What Can Go Wrong: Oil and Gold Prices Soar, U.S. Household Savings Drop As Household Debt Rises

Oct 20, 2023

Since the Israel war started on October 7th, oil prices increased $10 per barrel, or 12% to $88 per barrel (WTI). Given the likely escalation of the conflict, there is a growing risk of a supply disruption.

U.S. household excessive savings continue to decline at the fastest pace in recent history. As savings are declining, total household debt is increasing:

Q3 2023 consumer debt report will be published by the Federal Reserve later this month.

Mortgage rates continue to increase.
30-year fixed rate mortgage rate increased to 7.63%; while 15-year fixed rate mortgage rose to 6.92%:

Home Sales fell 2% in September and are now down 15.4% over the last year. Home sales are at their lowest since 2010. The median price of a home sold in September was $394,300, an increase of 2.8%.
Total U.S. debt has been growing by approximately $22 billion per day in late September/ October. Since it reached $33 trillion in September, total U.S. debt increased $650 billion.
The probability of the Federal Reserve keeping interest rates unchanged in November stands at 96.1%, up from 91.8% a week ago. There is now a 24.1% probability of a rate increase in December:
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Events:

Fed Chair Jerome Powell held a press conference in New York during the meeting of the Economic club. This was an important speech as it indicated the Fed’s next move and the perspective on the fiscal policy and the economy.
I discuss the details and my perspective on Powell’s speech in my recent video which you can watch here.
During a press conference in Luxembourg, Treasury Secretary Janet Yellen stated that the United States economy is in a “great shape” and therefore, the United States is “certainly” in a position to “fund two wars: one in Ukraine, and the second one in the Middle East”.
I discussed Yellen’s interview in my video. You are welcome to watch it here.
Rapid escalation of the war in the Middle East contributed to the increase in the price of gold. Gold always benefits during economic distress. As of close of day Friday, October 20th, gold increased to $1,981.36:

Have a great weekend!