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JUNE 21, 2024

STEEP OUTFLOWS

It has been reported that as of yesterday, Bitcoin exchange-traded funds (ETFs) in the U.S. recorded their fifth consecutive day of outflows, losing over $900 million this week. Data from SoSoValue indicates that the 11 listed ETFs experienced a loss of $140 million on Thursday with $1.1 billion in trading volumes. Grayscale’s GBTC, which has been seeing outflows since it converted to an ETF in January, led the negative trend with $53 million in outflows, closely followed by Fidelity’s FBTC, which saw $51 million in outflows. Notably, BlackRock’s IBIT, the largest ETF by assets, was the only one to register net inflows, albeit a modest $1 million, while other products saw no net activity. This outflow trend is the worst since late April, which saw $1.2 billion in net outflows between April 24 and May 2. However, let’s remember that inflows picked up thereafter, bringing in over $4 billion in the next 19 trading days before another wave of outflows began on June 10. Moreover, the recent downturn in Bitcoin prices has been influenced by $1 billion in sales by large holders, strengthening of the U.S. dollar, and a robust performance in the U.S. technology index market.

HIGHER TAXES COUNTDOWN

With tax breaks from the 2017 Tax Cuts and Jobs Act (TCJA) set to expire after 2025, many are preparing for potential tax increases. The TCJA introduced lower income tax rates, larger standard deductions, and higher gift and estate tax exemptions, but these benefits will end if Congress does not intervene. According to the Tax Foundation, more than 60% of tax filers could face higher taxes, and experts are emphasizing the importance of starting tax planning now to avoid last-minute decisions. Strategies being discussed include “accelerating income” to take advantage of current lower rates or converting pre-tax funds to Roth IRAs for future tax-free growth. In addition, high-net-worth families might also consider “lifetime gifts” before the gift and estate tax exemption drops by half in 2026. In fact, experts from Northern Trust advises that such gifts are most advantageous for those able to transfer more than $7 million. Ultimately, with the political landscape making future tax laws uncertain, proactive planning is essential to minimize potential financial impacts.

FUTURE LOOKS DIM

According to experts ar StoneX Inteĺligence, copper prices are expected to drop more than rise over the next year as the current high prices do not seem to match the actual market conditions. China, which is a major player in the copper market, is struggling with economic recovery and ongoing geopolitical issues are reducing demand, and its property sector continues to face significant problems. Moreover, manufacturing purchasing managers’ index (PMI) data worldwide has not been stable, and high metal prices are likely to further reduce interest in purchasing copper. All these factors contribute to a less favorable outlook for copper prices in the near future, and StoneX suggests that unless there is a change in these conditions, the demand for copper will likely remain subdued, making current high prices unsustainable.

SECOND WEEK OF GAINS

Gold prices have been rising, with futures up 0.4% to $2,355.5 per troy ounce, driven by signs of financial strain on U.S. consumers as indicated by May retail sales data. This increases the likelihood of an interest rate cut, which historically boosts gold prices since gold does not earn interest and becomes more attractive when rates are low. Furthermore, an annual World Gold Council survey has revealed that almost 60% of central banks in developed markets expect gold’s share of global reserves to rise over the next five years, adding further support to its price. As a result, gold has posted a second consecutive weekly gain, climbing 0.2% to $2,363.06 per ounce and hitting a two-week high. In addition, U.S. gold futures also rose 0.3% to $2,376.70. Moreover, soft economic data, including a drop in U.S. housing construction and tepid retail sales, have also bolstered the chance of a rate cut in September, reducing the opportunity cost of holding gold.

RATE CUT RALLY

Bonds are rising in value because business activity in Europe has slowed down, leading traders to expect central banks to cut interest rates soon. The yield on Germany’s 10-year bonds dropped, and U.S. Treasury rates followed, after disappointing manufacturing and services data from Europe’s biggest economies. Investors now expect the European Central Bank (ECB) to make multiple rate cuts this year, with two cuts likely by October and a high chance of a third one. This has also made people think the U.S. Federal Reserve might cut rates too. Additionally, as stated by experts from UBS Group AG, bond yields will likely keep falling as everyone focuses not just on when the Fed will cut rates but also by how much. Furthermore, in the UK, slow private sector growth has led markets to expect two quarter-point cuts from the Bank of England this year. Moreover, in regards of the forex market, the euro fell to a one-week low due to political issues in France, and the British pound hit a five-week low, facing its third consecutive week of losses, because of the expected rate cuts.

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