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MAY 10, 2024

REVENUE MANTAINED

Grayscale Investments maintained flat revenue in the first quarter by opting to keep fees stable for its Bitcoin exchange-traded fund. The company experienced outflows of $17.4 billion as investors shifted to lower-fee alternatives offered by competitors like BlackRock and Fidelity. Despite this, revenue surpassed expectations due to the rise in Bitcoin and Ether prices. Digital Currency Group, Grayscale’s parent company, also showed an 11% increase in revenue to $229 million, driven primarily by higher asset values. Mining subsidiary Foundry saw a 35% revenue increase, attributed to staking and equipment sales. Moreover, Luno, the crypto exchange subsidiary, reported a 46% sales growth driven by increased trading volumes.

CUTS STILL POSSIBLE

Atlanta Federal Reserve President Raphael Bostic suggested in an interview that the U.S. central bank is likely to lower interest rates this year despite uncertainties in timing and extent. He mentioned that businesses in his district foresee slower wage and job growth, with reduced pricing power. Bostic remains optimistic that these factors will lead to progress in lowering inflation and eventual monetary policy adjustments, though it may take some time. He expects a single interest rate cut later this year, and emphasized the need to patiently observe inflation trends and determine the right timing for any rate changes, and he is hopeful that these steps will help reach the Fed’s 2% inflation target. The Federal Reserve’s outlook will be updated in June, with expectations for inflation to return to the target level by late 2025 or early 2026.

PRECIOUS METALS ROSE

Gold prices have increased and are set for their strongest week since early April, driven by weak U.S. employment figures that suggest potential interest rate cuts by the Federal Reserve this year. Spot gold gained 1.1% to $2,372.46 per ounce, marking its highest level in over two weeks, while U.S. gold futures surged 1.7% to $2,379.30. Analysts from Commerzbank noted the focus on U.S. consumer prices amid concerns of inadequate progress in controlling inflation, leading to diminished expectations for interest rate hikes. Consequently, investor interest in gold grew. Additionally, reports emerged of Israeli forces targeting Rafah in the Gaza Strip, while indirect negotiations between Israel and Hamas have ceased, with spot silver, platinum, and palladium all posting weekly gains.

SOARING OIL

Oil prices are on the rise as demand increases in the U.S. and China, with Brent hovering above $84 a barrel and U.S. crude also edging up. This growth in demand is supported by ongoing conflict in the Middle East. Latest data indicates a surge in U.S. crude inventories due to higher refinery runs, while China’s oil imports in April surpassed last year’s figures, reflecting improved trade activity. Furthermore, China saw growth in both exports and imports in April, bouncing back from a contraction in the previous month. Meanwhile, tensions in Europe escalated with a Ukrainian drone attack setting a Russian oil refinery ablaze in the Kaluga region. In the Middle East, Israeli forces carried out airstrikes on Gaza, adding to the ongoing conflict in the region. The escalating conflicts raise the potential for broader turmoil, especially with Hamas’ main supporter, Iran, a key oil producer, and these geopolitical risks are anticipated to persist through the second quarter of 2024, with prices expected to gradually ease later in the year as global oil demand growth moderates.

INTERNATIONAL NEWS

In response to the robust strength of the U.S. dollar, China’s central bank, alongside other central banks, continues to bolster its gold reserves. This strategic move is aimed at offsetting economic uncertainties and mitigating the high costs associated with importing goods due to the dominant position of the dollar. Central banks, particularly those from emerging markets, are progressively diversifying their assets by turning to gold as a hedge against the prevailing economic volatility and the relentless ascent of the U.S. dollar. The growing trend of central banks accumulating gold underscores a broader shift towards using the precious metal as a protective asset in the face of a strong dollar and increasingly uncertain global economic conditions. This strategic shift not only reflects growing concerns about the sustainability of the dollar’s dominance but also highlights a concerted effort by central banks to safeguard their assets amidst heightened economic uncertainties.

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