numerous negative consequences, such as unjust blacklisting of innocent individuals and contentious practices of gathering and evaluating behavioral information in trial cities. In every scenario, the central government in Beijing stepped in to limit the abuses carried out by out-of-control local authorities.

Beijing may not necessarily be portrayed as the positive force in this situation, as we will discuss shortly. However, it appears that the social credit system is becoming a permanent fixture, and streamlining and modernizing its application to eliminate its current chaotic state is not a terrible idea. Furthermore, those concerned about a surveillance state can take comfort in the central government's awareness of the risks of relying solely on automated decision-making processes.

China prioritizes human oversight in its social credit system, as demonstrated by a 2021 amendment to the administrative penalties law emphasizing the need for human review of digitally gathered evidence. Furthermore, as of 2023, most social credit-related decisions were allegedly made by human assessors rather than artificial intelligence.

Stay Vigilant

During a speech in 2018, former US Vice President Mike Pence connected the social credit system to China's surveillance State, describing it as “An Orwellian system premised on controlling virtually every facet of human life.” 

In truth, it is a public, somewhat transparent, and diminishing effort to enforce moral standards in the public sphere that is quite separate. While not entirely harmless, it is not as sensational as Pence and others have portrayed. The concept of a social credit score, which is largely exaggerated, has frequently been used to represent a frightening, techno-dystopian future. Over time, it has become a popular cultural reference and the only version of reality that people tend to recall.

It's common to see satirical posts on Chinese social media platforms ridiculing individuals who naively assume that a social credit system is fully operational. On Weibo, for instance, users have created humorous mock-ups of China's social credit app, displaying absurd scores like 726, accompanied by warnings of being under close surveillance as a "second-class citizen" or alarmingly low scores of 0, instructing the individual to surrender, or even a score of -278, demanding immediate execution.


Source: X 

Regrettably, the social credit system has garnered excessive attention, overshadowing the fact that China, similar to numerous other governments globally, possesses numerous more effective methods for widespread surveillance, counterinsurgency, countersubversion, political oppression, and social control that often operate covertly and outside the confines of laws and regulations. 

While China's social credit system is well-known, fewer people know about initiatives like Project Sharp Eyes, Golden Shield, the Integrated Joint Operations Platform, and Skynet. Unfortunately, freedom and privacy violations occur daily in China and globally, often flying under the radar, maybe because they just aren't as meme-able as the idea of social credit.

It's crucial that we approach all of these issues with a critical eye, accurately identifying and understanding their impact and origins. If we fail to think critically and look beyond the surface level of popular narratives and memes, we risk becoming vulnerable to a surveillance state that erodes our autonomy.

 


 

Editor and Chief Markethive: Deb Williams. (Australia) I thrive on progress and champion freedom of speech.  I embrace "Change" with a passion, and my purpose in life is to enlighten people to accept and move forward with enthusiasm. Find me at my Markethive Profile Page | My Twitter Account | and my LinkedIn Profile.

 

 

 

 

Tim Moseley

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Gold looks good again this week as both Wall Street and Main Street turn bullish

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Gold looks good again this week as both Wall Street and Main Street turn bullish

After last week's price action was dominated by Friday’s news from China and the employment report, precious metals markets were squarely focused on inflation data and the Federal Reserve’s interest rate path this week.

After kicking off the week trading at $2,293.70 per ounce during the Sunday evening Asian session, spot gold broke above the $2,300 level about two hours before the North American market open, and that level held throughout the rest of the week's roller coaster ride.

Gold prices chopped along in a relatively narrow $15 channel as market participants waited for Wednesday, which would bring the consumer inflation report in the morning, then the FOMC rate announcement, updated economic projections, and Chair Powell's press conference in the afternoon.

The CPI report finally shook the market out of its sideways trading, spiking spot gold from $2,313 per ounce just before the data release to its weekly high of $2,336.72 immediately afterward. By the time the Federal Reserve announced that they were keeping rates unchanged at 2:00 p.m., the price had pulled back to $2,326 per ounce, and spot gold continued to sell off steadily as markets digested Powell’s hawkish rhetoric and the FOMC's updated projection of only one rate cut in all of 2024.

By Thursday, spot gold had once again slid back down to support, but it saw a firm bounce just below the $2,300 level and by Friday morning the yellow metal was once again marching higher into the weekend.

The latest Kitco News Weekly Gold Survey has a majority of industry experts and retail traders seeing green for gold prices next week as they emerge from their bearish hibernation and return to bullish pastures.

“Gold snapped a three-week decline, encouraged by political uncertainty in Europe, and a sharp drop in interest rates,” said Marc Chandler, Managing Director at Bannockburn Global Forex. “It recovered about half of what it lost after the US jobs data on June 7 and on reports that the PBOC did not buy gold for reserves last month.”

Chandler noted that spot gold traded to around $2841 in the middle of last week before consolidating. “Gold was relatively restrained, perhaps pulled by conflicting signals—of a stronger dollar on the one hand, and lower rates on the other. Trendline resistance begins the new week near $2362. On a medium-term view, I suspect gold is nearer a bottom than a top and expected lower interest rates to underpin the yellow metal.”

“I’m sticking with ‘up’ for this week as bulls put in a strong defense of $2300,” said James Stanley, senior market strategist at Forex.com. “The pullbacks are getting more concerning, however, as that shows bulls taking advantage of strength to realize profits and square up positions. That’s helped to build a possible head and shoulders pattern. That formation requires a breach of the neckline, but if it does then I think we could be soon looking at a deeper pullback scenario. And for that, I’m tracking the longer-term range resistance, around the $2,075-$2,082 level for longer-term support to play in.”

“For now, support remains in play and I’m biasing bullish, but I’m ready to change if the neckline breaks,” Stanley said.

 

“Up,” said Adrian Day, President of Adrian Day Asset Management. “Gold is recovering from last week’s sell-off as U.S. economic news has been more ‘dovish’ – weaker producer inflation numbers and higher claims for unemployment – both helping the case for a cut in interest rates, and geopolitical tensions heighten – more attacks on Israel from Hezbollah and Russian warships in the Caribbean.”

“I am bullish on Gold for next week,” said Colin Cieszynski, Chief Market Strategist at SIA Wealth Management. “It’s looking ready for a technical bounce up off of support.”

Sean Lusk, co-director of commercial hedging at Walsh Trading, was reflecting on what traders had learned from both last week and this one.

“I think this recent drop is just a reflection of two things in gold,” Lusk said. “Obviously, last week China just shot an arrow across the bow when nobody was looking, that they were backing off some gold purchases. They said that stuff so they can buy it cheaper, that’s how I view that. And China can say whatever the hell they want, but they have to back up all their money printing.”

“We also had what was deemed to be a blowout unemployment report by some media outlets,” he said. “What a laughable joke that was; not a blowout employment report, it wasn't even close to that. A lot of the gains were government-created, not in the private sector, and if you look within the numbers, and the revisions lower the prior two months, it wasn't that much of a gain, if any.”

Lusk said last Friday’s sharp correction downward wasn’t justified based on those releases. “But the market's going to do what it's going to do, and sometimes you can't fight it,” he said.

“Then CPI came in [this week], hit the dollar one day, and then they brought it back up on PPI,” Lusk observed. “It's just a mixed bag of nonsense, really. But I think for gold's price here, it's a pure consolidation. We held the weekly low down at $2,304. There's a lot of uncertainty all over the place, and I think that the path of least resistance for metals is still higher.”

Lusk said that since last Friday, the August futures contract dropped from $2,406 all the way to $2,304. “You dropped $100 in a day,” he noted. “That's pretty steep, right? But you haven't revisited that low. So now the key resistance is going to be that big ‘drop day’ high. You can draw a trend line from the May high the week before Memorial Day weekend at $2,477 to $2,406. Wherever that line's coming in, that's your trend line that you’ve got to watch. If they blow through last Friday morning's high before China made that announcement, then we're going up to $2,485, if not $2,500.”

“Now, should we blow through $2,304, then we're going down to $2,280 and we might go down to $2,200,” he cautioned. “But I think the trend is still up overall, no doubt about that. You've come off the highs a little bit, but you've had a hell of a run since the February lows. From $1,996 you ran up to $2,454 on the continuous. That’s a $458 move in three months.”

This week, 13 Wall Street analysts participated in the Kitco News Gold Survey, and after this week’s performance, they were considerably more optimistic about the precious metal’s near-term prospects. Eight experts, representing 62%, expect to see gold prices climb higher next week, while only two analysts, or 15%, predicted a price decline. The remaining three, or 23% of the total, expect gold to trade sideways during the coming week.

Meanwhile, 216 votes were cast in Kitco’s online poll, with Main Street investors somewhat more cautious than their institutional counterparts, but positive on balance. 117 retail tradSpot gold last traded at $2333.21 at the time of writing, up 1.26% on the day and 1.71% on the week.ers, or 54%, look for gold prices to rise next week. Another 49, or 23%, expected the yellow metal to trade lower, while 50 respondents, representing the remaining 23%, saw prices chopping sideways during the week ahead.

With the Federal Reserve’s monetary policy decision in the books, markets will shift their focus to Europe next week as the Swiss National Bank and the Bank of England will both announce their monetary policy decisions on Thursday morning.

Markets will also receive the Empire State manufacturing index on Monday, and retail sales for May on Tuesday. Then, Thursday brings housing starts and building permits for May, as well as weekly jobless claims and the Philly Fed manufacturing index. The week’s data wraps up with existing home sales on Friday morning.

Darin Newsom, Senior Market Analyst at Barchart.com, expects gold to build on this week’s rebound and make further gains. “While August gold’s intermediate-term trend remains down, its short-term trend has turned up,” he said. “This means the contract should take out its previous high of $2,358.80 with the next upside target near $2,370, then $2,391.”

“As we head into the weekend, I’m looking for increased investment buying tied to the political chaos in France,” Newsom added. “We can’t call it a Black Swan event given it was predictable as the China/Russia coalition gets more desperate ahead of the global 2024 election cycle.”

Alex Kuptsikevich, senior market analyst at FxPro, said he thinks gold’s support at $2,300 looks extremely fragile and unreliable.

“Firstly, last Friday, Gold went over 4% from peak to bottom, on high volumes and with a horrendous amplitude falling under the 50-day moving average,” he said. “All other dynamics of this week may well be considered as consolidation of liquidity by bears for a new blow to the metal. This thesis is reinforced by the fact that this 50-day average is already actively working as resistance.”

“Secondly, the dollar has been rising since last Friday, as if switching into a ‘buy on the downturn’ mode,” Kuptsikevich said. “The dollar index has pushed back from its 200-day moving average since the beginning of the month. And a rising dollar with attractive bond interest yields makes dollar bonds an effective competitor to gold.”

The third factor weighing on gold is the ongoing slide in stocks. “Separate from the short-squeeze-backed gains in individual stocks in the Nasdaq100 and S&P500, there is noticeable heaviness in the Dow Jones and Russell 2000 indices, not to mention the 5% loss by the French CAC40 for the week,” he said. “Politics was back to spooking the markets as we heard of new barrages of trade wars and the risks of increased protectionism.”

Adam Button, head of currency strategy at Forexlive.com, was also reflecting on the shifting political landscape and its short- and long-term implications for precious metals and the dollar.

“The consensus around open borders and open trade was built with the U.S. dollar at the heart of it,” Button said. “Breaking that system will have impacts, and we're seeing them, on the U.S. dollar, especially now that the U.S. is wielding tariffs as a tool. Trump the other day was talking about replacing income tax with tariffs. That's an attack on even a country like Canada, potentially. I don't think it's realistic, but 10 years from now, who knows? And what does 2028 look like? Does it look like two reasonable human beings in an election fight?”

“That's the way the pendulum is swinging,” he added. “And if it is, what are you doing holding Treasuries? When they say you're cheating on your tariffs, or you're cheating on imports, and they decide to steal your money, like they did to Russia?

“That seems outlandish, but in a world like that, what's gold worth?” Button asked. “$10,000? $20,000?”

Turning to Europe, Button said that the Franco-German consensus that has governed Europe since the dawn of the euro is ending. “What happens to the Eurozone from here? And the EU, what's the point of the whole thing if that's broken?” he asked. “We're seeing that in French bonds right now. It's not hard to envision the next German election, the next Hungarian election again, even the Dutch swung that way.”

“Political turmoil is the theme right now,” he said. “And that's a classic gold driver.”

That said, Button still doesn’t expect gold to rise in the near term. “Do I want to be long gold next week? No, I don't,” he said. “If something can't rally on good news, then it's not going to rally. That was the best CPI report that gold bulls could have hoped for, and gold didn't rally. It's having a decent day today, but maybe that's the push and pull of the political side.”

“I don't like the price action this week, that's what it comes down to for me,” Button added. “If $2,300 breaks, what's the downside? Probably like $2,150, something like that. Maybe I'm interested there.”

The other thing he’d like to see is whether gold prices can withstand some real pain in equities.

“No one has forgotten how poorly gold did at the outset of COVID,” Button said. “And I'm not to say that we'll see equities puke like that, but it hasn't been a counter-cyclical trade. So I just want to see what gold looks like in a poor day for equities, a real poor day, which I think we're headed toward. We just need one bad NVIDIA headline. It's really carrying the whole market here.”

Michael Moor, Founder of Moor Analytics, was breaking down the technical picture from gold’s recent price action in the lower and higher timeframes.

“On a lower timeframe basis: The trade below 24343 (+1.3 tics per/hour) has brought in $130.1 of pressure,” Moor wrote. “The trade below 24216 (+4 tics per/hour) projects this downward $60 (+)—we have attained $117.4. These rolled from (M) into the (Q). The trade back below 23642 (-1.2 tics per/hour) in (Q) has brought in $60.0 of pressure. Decent trade above 23489 (-1.2 tics per/hour starting at 7:00am) should bring in decent strength.”

“Areas of possible exhaustion to contend with below come in at 65216-4785, 62926, and 60280-59628; and we have entered into the ideal timeframe for one of these to hold more than temporarily – if we settle below the lower of these, this should be a larger, higher timeframe correction,” he said.

And Kitco Senior Analyst Jim Wyckoff holds a balanced view toward gold going into next week. “Choppy and sideways as bulls and bears are on a neutral near-term technical playing field,” he said.

Kitco Media

Ernest Hoffman

Time to Buy Gold and Silver

Tim Moseley

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Unlocking All Solutions Network: Your Gateway to Comprehensive Financial and Legal Services

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Unlocking All Solutions Network

Unlocking All Solutions Network: Your Gateway to Comprehensive Financial and Legal Services

In today's fast-paced world, dealing with real estate, finance, legal matters, and credit can be overwhelming. Whether you're experienced in investing or buying your first home, having access to reliable and affordable services is crucial. All Solutions Network (ASN) provides a variety of tailored solutions to meet your needs.

Unlocking All Solutions Network: Your Gateway to Comprehensive Financial and Legal Services

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Legal matters can be complex and overwhelming, but with ASN's legal professionals, your rights and interests are protected. Whether it's a personal injury case, drafting a will, or a legal dispute, ASN's attorneys offer expert advice and representation to help you navigate the legal system confidently.

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In conclusion, All Solutions Network is a valuable resource for individuals and families seeking comprehensive financial and legal services. Whether you're buying a home, planning for retirement, or dealing with a legal matter, ASN is there to help at every step. The solution to your financial and legal needs is just a click away with ASN.

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Tim Moseley

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Gold Price News: Gold Holds Steady But Fragile

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Gold Price News: Gold Holds Steady, But Fragile

Gold heads into Friday a little stronger but also little changed from the week’s open.

It appears to have consolidated around the critical $2,312/oz level following the previous week’s decline. However, we note that some technicals have deteriorated, with the 50-day simple moving average now becoming a constraint and a head and shoulders pattern now apparent.

Nevertheless, from a fundamental perspective, gold has remained relatively resilient, facing mixed US inflation data and, crucially, the Federal Reserve cutting its ‘dot plot’ projection of interest rates from an implied three-quarter-point cut to just one such cut this year. In mitigation, the Cleveland Fed inflation nowcast has moderated a little over the last week, but with the core PCE (the Federal Reserve’s preferred inflation measure) still at 2.6%, this currently gives US rate-setters little scope for comfort.

Against this backdrop, one might expect that positive (downside) surprises for gold are now priced out of US rates markets. However, both 2-year and 10-year US Treasury yields have moved some 20bp lower this week, leaving a rebounding dollar as the only rate hawkish signal. CME FedWatch suggests futures are still pricing a significant (c. 30%) probability of more than one quarter-point cut in US rates by the end of 2024, little changed from a week ago.

The market calendar for today is quite light, with only May US import prices and June Michigan Consumer Sentiment prints likely to be of some interest to gold investors.

Mike Ingram

Time to Buy Gold and Silver

Tim Moseley

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Gold Price News: Gold Ticks Higher Ahead of US Inflation Figures

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Gold Price News: Gold Ticks Higher Ahead of US Inflation Figures

Market Analysis

Gold prices edged higher on Tuesday, posting modest day-on-day gains, as the markets looked ahead to the release of macroeconomic data on Wednesday for renewed direction.

Prices rose as high as $2,320 an ounce on Tuesday, compared with around $2,310 an ounce in late trades on Monday.

KAU/USD 1-hourly Kinesis Exchange

The relative price stability this week followed a dramatic price drop from as high as $2,388 an ounce last Friday after news reports said China’s central bank had stopped buying gold in May, breaking an 18-month streak of monthly purchases.

The latest action leaves gold prices some way short of their all-time high of just over $2,450 an ounce seen on May 20.

The markets were left speculating over the PBoC’s next move and what price level would encourage a resumption of purchases for its official gold holdings, with some suggesting a drop to $2,200 an ounce could reignite regular buying.

Current heightened geopolitical tensions around the world have combined with political uncertainty due to upcoming elections in several countries, and these factors have contributed to gold’s strength along with central bank buying in recent months.

Looking ahead, the markets will be watching out for Wednesday’s US inflation figures for May, as well as an expected interest rate decision by the US Fed, which is widely expected to involve keeping the current rate of 5.5% on hold for the time being.

Then Thursday will see the release of US Producer Price Inflation numbers for a further update on price rises, as the markets try to gauge the timing of possible interest rate cuts by the US Fed in the autumn.

Frank Watson

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Tim Moseley

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People are coming to the view that rates are less likely to go down to their pre-pandemic levels’ Fed Chair Powell tells reporters

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People are coming to the view that rates are less likely to go down to their pre-pandemic levels,’ Fed Chair Powell tells reporters

Federal Reserve Chair Jerome Powell used his post-FOMC press conference to try to reassure markets that even though the central bank’s latest data showed inflation projections rising and the number of expected rate cuts falling, the committee’s policy bias was still tilted toward easing. However, he also suggested people were getting used to the idea that interest rates would not return to pre-pandemic levels, signaling that the Fed may be preparing markets for a higher neutral rate.

Powell was asked at the outset whether FOMC members expected no further progress on inflation this year, given that the new Core PCE forecast was 2.8% by the year-end, and it's already at 2.75%.

“What's going on there is that we had very low readings in the second half of last year, June through December really, and we're now lapping those,” he said. “As you go through the 12-month window, a very low reading drops out and the new reading gets added to the 12-month window.”

“It's just a slight element of conservativism, that we're assuming a certain level of incoming monthly PCE and core PCE numbers,” he continued. “We're assuming good but not great numbers, and if you put that on top of where we are now, you get a very slight increase in the 12-month reading.”

“Now, do we have high confidence that that's right? No,” Powell said. “It's just a conservative way for forecasting things. If we were to get more readings like today's reading, then of course that wouldn't be the case.”

The Fed Chair was also asked if two or three more inflation readings like the one markets saw this morning would make a September rate cut possible.

“I talk to all of the other participants on the FOMC every cycle, and we talk about their summary of economic projections [SEP], and their dot plot, and everything,” he said. “What I hear and see is that people are looking at a range of plausible outcomes, and in many cases, they're thinking ‘I can't really distinguish between two of these, they're so close, these are very close calls.’ But we ask them to write down the most likely one, so they do.”

“As you've said, 15 of the 19 are clustered around one or two [cuts],” Powell went on. “I look at all of them as plausible, so I think that does tell you what the committee thinks. But what everyone agrees on is it's going to be data-dependent. They're not trying to send a strong signal that this is what I think is the right thing. It's just what they think at a given point in time, subject to data.”

“In terms of future meetings, we don't make decisions about future meetings until we get there,” he added. “We want to gain further confidence. Certainly more good inflation readings will help with that.”

Powell was asked whether any FOMC members had changed their interest rate projections after the 8:30 am CPI release.

“When there's an important data print during the meeting, first day or second day, what we do is we make sure people remember that they have the ability to update, we tell them how to do that, and some people do, some people don't,” he said. “Most people don't, and I'm not going to get into the specifics. But you have the ability to do that, so that what's in the SEP actually does reflect the data that we got today, to the extent you can reflect it in one day.”

“I think we'll see PPI tomorrow, we'll know more about the PCE reading as the month goes on,” Powell added.

The Fed Chair was also asked whether the labor market is more vulnerable to higher rates now that many of the post-pandemic imbalances have eased.

“By so many measures, the labor market was overheated two years ago, and we've seen it gradually move back into much better balance between supply and demand,” Powell replied. “So what have we seen? We've seen labor force supply come up quite a bit through immigration and through recovering participation. On the demand side, we've seen quits moving down, we've seen job openings moving down, we've seen wage increases moving from very, very high levels a couple of years ago back down to more sustainable levels.”

Powell acknowledged that unemployment has risen by about 0.6% in a little over a year, but he characterized that as “very, very gradual,” and said 4% unemployment remains historically low. “We watch […] the labor market very carefully, and that's what we see,” he said. “We see gradual cooling, gradual moving toward better balance. We're monitoring it carefully for signs of something more than that, but we really don't see that.”

Chair Powell was then asked about the significant shift in the SEP since the March meeting, with the latest version showing a much shallower path of rate cuts this year.

“The big thing that changed was the inflation forecast moved up several tenths before the end of the year,” he said. “We had really good inflation data in the second half of last year, then a pause in progress in the first quarter. And what we took away from that was that it's probably going to take longer to get the confidence we need to begin to loosen policy.”

“The sense of that is that rate cuts that might have taken place this year, take place next year,” he continued. “There are fewer rate cuts in the median this year but there's one more next year. So really, if you look at year-end 2025 and '26, you're almost exactly where you would have been, just it's moved later because of that progress.”

The Chair was then asked about the SEP’s long run interest rate forecast, which also moved higher, and whether this indicated that rates may not be restrictive enough.

“You're right, it did move up,” he replied. “I just think people are coming to the view that rates are less likely to go down to their pre-pandemic levels, which were very low by recent history measures. Now, we can't really know that. Ultimately, we think that things like the neutral rate are driven by longer run, slow moving forces.”

The Fed Chair added that as time has gone on, everyone is wondering just how restrictive the policy has become. “My answer has been that policy is restrictive,” he said. “The question of whether it's sufficiently restrictive is going to be one we know over time. I think the evidence is pretty clear that policy is restrictive and is having the effects that we would hope for.”

Powell was then asked to explain why the central bank would cut at all this year when the growth forecast doesn't predict any slowdown in 2024, the unemployment forecast doesn’t show significant weakening of the labor market, and the latest inflation forecasts average out to no change.

“We think policy is restrictive and we think ultimately that if you just set policy at a restrictive level, eventually you'll see real weakening in the economy,” Powell replied. “That's always been the thought, that since we raised rates this far, we've always been pointing to cuts at a certain point. Not to eliminate the possibility of hikes, but no one has that as their base case, no one on the committee does.”

Powell then addressed signs that consumer-level inflation pressures were easing, saying that there were still problematic areas.

“It's true that inflationary pressures have come down, but we're still getting high inflation readings,” he said. “In some parts of non-housing services you see elevated inflation still, and it could be to do with wages.”

Powell added that goods prices have fluctuated. “There's been a surprising increase in import prices on goods which is kind of hard to understand, and we've taken some signal from that,” he said. “Wages are still running, I would say, above a sustainable path, which would be that of trend inflation and trend productivity. We haven't thought of wages as being the principal cause of inflation, but at the same time, getting back to 2% inflation is likely to require a return to a more sustainable level, which is somewhat below the current level of increases.”

Gold prices trended lower throughout Powell’s press conference, with spot gold sliding from $2,332.34 when he began speaking to $2,317.29 by the time he finished taking questions.

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Ernest Hoffman

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Tim Moseley

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Great reset financial world war coming: This is global elite’s plan to come out on top Carol Roth

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Great reset & financial world war coming: This is global elite's plan to come out on top – Carol Roth

The world is on the brink of a financial reset, with the global elite planning to come out on top, according to Carol Roth, New York Times bestselling author of 'You Will Own Nothing,' who says this threatens to leave the average person losing private property rights, other liberties and being subject to centralized control and draconian oversight.

"There is this change coming," Roth told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News. "In many ways, it's not so much that [the elite] intentionally try to keep you down. They are trying to preserve their power and their wealth. And if yours has to go away for that to happen, then that's just okay by them."

Roth warns that a financial world war or major shift in the financial order is coming and adds that it is not as conspiratorial as it sounds.

"If you go to the White House's website and look at remarks that President Biden gave to the business roundtable back in 2021, he talks on a regular basis about things changing in the financial order and says there is going to be a new world order out there," Roth noted

The U.S. is about 80 years into the cycle of being at the center of the global financial system, with the U.S. dollar being the world's reserve currency.

Roth highlights how every “empire” in history has collapsed, losing its financial supremacy, from the Romans to the Portuguese to the British.

"Before us, it was the British; before the British, it was the Dutch. And so I would imagine when you're in that position, you feel very invincible about it," Roth pointed out. "But if we look at the reality of debt loads in the United States and the debt service and all of the printing that's gone around the world, and the fact that the Fed has not done a good job of holding the reserve currency stable, you're seeing some of these shifts happen."

Roth points out that the BRICS Plus countries are actively de-dollarizing and trading in their own currencies, while central banks are selling off U.S. Treasuries and stocking up on gold.

For Roth's take on the decline of the U.S. as a global superpower and the kind of shift that's coming, watch the video above.

"Over the last decade, the amount of U.S. government debt has more than doubled from $16 trillion to over $35 trillion," Roth said. "At the same time, central banks worldwide were net sellers of Treasuries. And the interesting dynamic is that they're not going into another currency per se, but they're going into gold."

World Economic Forum's 2030 agenda

Roth also pointed out that as we see the bifurcation of the global monetary system and the U.S. hegemony wane, there are non-governmental players pushing an agenda that leads to less economic and individual freedoms.

Roth explains why private property ownership is integral to all other rights and how the push to diminish individual ownership is being led by the World Economic Forum (WEF), big technology companies and the United Nations.

“Private property is the guardian of every other right. Property rights are fundamental to wealth creation. Studying wealth creation at the individual level, you can see that the way that individuals create wealth is through ownership,” Roth wrote in ‘You Will Own Nothing.’ “Once you as an individual own nothing, it is easy for the government or similar center of power to gain figurative ownership and control over you. I will say this many times to hit at home, if you own nothing, they own you.”

She highlighted the World Economic Forum's (WEF) 2030 agenda, which lists eight predictions, the top being, 'You will own nothing and be happy.' The post was originally published in 2018 on WEF's Twitter account, now X.

Roth explains that the WEF has made a concerted effort to influence leaders in the public and private sectors to promote its agenda and ideals.

"I encourage everybody to look up the video with Klaus Schwab at the Harvard Kennedy School of Government when he talks about the Young Global Leaders program. And you have people like Canada's Justin Trudeau and Chrystia Freeland, who have been part of these programs, and he cites them — 'I look around, and I know all these people, and they've been part of the WEF's Young Global Leader program.' And so when somebody like Klaus Schwab says, 'We penetrate the cabinets,' I'm not sure what else that might mean other than 'We penetrate the cabinets,'" Roth explained. "So, while this is supposed to be a non-governmental organization, it seems like they're very entrenched in government."

For more background on the WEF and the role Klaus Schwab, the 86-year-old founder of the World Economic Forum, played during the decades he was at the helm, watch the video above.

Since recording this video, the WEF has announced that Schwab will step down as executive chairman and transition to a non-executive role by January 2025.

Central bank digital currencies (CBDCs)

Central bank digital currencies, or CBDCs, are the primary tool in implementing various agendas that threaten freedom, according to Roth.

Roth raises the alarm over the recent progress made around Central Bank Digital Currencies or CBDCs. "A [CBDC] is the number one concern. If you want to do something that's just going to completely destroy the foundation of the United States of America, you bring in a central bank digital currency, and it's just completely over," Roth cautioned. "It is just the absolute most frightening thing for freedom and wealth creation."

What are CBDCs?

Central bank digital currencies are programmable, digital currencies that operate as fiat currency. They are controlled and issued by central banks.

Proponents claim CBDCs can prevent money laundering, deter criminal activities, improve the speed and security of transactions, help fine-tune monetary policy, and allow for financial inclusion.

Critics claim CBDCs are the ultimate tool of control, censorship, and surveillance that can be used to monitor every single payment made and received, obliterating financial privacy and anonymity.

CBDCs continue to see accelerated adoption this year, with 134 countries exploring these options. According to the Atlantic Council, this represents 98% of global GDP.

One of the latest significant developments has been SWIFT – the global bank messaging network – planning a new platform to connect all the CBDCs in development to the existing financial system. The platform is said to launch within the next two years.

Crypto vs. CBDCs

Roth warned that some within the government are manipulating interest in digital currencies and digital assets to mainstream CBDCs and intentionally trying to conflate CBDCs with cryptocurrencies. For more information, watch the video above.

Roth stresses that truly decentralized digital currencies like Bitcoin are the antithesis of CBDCs. "A central bank currency is the exact opposite in terms of purpose and focus and what it stands for than a cryptocurrency where you have something like Bitcoin, which is entirely decentralized," she said.

Roth added that one of the drivers behind the surge in cryptocurrencies, especially Bitcoin, is the growing interest in the decentralized nature of these types of digital currencies.

"That's really what that's about. It's about preserving wealth. It's about having control and freedom," she said. "Every government is exploring a CBDC in some way. [Even] the Fed is running pilot programs and doing research," she noted.

Roth points to gold, silver, Bitcoin, and any other physical metals as hedges against the risks posed by a potential CBDC.

For Roth's take on how to protect your wealth and freedom amid this coming financial shift, watch the video above.

"The idea of ownership has to be viewed through an important lens. If you want to create wealth and have personal sovereignty and freedom, that comes to you through owning things. Through that ownership, assets can retain their value and increase in value. They may want you to own nothing, but I want you to own as much as possible," Roth said.

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Michelle Makori

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Tim Moseley

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Fed in focus: Asset prices on hold as investors await rate decision and inflation data

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Fed in focus: Asset prices on hold as investors await rate decision and inflation data

Cryptocurrency prices trended lower to start the week as investor attention is focused on the Federal Reserve and its upcoming decision on interest rates and May's Consumer Price Index (CPI) inflation reading, both of which are due on Wednesday.

Stocks fell under pressure in early trading but managed to climb back into the green in the afternoon despite rising expectations that the Fed will keep interest rates at a two-decade high for longer. The CME FedWatch tool now shows that anticipation for a September rate cut has fallen to 49%, down from 60% a week ago.

Geopolitical developments in Europe also have investors on edge after France's President Macron and German Chancellor Olaf Scholz suffered lopsided losses to far-right parties in European elections on Sunday. The euro fell to its lowest level in a month after the results were released, while the Paris stock index sank around 2% in the wake of Macron announcing snap elections.

At the market close on Monday, the S&P, Dow, and Nasdaq were all in the green, up 0.26%, 0.18%, and 0.35%, respectively.

Data provided by TradingView shows that Bitcoin (BTC) briefly spiked back above $70,000 in early trading to hit a high of $70,195, but gave back the gains in the afternoon and returned to support near $69,600.

BTC/USD Chart by TradingView

At the time of writing, Bitcoin trades at $69,640, an increase of 0.05% on the 24-hour chart.

Short-term leverage flush

“Highly positive ETF flows for the last 20 trading days have helped to offset pressure on BTC, however, the fact that this was unable to move the price further, and push BTC above its range high is a negative in the short-term,” said analysts at Bitfinex. “The counter-argument is that traders are executing a basis arbitrage trade, where they have long spot exposure and short perpetual futures to collect funding payments.”

“However, it is important to note that this is highly speculative,” they added. “As per the chart below, there has been high open interest (OI) on BTC, as well as on altcoins.”

“Coinglass data shows that BTC OI across major exchanges reached an all-time high of $36.8 billion on June 6th,” they said. “And despite [Friday’s] correction in price, OI is currently sustained above $36 billion levels.”

“We believe the drop on Friday was more of a ‘leverage flush’ where an extreme amount of leveraged longs on altcoins (as well as majors to some extent) is wiped out and funding rates neutralised,” the analysts suggested. “However, we do not expect a major decline to follow immediately, even though the leverage wipeout/liquidations were quite significant on altcoins.”

“This is mainly because the amount of BTC liquidations was relatively small,” they said. “While we had more than $360 million in long liquidations and over $410 million total liquidations on June 7th – the highest since April 14th and more than when BTC went sub $57,000 – this time around only $50 million of the long liquidations came from BTC.”

“Most were on altcoins, which explains the severity of the decline in altcoins last week relative to majors,” the analysts said. “Such liquidation events are usually not followed by further severe drops and hence the next week will be pivotal, given the forthcoming Consumer Price Index inflation report on June 12th is expected to be a major market catalyst, with the price expected to continue to range in a tight environment as derivatives positions get built up again.”

“In the current environment, holding the local lows around $68,000-$68,500 would be pivotal for bulls, whereas failure to move past range highs remains a cause for concern,” the analysts said.

Addressing the tough situation the Fed finds itself in regarding interest rates, Bitfinex analysts said keeping rates higher for longer is a double-edged sword that will need to be navigated with deftness.
 

“On one hand, the strength and adaptability of the US economy could enable it to thrive even in a high-interest-rate environment driven by robust labour demand and rising wages,” they said. “This scenario would support continued economic growth, solid consumer spending, and overall economic resilience.”
 

“However, there is also a significant risk that maintaining elevated interest rates for too long could stifle economic activity, leading to reduced investment, slower job creation, and a potential downturn,” they warned. “The Fed faces the delicate task of balancing these opposing outcomes.”

They also suggested that the recent rate cuts by the European Central Bank and the Bank of Canada, done to “shift towards more accommodative monetary policies to boost economic growth, suggest that the Fed may need to re-evaluate its own monetary policy.”

“With the Fed adopting a cautious approach, the actions of its global counterparts may influence its decisions in the coming months, particularly if inflation trends and economic conditions warrant a shift,” they said.

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Jordan Finneseth

Time to Buy Gold and Silver

Tim Moseley

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Wall Street throws in the towel on gold after Friday’s rout Main Street optimism likely a pre-selloff snapshot

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Wall Street throws in the towel on gold after Friday’s rout, Main Street optimism likely a pre-selloff snapshot

This week, precious metals markets saved all their drama for the grand finale. Spot gold opened the week trading at $2,325.26, and spent much of the first four days trading in a relatively narrow $25 range.

The expected 25 basis point rate cuts from the ECB and the Bank of Canada came and went, with spot gold eventually setting its weekly high of $2,386.75 just after midnight on Friday.

North American traders went to bed Thursday night expecting Friday morning’s nonfarm payrolls (NFP) report to be the week's highlight for gold. But the People's Bank of China (PBoC) stole the spotlight in the early hours, announcing at 4 am EDT that they had broken their 18 months streak of sovereign gold purchases in May and sending metals prices crashing through multiple levels of support as algorithmic stop loss orders were filled in rapid succession.

Spot gold sank like a stone, falling from $2,373.85 just before 4 am to $2,343.68 only one hour later, with much of the move taking place in a matter of minutes.

Then, the yellow metal was trading at $2,333.42 in the moments before the 8:30 am release of the surprisingly strong U.S. jobs report, which drove gold down even further as markets recognized that the Fed would have even less reason to cut in the near term. As gold was already down over $40 at that point, the NFP took the yellow metal all the way down to support near $2,300 per ounce.

Gold saw multiple bounces off the $2,300 level throughout Friday trading, but finally broke through support shortly after 2:40 pm EDT.

The latest Kitco News Weekly Gold Survey has the majority of industry experts throwing in the towel on gold’s near-term prospects, while most retail traders saw gains for gold in the coming week, though most voted before Friday morning’s fireworks.

“Two forces drove gold to new one-month lows ahead of the weekend,” said Marc Chandler, Managing Director at Bannockburn Global Forex. “The first, and which got the ball rolling, was news that although the dollar value of China’s reserve grew last month, it did not add to its gold holdings for the first time in 18 months. The second, which added insult to injury was the jump in US rates and the dollar in response to the stronger than expected US jobs data.”

“A break of $2300 in the spot market targets the May lows near $2277,” Chandler added. “A break of the $2270 area could send the yellow metal down to the $2220 area.”

“China rugging the gold bulls like GME today,” said Adam Button, head of currency strategy at Forexlive.com. Button thinks gold has further to fall. “This China news is bad,” he added.

Darin Newsom, Senior Market Analyst at Barchart.com, said gold prices are likely to move lower in the days ahead.

“While I’m not reading anything into Friday morning’s spike move, a knee-jerk reaction to the comic relief known as monthly US employment numbers, August gold remains in an intermediate-term downtrend on its weekly chart,” Newsom said. “The contract’s short-term daily chart is also showing a downtrend that didn’t quite complete itself this past week. Much will depend on Friday’s close, though the initial reaction Friday saw August take out its previous 4-day low of $2,334.80. Now we’ll see if there were any sell orders waiting below that mark."

“Positioned in inverse Gold and Silver ETFs as a hedge here, as the market has temporarily turned South,” said Mark Leibovit, publisher of the VR Metals/Resource Letter.

“I’m sticking with up, as support structure is still in place from the weekly chart,” said James Stanley, senior market strategist at Forex.com. “And for the first four days of the week gold held in a fairly strong position until finding resistance at 2378.”

“I think the driver around Chinese gold reserves could possibly be a trap door, and I don’t think the Fed is going to come off as overly hawkish next week,” Stanley added.

Colin Cieszynski, Chief Market Strategist at SIA Wealth Management, was weighing the implications of the jobs report ahead of next week’s Fed rate decision.

“The U.S. employment numbers mean it's less likely that the Fed's going to cut rates,” he said. “It's less likely they'll cut rates next week, and they're really under pressure to not cut rates. And that's been propping up the U.S. dollar, particularly in a week where Canada and Europe did cut rates.”

Cieszynski said this will also have a significant impact on the U. S. dollar, and on gold prices.

“That puts a tailwind behind the U.S. dollar and a headwind in front of gold in the near term, and other commodities as well,” Cieszynski said. “Anything that's priced in U.S. dollars has a headwind in front of it now, because this could boost the U.S. dollar a little bit in the short term.”

Looking past the surprising headline number, Cieszynski said that the most significant thing about the jobs report was its inflation data.

“The most important part was actually that wage inflation is going up again,” Cieszynski said. “I think a lot of people were hoping that maybe the Fed would signal a rate cut in July, but yeah… maybe September. You could still do two rate cuts this year, in September and December, one before the election and one afterwards.”

Cieszynski said that the downward price action from gold could be fairly dramatic, as its run-up provided few obvious areas of support. “It broke out over $2,160, and then it very quickly went to $2400, so the support is in at around $2,280ish, $2,285, and if that gets taken out, then back to $2,125, $2,150.”

This week, 18 Wall Street analysts participated in the Kitco News Gold Survey, and after Friday’s precipitous slide, few were optimistic about the near term. Only two experts, representing 11%, expect to see gold prices climb higher next week. Eleven analysts, fully 61%, predicted a price decline, and the remaining five, or 28% of the total, see gold trending sideways during the coming week.

Meanwhile, 184 votes were cast in Kitco’s online poll, with Main Street investors representing the ‘before’ picture of a relatively optimistic market. 107 retail traders, or 58%, look for gold prices to rise next week, the same proportion as last week. Another 33, or 18%, expected they would be lower, while 44 respondents, representing the remaining 24%, saw prices chopping sideways during the week ahead.

Next week will revolve around the Wednesday morning release of U.S. CPI for May, followed by the Federal Reserve’s monetary policy decision in the afternoon.

Then on Thursday, markets will be watching U.S. PPI for May and weekly jobless claims, with the Bank of Japan set to announce their monetary policy decision in the evening. And Friday morning will see the release of Preliminary University of Michigan Consumer Sentiment.

Adrian Day, President of Adrian Day Asset Management, was among the minority who believe gold could stage a comeback next week.

“Friday’s drop after the U.S. payroll report is overdone, and suggests some holders were nervous weak hands,” Day said. “The concern is that the payrolls report pushes back the prospects of a rate cut by the Federal Reserve, but no-one was expecting it at next week’s meeting; September was the earliest when a Fed rate cut was broadly expected. A lot can happen twixt now and then.”

“Moreover, the U.S. and the Fed are not the only game in town,” he added. “Both the European Central Bank and the Bank of Canada have cut rates in the last weeks, with a few other small central banks. The global trend is definitely to lower rates.”

Day said that while gold might see some follow-through from today’s selloff, he thinks it will only be for a day or two, and only shallow. “By the end of the week, I would expect gold to be moving up again.”

Kevin Grady, president of Phoenix Futures and Options, was looking at the market dynamics on Friday after the sharp overnight selloff.

“When the market dumps like that, the rest of the day is no longer about the news,” he said. “The rest of the day is people hitting stops, and in that market, it gets into a rhythm of the day where people are liquidating. So when you enter a day as a trader, and you see people are liquidating positions, it just changes the day. People are thinking, are there more stops under the market? Did we hit all the stops? Where's the buying coming in?”

“As a trader, that's what I look for,” Grady said. “I remember standing in the trading pit for years and years, and that's what I would watch for. Where are the stops? The market sells off… are they continuing? When you see another dip in the market and it doesn't continue, and strong buying comes in, who's doing that strong buying? Where's it coming from?”

Grady said that the payrolls report just exacerbated an already declining market, but soon all eyes will move to next week’s data.

“Let's see what the CPI looks like,” he said. “I think that's going to be the key for us. We have to wait and see.”

He’s also very interested in what Federal Reserve chair Jerome Powell will say at next week’s post-FOMC press conference.

“No one's anticipating any rate movements, but it's all about the verbiage, and the dot plot,” Grady said. “Everybody wants to know, where do these guys all stand as far as their projections and how many rate cuts are coming in, or will there be [cuts]? You saw the ECB cut rates this week. I still say that inflation is hot. Everything that touches, every single person, food, rent, education, insurance, any of those prices. Inflation is 15 percent at least on most of those metrics and I think that these guys see it.”

Grady said he thinks it’s increasingly likely that the Federal Reserve will decide to bite the bullet and raise the inflation target above 2%.

“I don't know if these guys at some point are going to start raising their target a little higher and say, our number is no longer 2 percent that we're going to target, we're going to try to say maybe it's 3%. I think that discussion is being kicked around, and I think that discussion has to be had, because right now, I don't think it's prudent to cut rates. I just don't think it's warranted, but they're in a really tight spot because on all the servicing debt that they have, they're paying exorbitant interest rates, and especially if the ECB is cutting rates, the entire world is flooding into U.S. Treasuries at 5.2%.”

Grady said that the Fed will need to do something at some point. “We're holding up the world, and we're going to continue to pay an exorbitant amount for our debt to service our economy?” he asked. “That's why I think these guys are in a real pickle.”

“I think they'd like to [cut], but I think the only way they're going to be able to lower rates is if they say, our target’s raised a little, we're going to go to maybe 3%,” Grady concluded.

“Gold's chart looks really weak, which is not surprising,” said Phillip Streible, Head of Market Strategy at Blue Line Futures. “If you are looking for metals exposure, copper and silver have better fundamentals. Gold investors should take a bit of a break for now.”

“We are likely in higher timeframe bearish correction against the move up from 19001,” said Michael Moor, Founder of Moor Analytics. “The trade below 24343 (+1.3 tics per/hour) has brought in $122.3 of pressure. The trade below 24216 (+4 tics per/hour) projects this downward $60 (+)—we have attained $109.6. On 5/22 we left the minor bearish reversal warned about, and on 5/23 left another bearish reversal above. These rolled into the (Q) and are OFF HOLD. Decent trade below 23642 (-1.2 tics per/hour starting at 6:00am) should bring in decent pressure, likely for days.”

“Neutral,” said Naeem Aslam, Chief Investment Officer at Zaye Capital Markets. “Consolidation with a grind to the downside.”

And Kitco Senior Analyst Jim Wyckoff sees further declines for gold next week. “Steady-lower as chart damage inflicted recently,” he said.

Spot gold last traded at $2,294.01 per ounce at the time of writing, down 3.45% on the day and down 1.43% on the week.

Kitco Media

Ernest Hoffman

Time to Buy Gold and Silver

Tim Moseley

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The Top Ten Cryptocurrency Blunders: A Must-Read Guide for All Investors

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The Top Ten Cryptocurrency Blunders: A Must-Read Guide for All Investors

Are you eager to maximize your returns in the cryptocurrency market? If so, it's crucial to avoid common pitfalls that could lead to significant financial losses. This comprehensive guide will delve into the ten most critical errors crypto investors often make, which can result in substantial monetary losses. By understanding and avoiding these mistakes, you can ensure that your investments not only avoid unexpected setbacks but also thrive, leading to significant profits that can potentially change your financial future.

#1. Not Doing Your Own Research (DYOR)

One of the most common blunders for investors is the lack of thorough research before diving into an investment opportunity. It's easy to get excited, especially when a friend boasts about a lucrative altcoin investment that promises astronomical returns. However, it's essential to avoid getting caught up in the frenzy and instead take a step back to educate yourself. 

This includes learning about reputable exchanges, secure cryptocurrency storage, and tax implications, as well as delving deeper into the specifics of individual crypto projects. By conducting your own research, you are taking control of your investments and empowering yourself with knowledge.

When evaluating research and projects, two crucial factors come into play. Firstly, verifying the project's authenticity and examining the token distribution is essential. To accomplish this, CoinmarketCap or CoinGecko can be used to analyze the coin or token. Delve into the data, focusing specifically on the price movement and trading activity. The trading volume should be substantial, indicating genuine interest and market participation. Additionally, the token should be listed on at least one reputable exchange.


Source: CoinGecko

With the basics covered, it's time to delve into more in-depth information from secondary sources. Explore cryptocurrencies on websites such as Messari, Binance Research, and CoinBureau, which provide comprehensive introductions to projects, their core teams, and objectives. Be sure to examine the profile section on Messari, which offers valuable insights into a project's background, token distribution, and other essential details.

It is essential to consider how tokens are allocated. It is favorable when tokens are distributed broadly among the community, indicating a healthy sign. Conversely, it raises concerns if a small group, often the founders, possesses most of the tokens. Additionally, it's essential to investigate the backgrounds and credentials of the founder, CEO, and other key team members. Videos featuring these individuals can provide valuable insight into their expertise and vision.


Source: Markethive.com

Previous interviews offer valuable insights into their progress in realizing their goals. Also, if they conduct regular meetings or webinars open to the public, it indicates transparency. Another key indicator of their credibility is their ability to follow through on their road map. At this stage, you should have gathered sufficient information to assess the project's authenticity and potential for long-term success.

#2. Opting For Inadequate Crypto Exchanges

Choosing the right exchange is a make-or-break decision. Many beginners and experienced cryptocurrency users fall into the trap of selecting the wrong exchange platform. The severity of this mistake can vary greatly, but it's crucial to start by verifying the exchange's authenticity. Unfortunately, many individuals are deceived by fraudulent crypto exchanges, underlining the need for vigilance in this crucial step.

Exercise caution when encountering sponsored advertisements for cryptocurrency exchanges, even when they appear on trusted news websites. Conduct thorough due diligence. Look into online discussions on Reddit, X, Bitcointalk, and other forums to see what users say about their experiences with these exchanges. 

Additionally, investigate the exchange's leadership, including the founders' backgrounds and the company's history. Just as you would carefully vet individual cryptocurrency projects, it's crucial to apply the same level of scrutiny when evaluating exchanges, particularly those that are less well-known.

Next, ensure the exchange aligns with your investment approach. This involves checking if the exchange provides the specific tokens you want to purchase. Most exchanges will meet your needs if you focus on investing in well-established large-cap tokens. However, if you're interested in smaller-cap tokens with greater risk but the potential for high returns, you'll need to be more discerning in choosing exchanges.

While specific cryptocurrency exchanges boast an extensive catalog of digital assets, others, like Coinbase, have a more limited selection, comprising only a few hundred options. Nevertheless, Coinbase's strict adherence to regulatory standards as a publicly traded company in the US ensures the implementation of rigorous security protocols. This sets it apart from many other exchanges, which lack similar oversight and may not inspire the same confidence level.

Beyond security and coin allocation, consider whether the exchange's features align with your trading style. As a beginner, you may prefer an exchange with a user-friendly interface. If you're more seasoned, verify that the exchange offers the advanced trading features you need. Many exchanges cater to diverse skill levels by providing basic and advanced platforms, but exploring your options is essential to finding the best fit.

Finally, ensure the platform you consider using accepts your currency and does not charge excessive trading fees. High fees can ruin a successful trading day, especially when more affordable options are available.

#3. Impulsive Decisionmaking With No Strategy

The third mistake to avoid is entering the crypto market without a strategic approach. As the saying goes, 'Failing to plan is planning to fail.' This adage holds particularly true in crypto, where impulsive decisions often lead to regret. By establishing a well-thought-out strategy, you can confidently navigate the market, making informed investment choices rather than relying on chance. With a solid strategy in place, you can feel secure in your decisions and confident in your ability to navigate the market. 

A solid strategy serves as a guiding framework, protecting you from making rash, emotional decisions and keeping you on track despite the influences of fear, uncertainty, and doubt (FUD) and the fear of missing out (FOMO). With a robust strategy and the discipline to stick to it, you can progress steadily without getting derailed.

Crafting a winning approach requires a tailored plan that suits your unique needs. Some general principles can serve as a guide. Start by setting clear and measurable goals rather than vague aspirations. Consider your comfort level with risk when setting these goals. For instance, someone in their early years without family responsibilities may be more inclined to invest heavily in cryptocurrency, whereas someone older with dependents may take a more cautious approach.

Regarding your cryptocurrency investments, you need to determine your comfort level with risk. Will you diversify your portfolio with smaller, more volatile altcoins, offering more significant growth opportunities but with higher uncertainty, or play it safer with established large-cap coins that provide more stability but limited upside? Additionally, should you hold onto your investments for the long term (HODL) or engage in active trading? This decision ultimately hinges on your personal risk tolerance and the trade-offs you're willing to make between security and potential returns.

Regardless of your investment approach, remember this crucial rule: never put in more money than you can comfortably part with, and refrain from taking on debt to fund your investments—it's simply not a risk worth taking. New investors, in particular, should resist the urge to amplify their bets with excessive borrowing, such as crypto leverage trading. Additionally, be sure to cash in on your gains periodically. Failing to do so is a common pitfall, so make it a deliberate part of your strategy, and you'll be grateful for it in the long run.

#4. Relying on a Centralized Exchange Instead of a Personal Wallet

Fourth on the list is a crucial security oversight: neglecting to self-custody one's crypto. To clarify, self-custody means having complete autonomy over your cryptocurrency by storing it in a personal wallet that only you can access and control. This approach is akin to keeping your physical cash in a personal safe rather than relying on a bank. For optimal security, self-custodial wallets are the recommended choice. Newcomers to the crypto world may wonder why they shouldn't simply store their funds on a centralized platform like Coinbase, Kraken, or KuCoin, but there are important reasons to avoid this approach.

Keeping some of your assets on these platforms for easy trading might be practical. However, there are risks when entrusting your assets to third parties online. Trusting the entity you are dealing with is essential, as some dishonest individuals are in the industry. A recent example is Sam Bankman Fried, who was once highly regarded in the crypto world but ended up causing significant financial losses to many. As a result, it's imperative to exercise extreme caution when dealing with online asset storage.

A second drawback of centralized exchanges is that, regardless of their trustworthy nature and rigorous security measures, they can never provide a guarantee against cyber-attacks. The cryptocurrency industry has witnessed a staggering $2.85 billion in losses due to theft from various exchanges and custodial services since 2012, demonstrating that no platform is entirely immune to breaches. Not even significant exchanges like Binance are immune, as evidenced by a hack they experienced in 2019 despite their robust security measures.

Cryptocurrency exchanges are attractive targets for cybercriminals due to the potential for substantial financial gains if their security measures are compromised. Malicious individuals seeking to take advantage of vulnerabilities in these platforms constantly threaten them. Additionally, regulatory uncertainties pose a risk for exchanges, as they may be subject to sudden closure or asset seizure by government authorities. An example occurred in 2021 when South Korea closed down 11 exchanges allegedly engaged in fraudulent activities.

Finally, there is a perpetual threat of financial collapse and insolvency. In such a scenario, users' assets could be at risk. The likelihood of this increases if an exchange fails to perform regular proof of reserve audits. Therefore, it is not advisable to keep assets on exchanges. Due to these concerns, the risks associated with storing assets on exchanges outweigh any potential benefits. As Benjamin Cowen, CEO of Intothecryptoverse.com, aptly puts it, "Treat exchanges like public toilets. Get in, do your business, and get out.”

So what should you do instead? You need to self custody your crypto by holding a non-custodial or self-custodial wallet. Non-custodial wallets are a broader category encompassing various wallets where users control their private keys. A non-custodial wallet can be browser-based or software-based, like Trust, Solflare, or Exodus, where users control their private keys. Although the wallet provider still bears some responsibility for safeguarding your assets, you have ultimate authority over your cryptocurrency.

Self-custodial wallets are a type of non-custodial wallet in which the user has complete control over their private keys and is responsible for managing their funds. They are hardware wallets like Ledger or Trezor in which the user has complete control over their private keys and is solely responsible for securing their assets. In both cases, the user controls their private keys and manages their funds. Still, the level of control and responsibility can vary depending on the type of wallet.

#5. Neglecting To Back Up Seed Phrases and Passwords

Another common security mistake is neglecting to create backups of seed phrases and passwords. A seed phrase is a set of words your cryptocurrency wallet generates and serves as the master key for managing and retrieving your funds. In the event of device failure, loss, or theft, your seed phrase is the only way to regain access to your assets stored in the wallet. 

Storing physical copies of your seed phrases and passwords may seem inconvenient to some people. However, considering the importance of safeguarding your finances, it is essential to prioritize security over convenience. It is crucial that these backups are kept in a tangible format. Avoid saving seed words digitally on your device at all costs, as this dramatically increases the risk of your cryptocurrency being stolen by malware or cyber criminals.

Consider choosing between a paper backup method or engraving the information on a steel card for added security. Ensure that you store this vital information in a secure location. Additionally, take into account the security measures for your cryptocurrency exchange accounts. Implement two-factor authentication, and remember to store the backup codes needed for account recovery securely. Losing access to your phone can lead to being locked out of your account, resulting in a cumbersome verification process to regain entry. Prevent this potential hassle by documenting and safeguarding the codes along with your seed phrases in a secure container or safe.

#6. No Risk Management Plan

Effective risk management is essential for achieving long-term success in the crypto market. It is commonplace to become impulsive and deviate from your initial investment strategy. Staying composed during a bullish market is crucial to avoid making hasty decisions. Therefore, having a risk management plan tailored to your investment approach is vital.

A crucial rule of thumb for all investors is investing only money you are comfortable potentially losing.  If you're an active trader, consider implementing risk management strategies such as stop-loss orders and profit-taking limits. These tools enable you to lock in gains when the market is favorable and limit potential losses when it turns sour. By doing so, you can avoid the need for constant market surveillance, providing peace of mind and a more hands-off approach to investing.

When managing risk, adopting a cautious mindset that extends beyond trading to include withdrawing your assets, also known as off-ramping, is essential. Many fall prey to a common mistake: sending funds to the wrong blockchain via an exchange. This mistake is easily preventable, but it can have irreversible consequences, and even with the help of wallet providers or exchanges, rectifying the situation is not always possible and can be highly stressful. To avoid this, take the precautionary step of sending a small test transaction to confirm the successful funds transfer. While this will incur some gas fees, it's a minor cost compared to the potential risks involved.

#7. Falling For Scams

Be cautious of fraudulent schemes, which are a significant concern in cryptocurrency and are closely related to managing risks. Conducting thorough research and remaining vigilant are essential to avoid falling prey to such schemes. Adopt a skeptical mindset and stay alert to potential red flags. Empowering yourself with knowledge of common fraudulent tactics is key to protecting your investments.

Some typical fraudulent schemes include Ponzi schemes, which rely on flimsy foundations and promise high returns but fail when new investments dwindle. Scammers may also attempt to attract victims to questionable investment platforms where funds are deposited but never returned. Another tactic is phishing attacks, where fraudsters create fake websites or emails to deceive individuals into revealing confidential information like private keys or wallet passwords.

Another insidious practice is pig butchering, a deceitful scheme in which individuals build a fake online connection with their targets and then manipulate them into divulging sensitive financial details or transferring funds. This deceptive tactic, akin to the tactics of the "Tinder Swindler," is prevalent in financial fraud. Moreover, cryptocurrency scams frequently exploit the influence of celebrities, using their images and names to deceive unsuspecting followers. Falling prey to such scams can have devastating consequences, not only draining your finances but also taking a heavy emotional toll on your well-being.

#8. Falling For FOMO 

The following three mistakes are rooted in emotional biases. Although intuition has its place in some regions of life, it's essential to separate emotions from rational thinking when making investment decisions. The fear of missing out (FOMO) is a common psychological trap, and it can cleverly manipulate investors into making impulsive choices.

Theodore Roosevelt once pointed out the negative impact of comparing oneself to others on happiness, quoting, “Comparison is the thief of joy.” “This concept can also be applied to investing. During times of positive market trends and when your peers are succeeding, it can be tempting to abandon one's investment strategy and lose focus.

The proliferation of social media has exacerbated the problem, as overnight successes and compelling forecasts of price surges create unrealistic expectations. For instance, many individuals were convinced that Bitcoin would soar to $100,000 during the previous market upswing despite falling short. The allure of this narrative led people to hold onto their investments for too long, neglecting to cash in when they should have. 

This reinforces the importance of developing a strategy tailored to one's risk tolerance and grounded in thorough research rather than following the crowd. Tuning out the noise and focusing on your approach is essential, a lesson closely tied to the following common pitfall: having inflated expectations, particularly among those new to the market.

#9. Inflated Economics

High hopes can sometimes result in significant letdowns. Viewing cryptocurrency investments as a means to rapid wealth can result in severe financial setbacks when reality fails to match these lofty expectations, particularly in the short term; investors often make ill-advised choices. Such mistakes include impulsively selling during market downturns or investing in high-stakes assets without adequately evaluating the risks.

It is crucial to have a solid strategy and adhere to it in order to succeed. By remaining patient and disciplined, your chances of success are higher. Should you experience good fortune in cryptocurrency, you must exercise humility and discretion. Boasting about your wealth can attract unwanted attention, and there have been disturbing instances where individuals who publicly flaunted their crypto gains online became targets of criminal activity. It's wise to keep your accomplishments private and avoid drawing unnecessary attention to yourself.

#10. Quitting Prematurely

Lastly, a common pitfall is surrendering too soon, which can cause investors to forfeit potential profits. The market's tendency to experience significant fluctuations can be intimidating, and those not prepared for such instability might quickly sell their assets during downturns, putting themselves at risk of losses. Exiting too early could result in missing opportunities for potential gains.

Successful investors are resilient and endure challenges, adapting their strategies and gaining knowledge along the way. Having a long-term perspective is key. While prices may experience significant fluctuations in the short run, it is essential to maintain a broader view. Viewing a bear market from a longer-term standpoint can offer a more positive outlook. 

Patience and holding onto investments can eventually lead to significant gains. Sometimes, you just have to “hold on for dear life” and wait for your fortunes to moon. Finding a balance and following the profit-taking strategy mentioned earlier is prudent. It is crucial not to let short-term market trends distract you from your crypto journey and to keep the perspective of how far the cryptocurrency industry has come since its inception. 

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

 


 

Editor and Chief Markethive: Deb Williams. (Australia) I thrive on progress and champion freedom of speech.  I embrace "Change" with a passion, and my purpose in life is to enlighten people to accept and move forward with enthusiasm. Find me at my Markethive Profile Page | My Twitter Account | and my LinkedIn Profile.

 

 

 

 

 

Tim Moseley

The Artist that came out of the Winter