APPROVALS DELAYED

Bitcoin ETF candidates experienced yet another disappointment as U.S. regulators have decided to postpone making a decision on whether to approve such a product. However, the wait for a potential decision may not be long, as the U.S. Securities and Exchange Commission (SEC) is expected to reach a verdict on the Bitwise Bitcoin ETP Trust by September 1, with applications from other firms like BlackRock, VanEck, WisdomTree, and Invesco due soon after. Although there is optimism in the cryptocurrency community that this time an exchange-traded fund directly investing in Bitcoin could gain regulatory approval, given BlackRock’s involvement and successful ETF history, analysts expect possible delays in decisions, especially if a lawsuit involving Grayscale’s Bitcoin trust conversion is resolved. Moreover, while enthusiasts hope ETFs would democratize Bitcoin investment and integrate digital assets into traditional markets, regulators have cited concerns about fraud and manipulation.

AVOIDING RECESSION UNCERTAINTY

A growing number of economists, including those within the Federal Reserve, are projecting that the U.S. might avoid entering a recession, although this certainty might not become evident until around 2024. Federal Reserve Chair, Jerome Powell, anticipates guiding the country’s economy to expand while reining in inflation rates back to the 2% target, yet achieving this goal presents significant challenges. The risk of not taking sufficiently aggressive measures against inflation could lead to its resurgence, necessitating stricter actions later on. Furthermore, the already vigorous tightening of monetary policy over recent years could potentially push the economy into a recession. This intricate situation, with potential risks on both sides, remains in a state of uncertainty as economists work to gauge the trajectory and potential outcomes.

DOLLAR’S RESURGENCE

Traders are placing their bets on the U.S. dollar remaining strong against other major currencies, expecting higher interest rates and lower inflation. The 10-year real yield, which considers inflation, has increased to 1.78% – its highest level since 2009. As a result, many are currently investing in the dollar for good returns, pushing it up by about 3% from a low last month. This shift is happening as hedge funds reduce their bets against the dollar. Furthermore, investors seem optimistic about the dollar’s future, and this change suggests that the dollar can gain even as the Federal Reserve reduces its tightening efforts. Nonetheless, experts emphasize ongoing efforts to manage inflation, particularly in the face of rising energy prices and growing debt levels. Renowned investor Bill Gross suggests that U.S. debt might be overvalued, positing that the fair value for “10-year Treasuries” should be around 4.5%, while the current rate hovers near this year’s peak of 4.20%.

PRICES UNDER PRESSURE

Gold prices have approached a five-week low due to a strong dollar and rising U.S. bond yields. This decline was further influenced by the impending release of the Federal Reserve’s meeting minutes for July, which are expected to offer insights into the potential for higher interest rates. The current price of gold stood at $1,913.50 per ounce, marking its lowest point since July 7, with U.S. gold futures at $1,946.00. Additionally, the rising potential for heightened interest rates and bond yields has led to a decrease in the attractiveness of holding gold. The market is currently awaiting the release of U.S. retail sales figures and the minutes from the Federal Open Market Committee’s (FOMC) July meeting, both of which are expected to shape market sentiment. Consequently, the SPDR Gold Trust, recognized as the world’s largest gold-backed exchange-traded fund, announced a decline in holdings to levels last seen in January 2020. Meanwhile, silver experienced a marginal 0.2% rise, reaching $22.71, while platinum held steady at $912.43. Palladium, on the other hand, saw a slight 0.1% decline, settling at $1,291.21.

KEY EVENTS HAPPENING THIS WEEK

Monday: U.S. consumer inflation expectations.

Tuesday: U.S retail sales report for July, Minneapolis Fed President’s speech, FOMC minutes, and earnings reports for Home Depot (before market opens) and Cava Group (after market closes).

Wednesday: Mortgage Bankers Association (MBA) reports, and earnings reports for Target, TJX companies (before market opens).

Thursday: Initial jobless claims report for week ending on August 12, and earnings report for Walmart (before market opens).

Friday: Earnings report for Palo Alto Networks (after market closes).