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World Bank slashes global growth forecast and warns of recession, gold price eyes $1900

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(Kitco News) The World Bank warned that the global economy could fall into a recession as growth sharply slows and economic conditions remain fragile.

In its Global Economic Prospects report, the World Bank has cut global growth to 1.7% for 2023. This is down from the 3% expected just six months ago. For 2024, the organization sees growth at 2.7%.

“The sharp downturn in growth is expected to be widespread, with forecasts in 2023 revised down for 95% of advanced economies and nearly 70% of emerging market and developing economies,” the report said.

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The drivers behind this dramatic slowdown are stubborn inflation, high interest rates, reduced investment and the war in Ukraine, the World Bank said.

There are also a number of triggers that could send the global economy easily into a recession this year. These include higher-than-expected inflation, sudden additional increases in interest rates, a resurgence of the COVID-19 pandemic, or renewed geopolitical tensions, the report pointed out.

“This would mark the first time in more than 80 years that two global recessions have occurred within the same decade,” the World Bank said Tuesday.

Advanced economies are expected to slow to 0.5% from the previous estimate of 2.5% in 2023. The U.S. economy is projected to grow just 0.5% this year. The euro area is looking at 0% growth, while China is estimated to see growth at 4.3%.

“Over the past two decades, slowdowns of this scale have foreshadowed a global recession,” the report said.

The crisis is intensifying, warned World Bank Group President David Malpass in the press release for the report. “Emerging and developing countries are facing a multi-year period of slow growth driven by heavy debt burdens and weak investment as global capital is absorbed by advanced economies faced with extremely high government debt levels and rising interest rates,” Malpass said.

The World Bank also sees risks of elevated core inflation weighing on the outlook. Stubborn inflation could lead to more central bank tightening after a year of synchronized and unprecedented hikes by central banks worldwide.

In response to the report, gold continued to trade above $1,850 an ounce, eyeing the $1,900 an ounce level after the precious metal hit seven-month highs on Monday. At the time of writing, February Comex gold futures were trading at $1,881.70, up 0.21% on the day.

Gold’s momentum got renewed at the start of the year, with prices up 2.7% since the start of the new year.

Gold also continues to track the U.S. dollar closely, said MKS PAMP head of metals strategy Nicky Shiels. “Gold remained in a tight range largely capped below $1,880, and in sync with the US$,” Shiels said Tuesday.

The yellow metal has gained traction on the idea that the Federal Reserve will be less hawkish in the new year, said FXTM senior research analyst Lukman Otunuga.

“Given how last Friday’s mixed jobs report has fanned speculation around the Fed slowing its rate hikes, further upside could be on the cards,” Otunuga said Tuesday. “Gold’s outlook is likely to be influenced by the upcoming U.S. inflation report. A further cooling in prices in December and lower bond yields would be a welcome development for zero-yielding gold. Looking at the technical picture, bulls remain in a position of power with the next key level of interest found at $1,900.”

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Gold declines in light of the report that revealed inflation continues to decline – Kitco NEWS

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As of 6:00 PM EST, the February contract of gold futures has fallen for the second time in the last seven trading days. Currently, gold futures are fixed at $1927.60, a decline of $2.40 or 0.12%. Gold traded to a high of $1935.40, and a low of $1916.50.

The key takeaway from today’s PCE inflation index report was that the core PCA index declined in December by 0.3%. The preferred inflation index used by the Federal Reserve was at 4.7% year-over-year in November and declined to 4.4% year-over-year last month.

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Both reports will influence decisions made by the Fed at next week’s FOMC meeting.

They will be critical components used by the Federal Reserve next week and will most likely strengthen the conviction of hawkish Fed officials to maintain their extremely aggressive monetary policy. Currently, the Federal Reserve’s forward guidance is composed of additional rate hikes and maintaining elevated rates for a longer time.

The most likely outcome is that the Fed will raise the rate by ¼% at the next two meetings. The Federal Reserve has stated they continue to work to reach its inflation target of 2%. A vast majority of market participants continue to believe that the Fed will backpedal on its commitment to keep rates elevated through 2023.

I will be speaking at the VRIC 2023 (Sunday, January 29-30) at the Vancouver Convention Center. Both Kitco News and I wish to welcome you if you’re available.

For those who would like more information simply use this link.

Wishing you as always good trading,

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Afraid to check a bag? Canada's missing baggage woes explained – CBC News

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Deborah Cleary was exasperated.

When she landed in Montreal on Dec. 19, following a trip to Italy, she discovered her suitcase was missing. More than a month later, Air Canada still hadn’t found her bag. 

“I’ve spent so much time thinking about it, worrying about it, checking online, calling Air Canada,” said Cleary from her home in Plattsburg, N.Y., on Tuesday. “I’m just sort of desperate to get my bag back.”

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The post-pandemic return to travel has been turbulent, plagued by mass flight disruptions and missing baggage piling up at airports. That has led to calls for airlines to improve their baggage delivery systems.

“It’s broken, so I think they need to fix that,” said Cleary, who visited the Montreal airport two weeks ago to search for her bag amidst a sea of unclaimed luggage. She didn’t find it.

However, following a CBC News inquiry to Air Canada, Cleary learned on Friday that her suitcase is being shipped to her home. 

“I’m very, very happy,” she said. “I had almost resigned myself, I was never going to see it again.”

Deborah Cleary and Dan Albert of Plattsburgh, NY pose for photo during their vacation to Italy.
Deborah Cleary and Dan Albert of Plattsburgh, N.Y., are still waiting to be reunited with their missing baggage that disappeared on their return flight from Milan to Montreal. (submitted by Deborah Cleary)

Canada’s first round of missing baggage chaos erupted in the summer, largely sparked by staffing shortages as airports and airlines scrambled to ramp up operations. 

There were high hopes the holiday travel season would go more smoothly — until severe winter storms hit much of Canada, causing hundreds of delayed and cancelled flights, plus a backlog of lost luggage.

“In the airline industry, a delay of greater than 15 minutes generally results in missed connections,” said former Air Canada executive Duncan Dee. “Delays equal missing bags.”

Former Air Canada executive, Duncan Dee.
Former Air Canada executive Duncan Dee says airports need more infastrucutre funding to keep operations running smoothly during bad weather. (CBC)

Dee said airlines need to do a better job keeping track of luggage, and the federal government also needs to invest more in airports.

In late December, cold weather caused a baggage belt to freeze at Toronto’s international airport; a fierce snow storm caused widespread flight delays and cancellations at Vancouver’s international airport.

“There’s obviously a need for better infrastructure, better resources for airports … to make them more resilient to these weather events,” said Dee.

What about the airlines?

When asked this week about recent travel chaos, Transport Minister Omar Alghabra said airports will get the tools they need, but did not elaborate. 

On the baggage issue, he pointed the finger at airlines. 

“I find it extremely frustrating when I hear stories of people not having their luggage for days on end,” he said during an event in Hamilton. “Airlines should be doing more.”

His comments follow several recent media reports about air passengers’ struggles to find their missing luggage

They include the saga of Nakita Rees and Tom Wilson of Cambridge, Ont., who battled with Air Canada for more than four months to retrieve Wilson’s missing suitcase. 

WATCH |Ontario couple told their luggage was lost — but it wasn’t: 

Air Canada said this couple’s luggage was lost. AirTags showed otherwise

5 days ago

Duration 2:18

A couple says Air Canada donated their luggage to charity just a month after it got lost en route to Toronto’s Pearson Airport. They tracked it to a storage locker.

The bag vanished during their flight home from Greece in September. Because the couple had put an air tag tracker inside the suitcase, they were able to track its journey to a storage facility in nearby Etobicoke, Ont. 

Even though Rees shared with Air Canada the whereabouts of the bag, the airline deemed it lost. 

“The most frustrating thing about it was we had no way of getting it, even though we knew the location and we told the airline so many times,” said Rees. “Because the air tags are newer, I just don’t think airlines know how to even use that information.”

The couple finally got the suitcase back this week — after their story was picked up by the media.

Airlines respond

Other passengers have also complained about similar experiences when tracking their lost luggage with air tags. 

Former Air Canada executive Dee said airlines typically track luggage by scanning their baggage tags and that their systems currently can’t accommodate air tracking technology.

“That’s something where airline processes have not caught up to the technology that’s available,” he said. “No airline in the world has the ability right now to accept information from travellers.”

Alghabra suggested airlines need to change with the times. 

“We hear about how Amazon is able to identify where their items [are at] every moment,” he said. “It’s frustrating that airlines still have not modernized their luggage handling system.”

Air Canada told CBC News it’s constantly exploring new technologies. The airline added that its baggage delivery rate has returned to normal, following the stormy holiday weather. 

Air Canada said that in Rees’ case, the baggage tag had fallen off the suitcase. The airline didn’t say how it eventually located the couple’s bag, but did indicate that they get to keep the $2,300 in compensation they received for lost luggage. 

WestJet said it has launched a strategic review to fine-tune its baggage systems. “[We] are committed to working together with our third-party service partners … to ensure we improve in this area,” said spokesperson Madison Kruger in an email. 

Baggage compensation

Travellers can claim up to approximately $2,350 for luggage that is lost or delayed on an international flight. For delayed baggage on domestic flights, the airlines design their own rules. 

Alghabra’s office told CBC News this week the government is exploring ways to strengthen rights for air passengers, including for delayed and lost baggage.

As for passenger Cleary, she had applied for compensation for a lost bag, but said getting it back is a better outcome. 

“I would much prefer to have my bag back than any money from Air Canada.”

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SBF's mom, Caroline Ellison aren't cooperating in bankruptcy probe: lawyers – Markets Insider

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  • SBF, his mom, his brother, and key executives in his crypto empire aren’t cooperating in the FTX bankruptcy case, according to a recent court filing.
  • FTX lawyers said several key insiders have not responded or declined to give requested information related to the collapsed exchange.
  • But discussions with Bankman-Fried’s father and another FTX executive have been making progress, the filing said.

Sam Bankman-Fried’s mom, brother, and former executives from his empire have not been cooperating with the investigation into FTX’s finances, according to the failed crypto exchange’s team of lawyers.

Lawyers have been working nonstop to locate and recover FTX’s assets since the crypto exchange declared bankruptcy in November, according to a court filing on Wednesday. Now they intended to subpoena Sam Bankman-Fried, his family, and former lieutenants.

While some of them have responded to letters sent by FTX’s lawyers asking for more information, none of them have voluntarily given the requested documents or information, the filing said.

In particular, former Alameda CEO Caroline Ellison and FTX co-founder Gary Wang have declined to give FTX’s lawyers requested information.

While they aren’t cooperating on the FTX bankruptcy case, both Ellison and Wang agreed to cooperate with prosecutors in their criminal case against Bankman-Fried after they pleaded guilty to fraud. Bankman-Fried has pleaded not guilty to fraud charges.

FTX’s former director of engineering, Nishad Singh, has not responded to bankruptcy lawyers’ information requests, though the 27-year-old crypto exec was reportedly one of the few people who knew FTX was misusing customer funds.

FTX lawyers also said they were not able to get a “meaningful engagement or any response” out of brother Gabriel Bankman-Fried, while mother Barbara Fried “ignored the Requests altogether.”

However, discussions with Bankman-Fried’s father Joseph Bankman and former FTX COO Zhe Wang have been making progress, the filing said.

“Certain insiders are currently cooperating with the Debtors to provide important information. But others are not, and thus, authorization to issue subpoenas to those with the missing information is critical to the Debtors’ and Committee’s recovery efforts,” lawyers said, adding there were still  “key questions” about FTX’s finances and transactions that needed to be answered. 

So far, liquidators have recovered $5 billion in liquid assets, but locating the rest of the money could take months, Ray warned, considering that the exchange had virtually no record-keeping.

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