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<ul class="summary-list"><li>The Russian central bank raised its key interest rate to 21% on Friday.</li><li>Inflation in Russia hit 8.6% year-on-year in September, well above the central bank's 4% target.</li></ul><a target="_blank" class="" href="https://www.businessinsider.com/russia-economy-population-decline-worker-shortage-growth-outlook-ukraine-war-2024-8">Russia's central bank</a> raised its key interest rate to a record high on Friday as inflationary pressure continues in the country.The Bank of Russia raised the benchmark rate by 200 basis points to 21%, saying inflation was "running considerably above" its July forecast.Inflation hit 8.6% year-on-year in Russia in September, versus a 4% target."Inflation expectations continue to increase," the bank said in a statement, adding: "Growth in domestic demand is significantly outstripping the capabilities to expand the supply of goods and services.""Further tightening of monetary policy is required to ensure the return of inflation to the target and reduce inflation expectations," it said.The Kremlin has long been battling high inflation and warnings of an overheating economy.Economic growth has been driven by huge defense spending on the invasion of Ukraine, which staved off fears of a recession but also kicked up inflation.Moscow has said defense spending will keep going up.Russia can probably go <a target="_blank" class="" href="https://www.businessinsider.com/russia-economy-outlook-defense-budget-spending-ukraine-war-putin-sanctions-2024-10">for years years before it has to confront its overspending</a>, Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center fellow, wrote in the Financial Times earlier this month."This is an unpleasant truth for policymakers in Europe and the US," Prokopenko said.

Russia's central bank hikes interest rate to 21% to fight stubborn inflation      

<ul class="summary-list"><li>China's yuan is falling as holders eye the risk of western sanctions.</li><li>The US Treasury threatened to impose secondary sanctions on nations aiding Russian trade.</li></ul>China's yuan is in the midst of a steep decline as holders of the currency eye the risk of US sanctions.The value of the yuan slumped against Russia's ruble for the fifth day in a row on Wednesday, falling to a level of 11.51 rubles. That's the cheapest the yuan has been in about a year. Central banks, meanwhile, are looking to dump the yuan while raising their holdings of the US dollar. Nearly 20% of central bank reserve managers said they planned on <a target="_blank" href="https://www.omfif.org/2024/06/reserve-managers-battling-low-returns-face-tough-choices/">raising dollar holdings</a> over the next one to two years, while 12% said they planned on reducing yuan holdings, according to a survey from the Official Monetary and Financial Institutions Forum.Yuan holders are assessing the risk of Western trade restrictions on China after the US Treasury imposed secondary sanctions on countries and entities doing business with Russia's economy. That puts China at particular risk, given that the nation become a <a target="_blank" href="https://www.businessinsider.com/russia-ukraine-war-putin-china-trade-partnership-economy-moscow-beijing-2024-4">key trading partner</a> to Russia since Moscow first began its invasion of Ukraine in 2022. The two countries have embarked on a "no limits" economic partnership, which took their trade to a <a target="_blank" href="https://www.businessinsider.com/china-russia-trade-record-ukraine-war-xi-jinping-vladimir-putin-2024-1">record $240 billion in 2023</a>, according to data published by the Chinese government. They've also partnered on efforts with other BRICS states to <a target="_blank" href="https://markets.businessinsider.com/news/currencies/dedollarization-dollar-dominance-brics-currrency-china-russia-trade-yuan-ruble-2023-12">phase out the use of the dollar</a>, which has been nearly eliminated in China-Russia trade.Lawmakers are reportedly already <a target="_blank" href="https://www.businessinsider.com/china-dedollarization-sanctions-russia-trade-dollar-access-banks-ukraine-war-2024-4">drafting sanctions</a> to impose against Chinese banks, sources told The Wall Street Journal in April. If enforced, those sanctions could completely cut off some Chinese lenders from the global financial system, severely limiting the volume of trade and currency transactions.China, for its part, has taken some steps to distance itself from Russia's economy. China's state-run banks are looking to restrict <a target="_blank" href="https://www.bloomberg.com/news/articles/2024-01-16/china-banks-tighten-curbs-on-russia-after-us-sanctions-order">lending to Russian clients,</a> due to fear of being targeted by US sanctions, people familiar with the matter told Bloomberg.

China's yuan is tumbling amid US sanctions and as central banks boost dollar holdings

<ul class="summary-list"><li>Traders and central banks should increase exposure to gold, Bank of America says.</li><li>The strategists say Treasurys face risks as US debt levels soar. </li></ul>Gold is increasingly attractive as other traditional "safe haven" assets face mounting risks, Bank of America strategists said.The strategists said investors, including central banks, should rotate into the precious metal, which bulls tout as a hedge against inflation and debt debasement resulting from rising government borrowing. "Gold looks to be the last 'safe haven' asset standing, incentivising traders including central banks to increase exposure," the strategists said in a Wednesday note.They explained that with US debt expected to keep soaring, Treasury supply faces risks. At the same time, higher interest rate payments as a share of GDP will make gold an attractive asset in the next few years.Rising spending is alson't merely a US issue. The analyst notes that the International Monetary Fund predicts new spending could amount to 7%-8% of global GDP annually by 2030. "Ultimately, something has to give: if markets become reluctant to absorb all the debt and volatility increases, gold may become the asset of choice. Central banks in particular could further diversify their currency reserves," the analysts wrote. With neither candidate for the upcoming US presidential election prioritizing fiscal discipline and a pullback in spending, national debt is projected to hit a record high as a share of the economy in the next three years, the analysts said.That will increase interest payments as a share of GDP, making gold an attractive asset amid concerns that markets won't be able to absorb new debt, they add."Indeed, with lingering concerns over US funding needs and their impact on the US Treasury market, the yellow metal may become the ultimate perceived safe haven asset," the analysts said.The analysts reaffirmed their target of $3,000 an ounce for gold by the end of next year, which implies 11.1% upside from levels on Thursday. The analysts' bullishness for the metal comes as worries grow over mounting spending and debt around the world. Investors have increasingly looked to gold in recent weeks as the Federal Reserve kicked off its easing cycle with a 50-basis point interest rate cut last month, driving the price of gold to gain around 4.3% in the last month.Central banks around the world have also increased their share of gold as a portion of total reserves. The Bank of America analysts note that gold now makes up 10% of central bank reserves, up from 3% a decade ago.

Gold is the 'last safe haven' as Treasurys face risks from soaring US debt, Bank of America says

<ul class="summary-list"><li>Central bankers will want to support stocks, according to Fundstrat's Tom Lee.</li><li>That's because the Fed wants a "healthy economy," a big component of which is a strong stock market, he said. </li></ul>The "Fed put" is back, and stock investors may not be fully pricing in the good news, according to Fundstrat's head of research Tom Lee.The prominent <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/stock-market-outlook-fed-rate-cuts-recession-outlook-fomc-meeting-2024-9">stock bull</a> pointed to the idea that central bankers could move to further ease monetary policy at any sign of weakness in the stock market. That notion had been dashed over the past two years, as the Fed aggressively hiked interest rates to control inflation. Yet, a supportive environment for stocks could be high on central bankers' agendas again as they prepare for what is likely to be the first rate cut since 2020, Lee said in a note on Wednesday. "Foremost, the Fed 'put' is back. That means the Fed's mandate is now primarily supporting a strong labor market," Lee wrote, pointing to fears that more jobs weakness could signal an oncoming recession. "That means the Fed wants a healthy economy."A healthy economy, though, hinges on consumer and business confidence, which is largely tied to the stock market, Lee said. Even if stocks were to see a 10% correction, businesses could become more cautious, he said, suggesting they could lay off more workers. A 30% stock decline would "almost guarantee" a recession due to the impact on the job market and household wealth, Lee added. "We think the Fed does not want the S&amp;P 500 to falter," he said. "The Fed in 2022 probably found the 27% decline of stocks as supporting their attempt to control inflation and manage inflation expectations. This is not the case any longer."A supportive central bank is majorly bullish for stocks, but investors probably haven't priced that in yet, Lee said, predicting more upside on the way for equities.Stocks have historically reacted well to Fed rate cuts. Since 1971, the first Fed cut has led to positive returns for investors 100% of the time in the next six months, with an average gain of 13%. There's also room for a "positive surprise" in stocks, Lee said, given that some investors believe the economy is already in a recession, a point Lee disagrees with. GDP growth has been stable, but <a target="_blank" href="https://www.businessinsider.com/us-recession-outlook-inflation-costs-consumer-spending-affirm-soft-landing-2024-7">three out of five Americans believe the US is already in a downturn</a>, according to a survey conducted by Affirm.Finally, rate cuts are likely to boost durable goods, auto sales, and housing sales, which should bolster the broader economy, Lee said."Keep in mind the Fed is dovish and there is a focus on keeping labor markets strong. We could be seeing turbulence for the next 8 weeks, but this is also in the context of a very strong stock market in 2024," he added.The Fed will announce its rate decision at 2 p.m. ET on Wednesday. Investors see 100% odds of a cut but are split on how big it will be, pricing in a 65% chance the Fed could trim rates by 50 basis points, according to the <a target="_blank" class="" href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html">CME FedWatch tool.</a>

The 'Fed put' is back. Here's why central bankers will want to support the stock market, according to Fundstrat's Tom Lee.

<ul class="summary-list"><li>The S&amp;P 500 is fresh off its worst weekly decline since March 2023.</li><li>But Deutsche Bank is offering four reasons to stay positive even as recession fears flare.</li></ul>It's an uncomfortable time for equity investors, with the S&amp;P 500 fresh off its biggest weekly decline in 18 months.Although the Federal Reserve is on the brink of long-awaited rate cuts, concerns have crept into the market that the economy is at risk of a sudden unpreventable softening. Deutsche Bank cites those fears as having fueled last week's equity-market jitters.The firm also notes that downturns have historically offered little warning, even when conditions seem fine, and says August's disappointing jobs data provided little security.With that all established, the firm says there are still five reasons for investors to feel optimistic about the economy and road ahead.<ol><li>Job growth remains stable</li></ol>Declining labor data has fractured faith in a soft landing, with Wall Street concerned that a jobs-led slowdown signals a broader downturn ahead.But the perceived decline in job growth isn't as noticeable as some might lead on, Deutsche said.Although payrolls data between April 2023 and March 2024 was lowered 818,000 last month, this downside revision is much more benign when spread out, Deutsche noted:"We'll have to see the full monthly breakdown of that, but it actually means the apparent decline in job growth is less severe once that is accounted for. So the path of payrolls is somewhat flatter than it appears," analysts wrote.The bank said that if these revisions were spread evenly throughout the year, three-month average nonfarm payrolls would remain virtually flat since November 2023.<ol start="2"><li>The stock market's decline has been narrow</li></ol>The market's opening performance last week may have spooked investors, but the plunge was not shared equally among sectors, Deutsche noted.Although the S&amp;P is down 4.25% since August's close, the popular Magnificent 7 stocks suffered a broader a 5.58% drop. This cohort comprises large-cap names that have soared when risk-on sentiment was stronger.But with interest rate cuts ahead and recession fears in the air, investors are more likely to reposition.In this context, Deutsche cited that Bloomberg's 60:40 bond portfolio fell less than 2%, having reached an all-time high on Friday. This could indicate a rebound in fixed-income, as investors gear up for looser borrowing costs.<ol start="3"><li>Rate cuts are on the horizon</li></ol>All of Wall Street appears to be bracing for the Federal Reserve to <a target="_blank" class="" href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html">lower rates</a> at its policy meeting next week. The impact of this is already being felt, Deutsche said."The US 10yr Treasury yield closed at 3.71% on Friday, the lowest since June 2023. And the effects of lower yields are already filtering through into the real economy," analysts wrote. "For instance, data from the Mortgage Bankers Association shows that a 30yr mortgage rate is currently at 6.43%, the lowest since April 2023."Of course, rate cuts could be perceived as a sign that the Fed is racing to stop a recession, but Deutsche sees no sign of this among other central banksGlobally, most have delivered a limited 25-basis move, an unlikely move if there was widespread economic alarm.<ol start="4"><li>Recession indicators: Not what they were</li></ol>Deutsche also pointed out that several indicators have been <a target="_blank" href="https://www.businessinsider.com/recession-indicators-perfect-track-records-sahm-yield-curve-conference-board-2024-9#the-sahm-rule-3">flashing warnings of an impending recession</a>, though a cooldown is yet to show. This has stirred debate among analysts for months now, with a number questioning whether these guaged are trustworthy in the current cycle."There's been a lot of debate as to why this might be, and whether the post- Covid economy is behaving differently somehow. For example, perhaps consumers were cushioned by the pool of excess savings built up in the pandemic," Deutsche said. "But whatever the reason, this shift in how the economy has behaved relative to prior cycles is making it more difficult to rely on these leading indicators."Examples include the Sahm Rule, which signals a recession when the three-month moving average in the unemployment rate climbs 0.5% from a 12-month low. Although this recently happened, the model's own <a target="_blank" href="https://www.businessinsider.com/claudia-sahm-rule-profile-recession-indicator-unemployment-rate-interest-rates-2024-8">founder dismissed it as a false positive</a>.

4 positives to focus on as recession fears grip the market, Deutsche Bank says

<ul class="summary-list"><li>Donald Trump commented on the Fed after Wednesday's interest rate cut.</li><li>As a president and a candidate, Trump has continued undermining the Fed's independence.</li></ul>Interest-rate cuts are finally here, and former President Donald Trump isn't happy about it.On Wednesday, the Federal Open Market Committee <a target="_blank" class="" href="https://www.businessinsider.com/fed-cuts-interest-rates-how-much-september-fomc-powell-inflation-2024-9">announced an interest-rate cut of 50 basis points</a>, the first cut Americans have received in over four years. With the pace of inflation slowing and the job market cooling over the past few months, some experts and Democratic lawmakers have been urging Fed Chair Jerome Powell to cut rates sooner rather than later to give Americans relief from high prices.But Trump feels differently — he <a target="_blank" class="" href="https://www.youtube.com/watch?v=ZlvBFsWoXtw">said</a> during a New York campaign stop on Wednesday that the rate cut "shows the economy is very bad to cut it by that much, assuming they're not just playing politics.""The economy would be very bad, or they're playing politics, one or the other," Trump said. "But it was a big cut."He's argued in the past that the Fed would only cut rates close to the election to aid Democrats, which he reiterated leading up to the central bank's announcement."They'll do the rate cut and all the political stuff tomorrow," Trump said during a Tuesday town hall in Michigan, adding that if he wins the presidential election, "we're going to get interest rates down."Notably, the president has no influence over lowering interest rates — the Federal Reserve is politically independent and is supposed to make monetary policy decisions solely based on its dual mandate of keeping inflation low and employment high.That's something Trump wants to change — The Wall Street Journal reported in April that members of Trump's team were <a target="_blank" href="https://www.businessinsider.com/trump-interest-rate-decisions-restructure-federal-reserve-jerome-powell-wsj-2024-4">creating plans to restructure the Fed</a> and allow Trump to have a say in interest-rate decisions. He later walked those comments back, saying in an August <a target="_blank" class="" href="https://www.bloomberg.com/news/articles/2024-08-19/trump-defends-fed-criticism-weighs-providing-aid-to-home-buyers">interview</a> with Bloomberg that he doesn't need to be "calling the shot, but it does mean that I should have a right to be able to talk about it like anybody else."Senior advisors to Trump told the Journal that those plans were not finalized.Trump has also previously accused the Fed of being political — he <a target="_blank" href="https://www.businessinsider.com/trump-interest-rate-cuts-powell-help-democrats-win-elections-inflation-2024-2">said</a> during a Fox interview in February that Powell is "going to do something to probably help the Democrats, I think, if he lowers interest rates."While Powell has not directly responded to Trump's comments, the Fed chair has repeatedly said that the Federal Reserve is an independent entity that makes decisions solely based on data and is not influenced by politics. "Our job is to support the economy on behalf of the American people, and if we get it right, this will benefit the American people significantly," Powell said during the Wednesday press conference. "It's something we all take very, very seriously. We don't put up any other filters. I think if you start doing that, I don't know where you stop."Trump sought to use his presidential power to appoint members to the Fed board who supported his unorthodox views of the central bank. Judy Shelton, a conservative economist who Trump nominated to the Board of Governors in 2019, had previously written that the Fed was "almost a rogue agency" that couldn't be trusted. Even fellow Republicans balked at her nomination, culminating in a 47-50 failed floor vote exacerbated by GOP absences related to COVID-19."In her past statements, Ms. Shelton has called for the Federal Reserve to be less independent of the political branches and has even questioned the need for a central bank," Sen. Susan Collins, a Maine Republican, said of her at the time. "This is not the right signal to send, particularly in the midst of the pandemic."Shelton was one of a series of Trump loyalists whose nominations ran aground. Former 2012 GOP presidential candidate Herman Cain and conservative commentator Stephen Moore both withdrew their respective nominations in the face of opposition. Trump was able to get former Kanas banking commissioner Michelle Bowman and economist Christopher Waller confirmed to the Fed Board.Trump has flip-flopped his views on his most important appointment to the Fed: Powell."He's strong, he's committed, he's smart," Trump said about Powell in 2017 when he nominated him to lead the Fed.In February, the former president said he would not reappoint Powell to lead the Fed. Earlier this summer, Trump told Bloomberg News that he would let Powell serve out his term. Trump's tepid support of Powell underlines just how mercurial he can be when it comes to the central bank."There are few more important positions than this, believe me, in our Government," Trump said in 2017 with Powell looking on.On that point, Trump hasn't wavered.

The Fed's interest-rate cut put Trump even more at odds with the central bank

<ul class="summary-list"><li>Stocks look poised for gains amid a fresh Fed easing cycle, BofA's Michael Hartnett says.</li><li>But that means investors once again exposed to risks of a tech bubble inflating anew. </li></ul>With further easing from the Federal Reserve on the horizon, the stage is set for a fresh stock market rally. That sounds like good news for investors, but with a new Fed easing cycle comes renewed risk of a bubble in parts of the market, Bank of America strategist Michael Hartnett said.On Wednesday, the central bank cut the fed funds rate by 50 basis points. The market is now pricing in 250 basis points through this year and next, which should help drive 18% earnings growth for the S&amp;P 500 by the end of 2025, according to consensus views.The growth doesn't "get much better than that for risk," Hartnett said. But it means investors will have to chase the stock market surge as bubble risks bounce back, he added.Hartnett has previously warned of the potential for a tech bubble as investment in AI has soared. In February, he said a "baby bubble" in AI is "growing up" and could drive market gains if monetary policy eases.That time has now come, with tech stocks leading indexes to rally to record highs on Thursday, a day after the Fed's rate cut. The tech-heavy Nasdaq 100 soared 2.6% as shares of Nvidia, Broadcom, ASML, and Meta all climbed by about 4%.Amid further AI investment and easing policy, Hartnett says the best way to position portfolios is with allocations to bonds and gold, which hedge against growth and inflation risks."Use risk rally to buy dips in bonds &amp; gold as recession &amp; inflation reacceleration 'tails' too unfashionable," he wrote.Hartnett has noted his bullish view on bonds before, saying back in May that he saw outsize growths for fixed income in the second half of the year. At the time, he said the 30-year Treasury was the best hedge amid weak growth.

Post-rate cut bubble risks mean investors should buy bonds and gold, Bank of America says

Domestic <keyword id="19910265" type="General" weightage="100" keywordseo="gold-prices" source="keywords">gold prices</keyword> have risen by 10% on a year-to-date basis on the back of the strength in global gold prices, which have surged by 18% year-to-date, driven by robust <keyword id="19894998" type="General" weightage="20" keywordseo="central-bank" source="keywords">central bank</keyword> purchases, heightened geopolitical risks, and growing expectations of a monetary policy pivot from the <keyword id="19901377" type="General" weightage="20" keywordseo="us-federal-reserve" source="keywords">US Federal Reserve</keyword>, according to the <keyword id="20195223" type="General" weightage="20" keywordseo="World-Gold-Council" source="keywords" meta.keywordsubtype="org" meta.entityname="World Gold Council" meta.hostid="153" meta.entityid="World Gold Council">World Gold Council</keyword>. The reduction in <keyword id="20069572" type="General" weightage="20" keywordseo="import-duty" source="keywords">import duty</keyword> has ignited a resurgence in gold demand across <keyword id="19895063" type="General" weightage="20" keywordseo="India" source="keywords">India</keyword>. Reports from the recently concluded India International Jewellery Show indicate a substantial increase in order bookings from retailers, particularly in preparation for the upcoming festive and wedding season. Manufacturers have noted that in some cases, orders have reached levels not seen in several years, underscoring the strong buying interest among <keyword id="21595593" type="General" weightage="20" keywordseo="jewellery-retailers" source="keywords">jewellery retailers</keyword> and consumers alike. The trend of bar and coin buying has also remained robust, with both consumers and jewellers capitalizing on the more attractive prices to stock up for future manufacturing needs. Historical analysis suggests that Indian consumer demand, encompassing jewellery and bar and coin demand, could see an additional 50 tonnes or more in the second half of 2024. This potential increase is fueled by a combination of an initial boost in consumer appetite due to the more attractive prices and a longer-term alignment of local prices with international rates. In a notable shift, domestic gold prices, which had been trading at a discount to international prices for five consecutive months, have now started trading at a premium following the <keyword id="19908389" type="General" weightage="20" keywordseo="Union-Budget" source="keywords">Union Budget</keyword> announcement. The discount had widened significantly in July, reaching a peak of around $80 per ounce in the third week of the month, driven by subdued demand and an increased supply of gold through various preferential trade agreements and unofficial channels. However, wholesalers who had inventory purchased under the old customs duty regime began selling gold at a premium to the landed cost to mitigate their losses, further supported by increased consumer demand. While the premiums have moderated recently, from $28 per ounce to around USD 5 per ounce, this shift highlights the changing market sentiment and the impact of rising international gold prices and potential inventory valuation adjustments. The changes introduced in the Union Budget, including a reduction in the long-term investment holding period and a lower tax rate, have made gold ETFs a more attractive investment option. Data from the Association of Mutual Funds in India (AMFI) reveals that net inflows into gold ETFs in July amounted to Rs 13.4 billion (approximately USD 160 million), marking the highest monthly inflows since February 2020 and an 84% increase compared to June 2024. Despite these inflows, the total assets under management (AUM) for Indian gold ETFs grew marginally by 0.3% from the previous month, reaching Rs 345 billion ($4.1 billion). This modest increase can be attributed to the 8 % fall in domestic gold prices following the import duty reduction. Year-to-date, net inflows into Indian gold ETFs have totalled Rs 45 billion ($543 million), with total AUMs rising by 48 % from a year ago. The <keyword id="19899810" type="General" weightage="20" keywordseo="Reserve-Bank-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Reserve Bank of India" meta.hostid="153" meta.entityid="Reserve Bank of India">Reserve Bank of India</keyword> (RBI) has continued its gold purchasing trend, although at a slower pace following a significant increase in June, when purchases reached 9.3 tonnes--the highest monthly total in nearly two years. Year-to-date, the RBI's gold acquisitions have totaled 44.3 tonnes, surpassing the total purchases of the past two years combined. The RBI's gold reserves have now reached a record 849 tonnes, representing 8.8% of total foreign reserves, compared to 7.5 % a year ago. In July, gold imports remained steady at $3.1 billion, maintaining the stable trend observed over the previous three months. Between April and July, imports averaged $3.2 billion, with volumes ranging between 43 and 47 tonnes during this period. The gold import bill for July 2024 was 11 % lower than the previous year, with an estimated 26% decrease in volume terms, around 47 tonnes. Despite a surge in international gold prices, domestic gold prices in India have experienced a notable decline, primarily due to the 9 % reduction in import duty announced in the Union Budget 2024-25. This policy change has led to a 6% decrease in the landed cost of gold, marking a shift in the domestic gold market dynamics.

Domestic gold prices surge 10% amid global price rally, central bank buying: World Gold Council

<ul class="summary-list"><li>Russia's yuan reserves are nearly depleted due to Chinese banks' fear of US sanctions.</li><li>Russian banks urged the country's central bank to address the yuan liquidity deficit, causing the ruble to drop.</li></ul>Russia's banks have practically emptied their stash of yuan, largely because Chinese financial firms are spooked from doing business with the nation.<a target="_blank" class="" href="https://www.reuters.com/markets/currencies/major-russian-lenders-say-yuan-coffers-empty-urge-central-bank-action-2024-09-05/">According to Reuters</a>, lenders ured Russia's central bank to address a yuan liquidity shortage in the nation, with insiders stating that access to the Chinese currency was running dry. Russia's ruble dropped nearly 5% against the yuan earlier this week, Retuers noted. The drop came shortly after Russia's finance ministry suggested the Central Bank of Russia would shrink its daily yuan sales, with central bankers selling just $200 million a day, down from the $7.3 billion sold daily in the last month.Sberbank, a large state-owned lender in Russia, told Reuters it could no longer lend in yuan due to having "nothing to cover" the trade.VTB, the second-largest lender in Russia, said it urged the central bank to counter the yuan liquidity shortage through currency drops, and added that exporters to the nation should sell yuan to Russia as well.The shortage has stemmed from Chinese banks, who are more hesitant to trade currency in Russia after the US threatened to impose secondary sanctions on those doing business with Russia while it continues its war against Ukraine. Payment scuffles between Russian companies and Chinese banks have escalated in recent weeks, with nearly all Chinese banks <a target="_blank" href="https://www.businessinsider.com/russia-economy-all-china-banks-refuse-yuan-ruble-transfers-sanctions-2024-8">stopping transactions with Russia.</a> Some banks have even <a target="_blank" class="" href="https://www.businessinsider.com/russia-economy-china-banks-return-payments-shipped-goods-exports-sanctions-2024-8">returned payments for goods</a> that had already been sent to Russia, out of fear of being targeted by sanctions, a Russian media outlet reported.Russian businesses, meanwhile, have been <a target="_blank" href="https://www.businessinsider.com/russian-economy-china-banks-payment-transfers-western-sanctions-ukraine-war-2024-8">locked out of billions</a> in recent months, mainly due to payment issues at foreign banks, according to data from Russia's central bank.The payment difficulties are a problem for Russia's economy, which has grown more isolated from global markets, and consequently, more reliant on China's yuan after being targeted by Western sanction in 2022. Russia's central bank said the <a target="_blank" class="" href="https://www.businessinsider.com/dedollarization-russia-china-yuan-ruble-exchange-rate-benchmark-new-sanctions-2024-6">yuan had become its main exchange currency this year</a>, accounting for more than half of all currency trades in the nation.

Russian banks say they're run out of yuan as Chinese firms pull away from the nation

<ul class="summary-list"><li>Russian banks are urging the country's central bank to boost yuan liquidity amid shortages.</li><li>But Russia's central bank is advising lenders to limit yuan-denominated loans.</li></ul>Russia's central bank and lenders are asking each other to preserve the country's stash of Chinese yuan.Last Thursday, <a target="_blank" class="" href="https://markets.businessinsider.com/news/currencies/russia-economy-china-yuan-sanctions-bank-payments-trade-transfers-2024-9">Russian banks</a> complained that they've run out of the Chinese yuan and called on the Central Bank of Russia to increase liquidity through currency swaps.But Russia's central bank is passing the buck back to the country's banks.In a <a target="_blank" class="" href="https://cbr.snowball-income.com/Collection/Collection/File/50609/ORFR_2024-08.pdf">report</a> published on Friday, Russia's central bank advised lenders to limit the issuance of yuan-denominated loans.The central bank is a primary source of yuan liquidity that it provides via daily sales and one-day swaps of the currency."Part of the growth in yuan lending was due to the replacement of loans in 'toxic' currencies, but 41% of the increase came from new foreign currency loans," said the Russian central bank in the report, referring to the currencies of countries that have imposed sanctions against the country.It added that currency swap operations can only serve as a short-term mechanism to stabilize the market, but they aren't permanent funding tools.The banks called for increased central bank currency swaps because they needed to use the mechanism to cover their foreign currency lending.But yuan liquidity is so tight that Sberbank's CEO German Gref said last Thursday that his bank cannot lend in the yuan, because it has "nothing" to cover tight foreign currency positions with, per <a target="_blank" class="" href="https://www.reuters.com/markets/currencies/major-russian-lenders-say-yuan-coffers-empty-urge-central-bank-action-2024-09-05/">Reuters.</a> Sberbank is Russia's largest bank.Russian exporters can also provide liquidity through currency sales, but many <a target="_blank" href="https://www.businessinsider.com/russia-economy-all-china-banks-refuse-yuan-ruble-transfers-sanctions-2024-8">Chinese banks</a> are refusing to process payment transactions for Russian companies due to fears of US secondary sanctions.Chinese lenders are also avoiding currency trading in Russia for the same reason.The difficulties surrounding yuan liquidity in Russia highlight increasingly challenging trading conditions for the country as the West steps up sanctions.But <a target="_blank" class="" href="https://www.businessinsider.com/dedollarization-countries-national-tech-payments-systems-russia-china-india-swift-2024-8">Russia and its trade partners</a> are trying to find ways to get around the payments issue.Dmitry Birichevsky, head of the economic cooperation department of the Russian Foreign Ministry, told Russian TV that the country and its partners are discussing how to link up their bank messaging systems, <a target="_blank" class="" href="https://tass.com/politics/1839601">TASS</a> state news agency reported on Friday."Combining these systems or deciding on the basis on which [system] we will work is the most sensitive, painful issue, because this is part of the country's financial sovereignty," Birichevsky said.

Russia's central bank and lenders tell each other to resolve the country's yuan supply squeeze

<ul><li>Gold prices are set to continue their record bull run to $3,000 per ounce, according to David Rosenberg.</li><li>Rosenberg highlighted a buying spree from China's central bank as one reason why prices will rise.</li><li>Rosenberg said that the Federal Reserve's upcoming easing cycle should also boost gold prices.</li></ul>Famed economist David Rosenberg is feeling good about where gold prices are headed.In a note on Monday, Rosenberg outlined why he expects gold prices to <a href="https://markets.businessinsider.com/news/commodities/gold-price-all-time-record-safe-haven-rate-hike-geopolitics-2024-3">continue their record bull run</a> to $3,000 per ounce, representing potential upside of 29% from current levels.Rosenberg said <a href="https://www.businessinsider.com/gold-price-china-consumers-central-bank-pboc-economy-concerns-dedollarization-2024-4">China's central bank is on a gold buying spree,</a> having bought gold reserves for 17 months in a row, and it could have a lot more to buy up as it pushes its gold reserves to levels comparable with other central banks. "China's drift from the US is behind its slow but steady rotation from US dollar reserves to gold — and also means the end of the yuan as a potential second reserve currency (pushing other central banks back toward gold)," Rosenberg said.Over the past year, China alone has purchased about 181 tonnes of gold, and it's now the sixth-largest holder of gold reserves, bringing its share of total reserves to 4.3% in March. But its share of gold reserves is tiny compared to other central banks, with the global average being 13%.That means there could be plenty of runway left for China to keep adding to its gold reserves."The US holds 70% of its reserves in gold. So there is incredible room to run for the PBOC over the next few years just to approach the global benchmark of gold reserves," Rosenberg said.If China added just one more percentage point of gold to its reserves, that would imply 420 tonnes of gold, which alone would consume 11% of new production.Aside from China's central bank continuing its buying spree, Rosenberg said other factors that could help boost the price of gold to $3,000 per ounce include increased demand from investors via gold ETFs <a href="https://www.businessinsider.com/israel-hit-iran-with-half-ton-rampage-supersonic-missile-report-2024-4?mrfhud=true">as geopolitical tensions remain heightened</a> and the start of the Federal Reserve's easing cycle.If and when the Fed starts to cut interest rates, that will help boost demand for gold, according to Rosenberg."That's the event that would bring $3,000 per ounce into view," Rosenberg said.While the Fed is no longer expected <a href="https://www.businessinsider.com/interest-rates-2024-outlook-rate-cut-predictions-wall-street-stocks-2023-12">to cut interest rates seven times this year</a> due to a resilient economy, it is still expected to launch its first interest rate cut later this year.

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