Investor Alert

What Constitutes a Recession? It’s More Complicated Than You Think

Author: Frank Holmes
Date Posted: July 29, 2022 Read time: 44 min

So did the U.S. just enter a recession? It depends on who you ask.

As you no doubt heard, U.S. real gross domestic product (GDP) retreated for the second consecutive quarter, falling 0.2% in the June period after a decline of 0.4% three months earlier.

For many people, this is a clear indicator that the country is in recession.

But according to the committee that’s responsible for making the official call on what constitutes a recession, it’s more complicated than that.

That committee is the Business Cycle Dating Committee, part of the U.S. National Bureau of Economic Research (NBER). Way back in November 2001, the eight-member group of economists sought to clarify how it defines a recession. Interestingly, the members said that they give “relatively little weight to real GDP because it is only measured quarterly and is subject to continuing, large revisions.”

So if not GDP, what do they look at?

Employment and Wages Are Up, but Business Conditions Contracted in July

In the committee’s eyes, a recession is “a significant decline in activity spread across the economy.” This decline, it adds, is “visible in industrial production, employment, real income and wholesale-retail trade.”

Some of the areas mentioned above are strong right now, while others are clearly slowing.

On the plus side, the U.S. jobs market remains robust, and wages and salaries continue to grow. In the second quarter, the employment cost index (ECI), which measures total compensation for private workers in all industries and occupations, rose 5.5% compared to the same quarter last year. Although the increase is not enough to keep up with inflation, it’s a healthy jump, nonetheless.

On the other hand, business activity appears to be slowing. The preliminary reading of the overall U.S. business market shows that conditions deteriorated in July. The Flash U.S. PMI Composite Output Index, which combines the services and manufacturing industries, came in at 47.5, the first contraction since June 2020. The only part of the economy that reported expansion in July was manufacturing, which recorded a 52.3.

Hope for the Best, Prepare for the Worst

So again, has the U.S. economy entered a recession? The best answer to this question is: Maybe. There are conflicting signals. Inflation-adjusted GDP has indeed fallen for two straight quarters, but this alone doesn’t mean a pullback has begun, according to economists.

In fact, it’s possible, although rare, for the economy to experience two or more quarters of negative growth and still not officially be in a recession. From what I can tell, the last time this happened was in 1947.

Similarly, the U.S. economy can slip into a recession without recording a decrease in GDP for two quarters. This happened in 2001, during the dotcom bubble.

As you may know, there’s a lot of controversy and disagreement right now surrounding the exact characteristics of a recession, just as there has been in the past. A member of the Reagan administration, for instance, tried to lobby the head of the NBER to roll the 1981-1982 recession into the 1980 recession, which occurred before President Ronald Reagan took office, so that it could be blamed on his predecessor.

Today, a lot of people want to be able to blame the Biden administration for an economic slowdown. They may get that chance.

For now, I believe the most important thing any of us as investors can do is hope for the best and prepare for the worst. That goes regardless of where you stand on this issue.

Building Our Resilience in a Rising Interest Rate World

Consider what McKinsey & Company said this week. The consultancy firm stressed that now is a time “when companies can make the kind of pivot that strengthens their growth trajectory for the next several years.” The companies that are in the best position to weather a potential slowdown and thrive afterward, according to McKinsey, have “strong balance sheets, low leverage and ample cash.”

It’s largely for this reason that U.S. Global Investors has been building up its cash levels. In the event of a recession, and with interest rates on the rise, we want to have adequate amounts of dry powder to not only survive but also make acquisitions if the opportunity presents itself.

Farewell to a Very Special Friend

On a final note, I wish to share some sad news. This week, Lundin Gold regretfully announced that its founder and former chairman, Lukas Lundin, passed away at the age of 64, following a two-year battle with brain cancer.

Born in Stockholm, Sweden, Lukas founded Lundin Gold in 2014 and was Chairman of the Board until he stepped down earlier this year. Before that, he worked for years with his father Adolf Lundin and brother Ian Lundin in a number of resource mining companies collectively known as the Lundin Group, which cover a broad range of materials from gold to copper to oil. Besides Lundin Gold, these companies include Lundin Mining, NGEx Minerals, Lucara Diamond, International Petroleum and more.

I had the pleasure of knowing Lukas well. He was an amazing father to his four sons Harry, Adam, Jack and William, all of whom are involved in the family business, and he was as creative a force in the mining community as you could find. He always had a big smile and a can-do, will-do attitude. A special friend, he was thoughtful, kind and generous with others. May he rest in peace. 

Index Summary

  • The major market indices finished up this week. The Dow Jones Industrial Average gained 2.97%. The S&P 500 Stock Index rose 4.33%, while the Nasdaq Composite climbed 4.70%. The Russell 2000 small capitalization index gained 4.37% this week.
  • The Hang Seng Composite lost 2.57% this week; while Taiwan was up slightly 0.34% and the KOSPI rose 2.44%.
  • The 10-year Treasury bond yield fell 9 basis points to 2.655%.

Airline Sector


  • The best performing airline stock for the week was Frontier, up 31.1%. Ryanair Holdings, Europe’s largest discount airline, posted a profit for the first quarter through June, reports Bloomberg. The airline is sticking with plans to lift capacity beyond pre-Covid levels even as other carriers slash timetables to cope with a staffing crisis after weeks of delays and cancellations. Ryanair posted adjusted net income of 170 million euros for the fiscal first quarter, and analysts had forecast earnings of 150 million euros.
  • British Airways’ staff cancelled its planned strike at Heathrow airport, reports Reuters, averting a further escalation in the disruption seen at airports this summer. The workers have accepted a pay hike and other benefits, which comprise a combined 14% salary increase this year.
  • The international portion of the ISI Airlines Survey, which was launched in early 2008, rose from 70.0 to 72.5, to hit a new record high this week. International demand has led recent improvement in the sector after having lagged earlier in the recovery, with long-haul trips showing the greatest degree of progress. 


  • The worst performing airline stock for the week was Southwest, down 5.1%. United Airlines’ 2023 capacity expectations have been reduced given the timing of Boeing deliveries, lower utilization, and some long-haul adjustments, according to the airline. United forecasts 2023 capacity up no more than 8% versus 2019 compared to its original plan of up 20%. Even with supply coming down, total capex is still expected to be about $8.5 billion next year, making it harder to de-lever in the coming years.
  • Volaris released slightly negative second quarter 2022 results with operating loss of $20 million, missing consensus estimates of $9 million income. Revenue came in flat year-over-year, hinting low ability in the quarter to pass through the significantly higher fuel costs. Furthermore, despite the decent cost control during the quarter, higher jet fuel cost has dragged profitability.
  • Allegiant management now anticipates second quarter adjusted earnings per share (EPS) of $0.62 per share, below consensus estimates of $1.38. Demand continues to be strong this summer, but higher-than-expected fuel costs and a deterioration in fuel efficiency hurt the bottom line.


  • JetBlue Airways has reached a $3.8 billion deal to buy Spirit Airlines, reports CNBC. The takeover would create the country’s fifth-largest airline and remove a fast-growing budget carrier from the market. If approved by regulators, JetBlue’s takeover of Spirit would leave Frontier as the largest discount carrier in the U.S., the article explains.
  • Building on their long-standing alliance, Air Canada and United Airlines announced a cooperative business arrangement for the Canada-U.S. transborder market that would provide customers traveling between the two nations with more flight options and better flight schedules. Customers will have access to connections to eight of Canada’s most populated cities as well as 38 codeshare destinations in the United States, all while taking advantage of the carriers’ loyalty programs, the announcement explains.
  • According to Bank of America, Qantas is one of a handful of airlines emerging with stronger earnings power after COVID, with the exit of Tigerair and A$1 billion of annual savings. Qantas is well positioned to manage fuel and recession risks. Australia’s domestic duopoly allows it to cut supply to manage fuel and demand risks. While domestic competition always lurks, the bank sees no break in discipline given the first half of 2023 timetable data and fuel, labor, and slot constraints.


  • Deutsche Lufthansa AG’s pilots’ union is holding a vote on whether to strike, a move that would further disrupt the airline’s crucial summer travel season. The pilots’ union is gauging support for a walkout as talks with the airline regarding pay and conditions stumble, according to a spokeswoman for the labor organization. A strike could then take place as soon as August, typically among the busiest months for the European travel sector.  
  • Almost half of all U.K. airport and airline workers (41.4%) are considering quitting the industry, new research reveals.  A survey of 1,700 workers found reasons for wanting to leave include pay and stress. However, only 5% cited the current disruption at U.K. airports, 4.2% said it was due to angry and unreasonable passengers, and just 4.2% said the job was impacting their mental health. Two out of three claimed they haven’t had a pay raise in the last 12 months, with 82% having no additional or enhanced benefits over this period either. The poll by jobs website CV-Library also found that 33.3% believe their job is too stressful for their current salary.
  • Many airlines have scaled back their fiscal year 2022 capacity plans, as labor issues, both in relation to airport staff and pilots, have created numerous operational challenges for the airlines. In order to ensure operational reliability, manage jet fuel costs, and allow time for aircraft manufacturers to fulfill their orders, airlines are scaling back their capacity plans. Airlines appear to be prepared to overstaff in order to ensure smooth operations, which will further add to cost pressure.

Emerging Markets


  • The best performing country in emerging Europe for the week was Russia, gaining 5.4%. The best performing country in Asia this week was India, gaining 3.3%.
  • The Polish zloty was the best performing currency in emerging Europe this week, gaining 0.03%. The Indonesia rupiah was the best performing currency in Asia, gaining 1.1%.
  • The National Bureau of Statistics (NBS) announced that total industrial profits in China grew 1.0% in January through June. For the month of June, industrial profits showed modest positive growth of 0.8% (versus -6.5% in May).


  • The worst performing country in emerging Europe for the week was Hungary, losing 1.2%. The worst relative-performing country in Asia this week was Hong Kong, gaining 2.6%.
  • The Russian ruble was the worst performing currency in emerging Europe this week, losing 7.6%. The Pakistani rupee was the worst performing currency in Asia this week, losing 4.8%.
  • This week’s release of economic confidence data further points to a deteriorating situation in the region. Economic confidence for July dropped to 99.00 from 104.0 in May, Industrial Confidence declined to 3.5 from 7.4, and Service Confidence stopped at 10.7, down from 14.8 in the prior month. Consumer confidence was unchanged, at a negative reading of 27.0.


  • Chinese technology giant Alibaba applied for primary listing in Hong Kong. The company will keep its current listing, trading on the New York Stock Exchange. A primary listing on the Hong Kong Exchange, however, will allow Chinese investors to have easier access to the shares through a link to the Hong Kong Exchange known as Stock Connect. Alibaba shares gained after the announcement was made on Monday.
  • Over the weekend China will release PMI data and Bloomberg economists expect them to stay above the 50 mark in July, despite the Asian nation having a tough time to reopen its economy after extended lockdowns. China’s Manufacturing PMI will be released on July 30 and is expected to increase to 50.4 from 50.2. Caixin PMI will be reported a day later. Bloomberg economists expect the Caixin index to drop to 51.5 from 51.7, remaining above 50 which separates growth from contraction.
  • Investors might be focusing on Indian equites again after a recent correction in the dollar and a drop in oil price. India had a record foreign outflow of about $33 billion since the start of October, according to Bloomberg. Overseas investors bought a net $1.2 billion of Indian stocks last week, the most since early April. Indian local shares can widen outperformance over their Asian peers, Ashutosh Joshi and Akshay Chinchalkar said this week.


  • Russia said it would further reduce natural-gas supplies to Europe this week, reports the Wall St. Journal, lobbing another volley in its economic war with the West and raising new questions about Europe’s ability to avoid shutting down factories and leaving homes cold this winter. Gazprom announced that gas exports through the Nord Stream pipeline to Germany would drop to about a fifth of the pipe’s current capacity, the article continues, blaming sanctions-related problems with turbines that have already reduced flows.
  • Hong Kong posted a sharper-than-expected drop in June exports. The city may have to downgrade its annual growth forecast in August for the second time in three months, the city’s finance chief has warned. Negative impacts of lockdowns due to COVID may weaken the economy further. China’s mainland may revise down its growth expectation in a meeting usually held at the end of July.
  • Equity analysts have cut 12-month profit projections for members of the MSCI Emerging Markets Index since Russia invaded Ukraine in February. Now, for the first time since the global financial crisis, the average forecast for the index has fallen below the actual profits reported over the previous 12 months.

Energy & Natural Resources


  • The best performing commodity for the week was the September DCE Iron Ore Futures contract, up 17.55%, which jumped on speculation that China would establish a real estate fund to help developers bolster the property market. TRP’s Keystone Pipeline returned to full capacity after completion of necessary repairs to an electric substation. The crude oil pipeline from Hardisty, Alberta to Patoka, IL and Cushing, OK had operated at a reduced capacity since July 17, 2022, after vandalism damaged a transformer at an electric substation in rural South Dakota that solely services the pipeline. TRP subsequently declared force majeure given the impact to its Carpenter pump station.
  • Global LNG output in June 2022 was 383 million tonnes (Mt), implying capacity utilization of 83%. Production was 2% higher than the prior month and 13% higher than the previous corresponding period. Higher Asian production was partially offset by lower North American and African output, which were impacted by the outage at Freeport LNG and maintenance at Angola LNG, respectively.
  • According to Baker Hughes, the Canadian rig count averaged 112 in the second quarter of 2022, up 58% from 71 in the same quarter as 2021 and the strongest second quarter rig count since 2017. During the quarter, 852 wells were drilled according to Geologic, up 49% from 571 in the second quarter of 2021 and the highest second quarter well count since 900 in 2018. The U.S. land rig count averaged 698 rigs in the second quarter of this year. In total, 81 land rigs were added with the largest increase coming from the Permian (up 30) and Eagle Ford (up 16).
US rig count is increasing


  • The worst performing commodity for the week was lumber, down 10.35%, as recession fears have tended to keep buyers on the sidelines with new home orders falling. World steel output fell 2.9% this month (-5.9% year-over-year) driven by weak China output (-3% this month and year-over-year) and the rest of the world down 3% this month (-9% year-over-year). America’s output was flat this month, but the European Union and the U.K. fell 3% this month (-12% year-over-year) as prices collapsed. India fell 3.4% this month (up 6% year-over-year) after the 15% export duty news in May, and Japan declined 4.6% this month (-8% year-over-year).
  • Following a strong decline in June, featuring hot-rolled and cold-rolled steel down 19% and 15%, respectively, steel prices have declined solidly so far in July, with hot-rolled and cold-rolled down 16% and 8%, versus June’s average prices.
  • Met coal prices fell sharply again this week with FOB Australia PLV down 13.4% and CFR China PLV down 9.0% this week. Met coal continued to tumble as demand remains weak in China. The price differential between thermal and met coal has led to high-volatile coking coal and semi-soft coking coal being sold in the market as a substitute for thermal. Supply increased 8% this week from Eastern Australian ports as weather conditions improved.


  • Morgan Stanley believes more supply is starting to come through in the lithium market and expects the market to remain tight through 2022, especially when considering restocking needs. The group forecasts China’s spot price to average $70,000 per ton in the second half of 2022. They still expect the lithium price to trend lower in 2023 as supply expands and market tightness eases.
  • Renewable stocks gained this week on the landmark climate deal reached by U.S. Senators Joe Manchin and Chuck Schumer. The deal buoyed companies from solar, wind, and nuclear power to fuel cells.  A total of $369 billion will go toward reducing carbon pollution and lowering Americans’ power bills.
  • Finland intends to construct and operate a national hydrogen transmission network and link this infrastructure to other countries in the Baltic Sea region. The initiative is intended to both reduce carbon emissions and enhance energy security as Finland pivots away from Russian natural gas. State-owned Gasgrid Finland, which has previously transported natural gas primarily from Russia, would build the network over the next several years. The network, which will take several years to complete, would consist of three hydrogen valleys, with two of them on the western coast near existing wind power infrastructure and one in southeastern Finland.


  • JPMorgan does not believe the risk of recession is factored in yet in the oil price, and that risk is growing. While historical evidence suggests that demand is well supported as long as global growth remains positive, the oil price tends to fall in all recessions by 30% to 40%. Under a 1.5% global growth scenario, global oil demand could grow by 0.6 mbd in 2023, 0.6 mbd below the current forecast, the bank explains. This slowdown in growth, without a concurrent cut to oil supplies, would result in a 1.4 mbd surplus on average in 2023.
  • The world’s largest chemical producer plans to cut the production of ammonia (a key ingredient in fertilizers) – meaning food shortages might worsen. Headquartered in Germany, BASF, the world’s largest chemical producer, has stated that it plans to cut ammonia production even further to cope with skyrocketing natural gas prices.
  • According to Goldman, the iron ore market is set to swing into significant surplus over the second half of this year. The bank now projects the market to be in a 67Mt surplus over the remainder of 2022 (versus 34Mt previously) after a 56Mt deficit in the first half. Crucially, this sharp swing into oversupply reflects a combination of both extended property-related onshore demand weakness and a sharp deceleration in ex-China steel demand, compounded by a largely unchanged supply path.

Luxury Goods


  • Sales of Louis Vuitton handbags and the easing of lockdowns across the world helped revenue soar at fashion houses owned by LVMH, reports Bloomberg. Organic revenue at LVMH’s fashion and leather goods division surged 120% in the second quarter from a year earlier, the article explains, and 40% from the same period in 2019.
  • Despite slowdowns in China, Italian luxury name Moncler also announced a sales beat this week. First half sales rose 48% to EUR 918.4 million. Jefferies says that company is set to remain ahead of its luxury goods peers due to store expansions and a marketing push planned for the second half of 2022. Shares gained after the quarterly data was released.
  • Cettire, an online retailer, was the best performing S&P Global Luxury stock for the second week in a row. Shares gained 21.7% in the past five days, after surging 39.5% in the prior week.


  • United States GDP shrank 0.9% in the second quarter, while Bloomberg economists were expecting the economy to grow 0.4%. The broad measure of the goods and services produced across the country shrank as the housing market buckled under rising interest rates and high inflation took steam out of business and consumer spending, explains the Wall St. Journal.
  • Personal consumption in the United States, one of the largest consumers of luxury goods, grew only 1% in the second quarter versus an increase of 1.8% in the prior quarter. Bloomberg economists were expecting a slightly stronger reading in the second quarter of 1.2%.
  • Melco Resorts, a casino and gaming company with operations in Macau, was the worst performing S&P Global Luxury stock, losing 8.26% in the past week. New lockdowns in China renewed pressure on gaming stocks.


  • A first set of results from luxury stocks including Cartier owner Richemont, U.K. trench coat maker Burberry Group Plc, Italy’s Brunello Cucinelli SpA, and German chain Hugo Boss AG, have shown the luxury industry is still in good shape outside of China. These companies have either maintained or increased guidance, and their shares have largely outperformed the market since the reporting announcements. Luxury stocks have underperformed the broader market this year and valuations now look much more attractive.
  • After U.S. GDP data was released this week, some observers commented that the U.S. economy may be falling into a recession with contractions in growth. The perspectives on large and fast rate hikes are fading. The CME’s FedWatch tool shows a 20% chance of a 75 basis points hike in September, down from a 50% chance prior to this week’s FOMC meeting.
  • According to a study released Thursday by OLX Autos and Crisil, the pre-owned luxury car market grew faster (at 15%) than the new luxury car market (10%). The research report comments that “BMW is the most popular pre-owned luxury car brand in terms of demand, followed by Mercedes-Benz, Audi, Jaguar, and Porsche.” The research team also points out that with the end of the pandemic, customers have taken stronger initiatives to upgrade to luxury car brands.


  • Kering reported 9.9 billion euros in revenue during the first six months of 2022, up 16% compared to the first half of last year, reports TheFashionLaw.com. Helping to drive what the luxury goods group called “sharply higher sales” was Saint Laurent, which boasted sales of 1.48 billion euros, up 34% on a comparable basis.
  • The IMF cut China’s 2022 GDP growth forecast by 1.1% to 3.3%, primarily due to Covid outbreaks and lockdowns. The IMF also cut its 2023 growth projection for China by 0.5% to 4.6% in 2023, with the group anticipating a recovery from lockdowns in the second half forecasts for both years.
  • Final July U.S. Global Manufacturing PMI will be released next week, and the reading may stay unchanged at 52.3, above June’s level of 52.7, but well below the 63.4 recorded in June of last year. Weaker PMIs will negatively impact growth, and United States already reported two consecutive quarterly GDP contractions.

Blockchain and Digital Currencies


  • Of the cryptocurrencies tracked by CoinMarketCap, the best performer for the week was Optimism OP, rising 78.95%.
  • SEBA Bank AG, an online bank backed by Julius Baer Group that’s focused on digital assets, plans to more than double its headcount in Asia, despite the recent route in crypto assets. The bank is seeking to increase its staffing to more than 20 in Hong Kong and Singapore from about seven now, reports Bloomberg. 
  • Alternative digital currencies are outperforming Bitcoin after the Federal Reserve reiterated its commitment to combat inflation with another sizeable rate increase. Investors’ appetite for risk assets appears to have returned as the prices of so-called altcoins surged on Wednesday, Bloomberg explains. Ether was leading the pack, up nearly 11%.


  • Of the cryptocurrencies tracked by CoinMarketCap, the worst performing for the week was Huobi Token, down 7.55%.
  • Bitcoin sank to a more than one-week low, pummeled by investor skittishness ahead of a looming Federal Reserve interest-rate hike and amid harsher regulatory scrutiny of the cryptocurrency sector. The retreat has put a dent in expectations for a sustained Bitcoin rebound and returned the token to a trading range between roughly $19,000 and $22,000, writes Bloomberg. 
bitcoin is back down
  • Kraken, one of the world’s largest cryptocurrency exchanges, is under federal investigation, suspected of violating U.S. sanctions by allowing users in Iran and elsewhere to buy and sell digital tokens. Kraken would be the largest U.S. crypto firm to face an enforcement action from OFAC sanctions against Iran, which the United States imposed in 1979, according to an article published by Bloomberg.


  • Crypto platform Voyager Digital LLC said a joint offer proposed by FTX and Alameda is a “low-ball bid” that disrupts the bankruptcy process. Sam Bankman-Fried proposed a restructuring deal to Voyager publicly. Under the plan, Alameda, Bankman-Fried’s trading firm, would buy all of Voyager’s digital assets and digital asset loans in cash at market value. Meanwhile, his crypto exchange FTX would offer customers of Voyager an option to receive their share of claims by opening a new account at FTX, writes Bloomberg. 
  • Bitcoin and Ether are headed toward their best month since 2021 amid a revival of risk appetite in global markets and optimism about an Ethereum network upgrade. Bitcoin is up 26% in July and Ether up 65%, though their rallies paused on Friday, writes Bloomberg. 
  • Variant, a venture capital firm that invests in the cryptocurrency sector, said it raised $450 million for decentralized web projects. The company whose founders include former Andreessen Horowitz employees, said that $15 million will be dedicated to seed investments, according to a Bloomberg article.


  • Coinbase Global is facing a U.S. probe into whether it improperly let Americans trade digital assets that should have been registered as securities. The SEC’s scrutiny of Coinbase has increased since the platform expanded the number of tokens in which it offers trading, writes Bloomberg. 
  • Hackers are increasingly targeting financial firms such as banks and trading houses with attacks designed to use their computer systems to mine cryptocurrencies, according to cybersecurity firm SonicWall. The number of so-called crypto-jacking attacks on financial companies more than tripled in the first half from a year earlier. The overall number of such events rose 30% to 66.7 million, the report found. 
  • South Korea’s Financial Supervisory Service is probing $3.4 billion worth of “abnormal” foreign-exchange transactions at two of the country’s largest commercial banks for possible links to illegal crypto-related activities. Unusual transactions totaling 1.6 trillion won took place at five branches of Woori Bank between May 3, 2021, and June 9, 2022. Similar transactions worth 2.56 trillion won were detected at 11 branches of Shinhan Bank between February 23, 2021, and July 4, 2022, writes Bloomberg.

Gold Market

This week gold futures closed at $1,779.80, up $34.50 per ounce, or 1.98%. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week higher by 3.09%. The S&P/TSX Venture Index came in up 6.26%. The U.S. Trade-Weighted Dollar fell 0.81%.

Date Event Survey Actual– Prior
Jul-25 Hong Kong Exports YoY -0.7% -6.4% -1.4
Jul-26 Conf. Board Consumer Confidence 97.0 95.7 98.4
Jul-26 New Home Sales 655k 590k 642k
Jul-27 Durable Goods Orders -0.4% 1.9% 0.8%
Jul-27 FOMC Rate Decision 2.50% 2.50% 1.75%
Jul-28 GDP Annualized QoQ 0.4% -0.9% -1.6%
Jul-28 Initial Jobless Claims 250k 256k 261k
Jul-29 Eurozone CPI Core YoY 3.9% 4.0% 3.7%
Jul-31 Caixin China PMI Mfg 51.5 51.7
Aug-1 ISM Manufacturing 52.0 53.0
Aug-3 Durable Goods Orders 1.9%
Aug-4 Initial Jobless Claims 260k 256k
Aug-5 Change in Nonfarm Payrolls 250k 372k


  • The best performing precious metal for the week was silver, up 8.88%, likely on short covering around the Federal Reserve hiking the borrowing cost. Gold climbed this week after the U.S. economy shrank for a second consecutive quarter, reports Bloomberg, pushing the dollar and Treasury yields lower. Bullion rallied as much as 1.2% to reach a three-week high after GDP fell 0.9%.
  • According to the World Gold Council’s second quarter Gold Demand Trends report, continued growth in the second quarter lifted first-half mine production 3% to 1,764 tonnes – making it a record first half for the group’s data series. Mine production benefited from an absence of COVID-related lockdowns, the report explains, and was also boosted by continued recovery in China following safety stoppages in 2021.
  • Agnico Eagle Mines reported strong financial and operating results for the second quarter of 2022 on Thursday. Highlights included record gold production along with strong earnings and cash flow generation. Payable gold production in the quarter was 858,170 ounces at production costs per ounce of $766, total cash costs per ounce of $726, and all-in sustaining costs per ounce of $1,026. Expected payable gold production in 2022 remains unchanged at between 3.2 and 3.4 million ounces.


  • The worst performing precious metal for the week was spot gold, but still up 1.98%. Shares of Newmont tumbled on Monday after the gold miner’s second-quarter earnings fell short of estimates, reports Barron’s. For Newmont, adjusted earnings per share of 46 cents came in below consensus of 65 cents. The miss was largely due to higher cost of sales, exploration, and G&A expenses. Management notes that earnings were negatively impacted by higher labor, materials and consumables costs of $80 million, higher fuel and energy costs of $50 million, and the $70 million expense recognized in the second quarter related to the Peñasquito profit-sharing agreement announced in early July.
  • Over the broad market selloff over the last few months, gold has managed to outperform nearly all other asset classes (except for the U.S. dollar) as a store of value. However, gold miner equities (as measured by the GDX ETF) have underperformed the underlying commodity by 25%. While a portion of this is due to some margin compression from input cost inflation, the group has also underperformed the S&P 500 by 22% (where almost all companies in this broad market index have also seen margin pressure from inflation).
  • SolGold is in discussions with major shareholders on possible financing options for its Cascabel Project in Ecuador. Initial capital costs of $2.7 billion to build a large copper mine presents a challenge and local communities near the proposed mining projects are gaining political support in some government agencies.


  • It is estimated that quant-oriented commodity trading advisors unwound nearly $100 billion of bearish stock-bond bets recently, helping the world’s biggest markets to recover from their worst half in history, according to Bloomberg. Nomura Holdings and JPMorgan noted that commodity trading advisors have offloaded big, short positions that were oriented around soaring inflation. The recent Federal Reserve commentary implies that they could perhaps reduce their pace of rate hikes due to recession risk. Nevertheless, the junior gold stocks have had a strong bid since the start off the month, with the GDXJ ETF up 5.06% while the GDX ETF is still off 4.05%.
  • GCM Mining Corp. agreed to buy all of the outstanding Aris Gold shares it doesn’t own to form a new company named Aris Gold Corporation. All outstanding Aris Gold shares not held by GCM will be exchanged at a ratio of 0.5 of a common share of GCM for each common share of Aris Gold. GCM and Aris Gold shareholders are expected to own, on a diluted in-the-money basis, approximately 74% and 26% of the combined group, respectively.
  • The India International Bullion Exchange has just launched, giving qualified jewelers the ability to directly import bullion. Current rules that require a bank-approved agency to act as an intermediary would be eliminated. India is the second biggest importer of gold. It is expected the new rules will be more transparent which allows for better pricing for the consumer.


  • According to RBC, the relationship between gold and the U.S. dollar is inversely correlated but has drifted a little in terms of correlation strength over time, (with current recent dollar strength driving material weakness in gold but periods in the past (2013-2019) where they were less correlated). One would likely need to see double-confirmation of peaking real interest rates and peaking/reversal in U.S. dollar strength for gold to start working to the upside. 
  • The greenback now stands at an all-time high, according to some measures, notes Bloomberg. Since mid-2021, the dollar has appreciated by 15% against a basket of currencies. Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore said, “There is no Kryptonite to blow up the dollar’s strength immediately, with the Eurozone hampered by the war in Ukraine and China’s growth uncertain.” With about 40% of global trade priced in dollars, consumers around the world are feeling the pain of a rising dollar. In the 1980s when the Fed last fought inflation, dollar strength eventually led to the Plaza Accord, an agreement that international policy makers cut to artificially rein in the greenback as they realized the possibility that further gains would convulse the global financial system and trigger other pain.
  • Despite bullish signals on Chinese demand, UBS expects the palladium price to slide through 2022. The bank cut its year-end price target by $200 to $1,700 an ounce on the prospect of a recession in the European Union and rate hikes by the Federal Reserve. “Robust imports are likely one reason why palladium has held up so well compared to other precious metals in recent weeks,” UBS wrote in a note. “Industrial demand will suffer from slower economic growth in Europe and in view of aggressive monetary policy tightening in the U.S.” 
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Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of (06/30/22): 

Ryanair Holdings Plc

United Airlines

JetBlue Airways

Spirit Airlines

Deutsche Lufthansa


Gazprom Neft

Louis Vuitton



Lundin Gold Inc.

Agnico Eagle Mines

Newmont Corp

Lucara Diamond Corp

*The above-mentioned indices are not total returns. These returns reflect simple appreciation only and do not reflect dividend reinvestment.

The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in their industry. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The Nasdaq Composite Index is a capitalization-weighted index of all Nasdaq National Market and SmallCap stocks. The Russell 2000 Index® is a U.S. equity index measuring the performance of the 2,000 smallest companies in the Russell 3000®, a widely recognized small-cap index.

The Hang Seng Composite Index is a market capitalization-weighted index that comprises the top 200 companies listed on Stock Exchange of Hong Kong, based on average market cap for the 12 months. The Taiwan Stock Exchange Index is a capitalization-weighted index of all listed common shares traded on the Taiwan Stock Exchange. The Korea Stock Price Index is a capitalization-weighted index of all common shares and preferred shares on the Korean Stock Exchanges.

The Philadelphia Stock Exchange Gold and Silver Index (XAU) is a capitalization-weighted index that includes the leading companies involved in the mining of gold and silver. The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar. The S&P/TSX Canadian Gold Capped Sector Index is a modified capitalization-weighted index, whose equity weights are capped 25 percent and index constituents are derived from a subset stock pool of S&P/TSX Composite Index stocks. The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver. The S&P/TSX Venture Composite Index is a broad market indicator for the Canadian venture capital market. The index is market capitalization weighted and, at its inception, included 531 companies. A quarterly revision process is used to remove companies that comprise less than 0.05% of the weight of the index, and add companies whose weight, when included, will be greater than 0.05% of the index.

The S&P 500 Energy Index is a capitalization-weighted index that tracks the companies in the energy sector as a subset of the S&P 500. The S&P 500 Materials Index is a capitalization-weighted index that tracks the companies in the material sector as a subset of the S&P 500. The S&P 500 Financials Index is a capitalization-weighted index. The index was developed with a base level of 10 for the 1941-43 base period. The S&P 500 Industrials Index is a Materials Index is a capitalization-weighted index that tracks the companies in the industrial sector as a subset of the S&P 500. The S&P 500 Consumer Discretionary Index is a capitalization-weighted index that tracks the companies in the consumer discretionary sector as a subset of the S&P 500. The S&P 500 Information Technology Index is a capitalization-weighted index that tracks the companies in the information technology sector as a subset of the S&P 500. The S&P 500 Consumer Staples Index is a Materials Index is a capitalization-weighted index that tracks the companies in the consumer staples sector as a subset of the S&P 500. The S&P 500 Utilities Index is a capitalization-weighted index that tracks the companies in the utilities sector as a subset of the S&P 500. The S&P 500 Healthcare Index is a capitalization-weighted index that tracks the companies in the healthcare sector as a subset of the S&P 500. The S&P 500 Telecom Index is a Materials Index is a capitalization-weighted index that tracks the companies in the telecom sector as a subset of the S&P 500.

The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a market basket of goods and services purchased by individuals. The weights of components are based on consumer spending patterns. The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.

The MSCI Emerging Markets Index is a selection of stocks that is designed to track the financial performance of key companies in fast-growing nations.

The Employment Cost Index (ECI) is a quarterly economic series that measures the growth of total employee compensation.