FX168 Financial News Agency (Asia Pacific) Recherche Bay precious metals investment researcher Laurent Maurel said that the major revision of the US non-farm payrolls (NFP) proves that it is increasingly difficult to predict economic recession. He warned that the gold market is ready to face the detonation point of the second phase of inflation, and the bullish trend of gold warns investors that the Federal Reserve is about to make another monetary policy mistake.
Maurel pointed out in his article last Friday (August 30th): "Two months ago, I wrote that it would be difficult to predict a recession in the U.S., and based solely on the analysis of employment data, it might be even harder to predict the U.S. recession."
He emphasized, "I never thought these employment data would be modified to such an extent."
In March this year, when most economists still believed the data published by the Biden government's Labor Statistics Bureau, analysis showed that the actual employment figures were at least overestimated by 0.8 million. The recent revisions confirm this overestimation, especially in professional services, leisure, and high-paying industries such as manufacturing.
(Source: ZeroHedge)
The purpose of this data manipulation is to present a stronger economy than it actually is, thereby distorting the public's perception. In fact, the job growth in 2023 is much more moderate than initially announced. This is the second largest data revision in the history of the USA, and the inaccuracy of US employment data has further complicated the analysis of the real economic situation.
Morrell added, "In this situation, how confident can we be about the employment report that will be released next week? Should we expect further data revisions?"
"On the eve of the crucial US election, inflation data may also be manipulated. However, all indicators pointing to the start of a new phase of inflation are positive."
The global freight rate increase indicates the recovery of the Producer Price Index (PPI) in the United States:
(Source: Bloomberg)
In 2020, these rate hikes occurred six months before the sudden recovery of inflation. The battle against inflation is far from won, as the latest data on single-family home sales shows no significant price drops.
(Source: FRED)
The housing prices in the USA are at their highest level in history, but owning a house has never been so difficult.
(Source: YCharts)
The latest survey from the Federal Reserve Bank of Dallas shows that the construction industry is still under pressure. Prices in the region have not declined, on the contrary, prices continue to rise. For example, a door that was priced at $3,000 a year ago now sells for $10,000. Market competition has weakened. The number of local businesses has decreased, and many businesses have closed due to difficulties in maintaining labor or imminent retirement of owners. Other businesses have been acquired. The supply cycle for items such as transformers and generators is still long.
The prices of some agricultural products have also continued to soar, taking coffee as an example, its price has increased fivefold since 2020:
(Source: Trading View)
The inflation rate is still at the highest level in 40 years, but the market currently expects the Federal Reserve to cut interest rates at the next meeting.
The high interest rate period seems to be over, at least according to the bets of many investors. U.S. money market funds recorded inflows of about $90 billion in the first half of August, the highest level since November 2023.
(Source: Financial Times)
Total assets of money market funds reached a record high of about $6.2 trillion.
Never before has so much capital been invested in these products, and the money market fund's expected yield this year is projected to bring billions of dollars in returns to its shareholders, thereby further increasing available liquidity. The cumbersome task of withdrawing liquidity from the market by the central bank is being offset by this self-perpetuating liquidity bubble.
Morrill mentioned, 'The supply of liquidity is increasing while the number of available physical assets is decreasing. We have all the factors for an inflation recovery. The conditions are in place, we just need a trigger to get things started again. The first wave of inflation was triggered by the COVID-19 crisis.'
What will trigger the second round of inflation? In the face of the risk of inflation reemerging, is considering interest rate cuts a wise move?
In conclusion, he stated, 'The rising prices of gold are telling us that we are about to enter a new phase of inflation. Gold is warning us that the Federal Reserve is about to make another monetary policy mistake.'