Precious Metals Week In Review
1. Stocks opened mostly flat on Tuesday as cautious investors assessed signs the roaring November rally could be overdone. The benchmark S&P 500 dipped around 0.1% while the Dow Jones Industrial Average and tech-heavy Nasdaq Composite both hugged the flatline after a downbeat close to start the week. Confidence that U.S. interest rates have peaked, and the economy is robust has helped the benchmark S&P 500 rise over 8% in November so far. But analysts are seeing signs of the bullishness running out of steam and of potential economic softness as market gains stall. Investors may well be treading carefully ahead of two key batches of economic data due later this week. Wednesday brings an update on GDP in the third quarter, while Thursday's PCE (Personal Consumption Expenditure) reading on consumer inflation, the Federal Reserve's preferred gauge, will set expectations for policymakers' next rate move.
2. The gold market is holding near a six-month high, seeing little reaction to better-than-expected U.S. consumer optimism. The Conference Board said on Tuesday its consumer confidence index fell to 102 this month, compared to October's revised reading of 99.1. The data beat expectations as consensus estimates looked like a rise to 101. Higher consumer optimism is not having much impact on gold. December gold futures are currently trading near session and six-month highs at $2,027.30 an ounce, up 0.74% on the day. However, the report also noted that sentiment still points to lower economic activity in the months ahead. "While consumer fears of an impending recession abated slightly, to the lowest levels seen this year—around two-thirds of consumers surveyed in November still perceive a recession to be "somewhat" or "very likely" to occur over the next 12 months. This is consistent with the short and shallow recession we anticipate in the first half of 2024," the report said. Dana Peterson, Chief Economist at The Conference Board said that the survey shows investors are still concerned about inflation and geopolitical uncertainty even as sentiment improves. "General improvements were seen across the spectrum of income groups surveyed in November. Nonetheless, write-in responses revealed consumers remain preoccupied with rising prices in general, followed by war/conflicts and higher interest rates," said Peterson. In a note published Sunday, commodity analysts at Goldman Sachs said they expect higher gold prices through 2024. In the report titled ‘Gold's shine is returning,' the analysts raised their 12-month price target to $2,050 an ounce.
3. Even with silver’s recent gains, the precious metal needs to show significant movement in a few key metrics before the bulls can expect a true rally, according to Chief Market Analyst Everett Millman. Millman spoke on Friday, as silver was wrapping up one of its strongest trading weeks in recent memory. Millman said he sees the silver market consolidating for what he expects will be a big rally. “The silver market right now looks like a coiled spring to me,” he said. “It's just going to continue to keep building this kinetic potential to move higher. The big question is, when is that going to happen, or what is the factor to look for?” Millman said. He counts himself among the silver bulls, all of whom are expecting the precious metal to trade significantly higher than its current level. Millman agreed that if we judge the precious metals sector by silver, the key
takeaway for investors is that even after golds multiple breaks above $2,000 and new all-time highs in most of the world’s currencies, gold still hasn’t seen its true rally either. “Even if you just compared to some recent episodes we've had since 2020, gold and silver have both had much, much stronger rallies than we've seen at all this year,” he said. “It's just been this back and forth, cooling off and selling off back down to about $1800, then grinding back up above $1900.” Millman said this sort of price action is decidedly subdued and doesn’t resemble anything approaching a breakout. “I wouldn't describe anything we've seen with gold recently as a legitimate breakout. When you start seeing those days where gold is trading up 1.5% or 1.75%, multiple days during a week, that'll be breakout territory.”
4. Oil prices jumped early in the week settling up about 2% on the possibility OPEC+ will extend or deepen supply cuts, a storm-related drop in Kazakh oil output and a weaker U.S. dollar. OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, is due to hold an online ministerial meeting on Thursday to discuss 2024 production targets. The market tumbled last week when OPEC+ pushed back the original date for its meeting to iron out differences on production targets for African producers. Four analysts polled estimated that the latest round of weekly U.S. supply reports will show crude inventories fell by about 900,000 barrels. The U.S. dollar sank to a three-month low on Tuesday after U.S. Federal Reserve Governor Christopher Waller flagged the possibility of lowering the Fed policy rate in the months ahead if inflation declines further. A weaker dollar typically bolsters oil demand, making dollar-denominated oil less expensive for buyers using other currencies.
5. Shrugging off higher interest rates, America's consumers spent enough to help drive the economy to a brisk 5.2% annual pace from July through September, the government reported Wednesday in an upgrade from its previous estimate. The government had previously estimated that the economy grew at a 4.9% annual rate last quarter. Wednesday's second estimate of growth for the July-September quarter confirmed that the economy sharply accelerated from its 2.1% rate from April through June. It showed that the U.S. gross domestic product, the total output of goods and services grew at its fastest quarterly rate in nearly two years. Consumer spending, the lifeblood of the economy, rose at a 3.6% annual rate from July through September, still healthy but a downgrade from the previous estimate of 4%. Private investment surged at a 10.5% annual pace, including a 6.2% increase in housing investment, which defied higher mortgage rates. The U.S. job market is cooling from the red-hot levels of the past two years. But it's still healthy by historical standards: Employers are adding an average of 239,000 jobs a month this year. And the unemployment rate has come in below 4% for 21 straight months, the longest such streak since the 1960s. The combination of easing inflation and resilient hiring has raised hopes the Fed can manage a so-called soft landing, raising rates just enough to cool the economy and tame price increases without tipping the economy into recession.
6. In the week ending November 25, the advance figure for seasonally adjusted initial claims was 218,000, an increase of 7,000 from the previous week's revised level. The latest labour market data was exactly in line with expectations, as consensus estimates called for a 218,000 print. The gold market is holding steady following the in-line employment data, with spot gold last trading at $2,039.14 per ounce at the time of writing, down 0.25% on the session. The Federal Reserve has said that it needs to see some weakness in the U.S. labour market before it starts looking at potential rate cuts. Meanwhile, the four-week moving average for new claims – often viewed as a more reliable measure of the labour market since it flattens week-to-week volatility – remained at 220,000, with the previous week's print revised slightly upward to 220,500.
7. The total number of active drilling rigs in the United States rose by 3 this week after rising by 4 last week, according to new data that Baker Hughes published Friday. The total rig count rose to 625 this week. Since this time last year, Baker Hughes has estimated a loss of 159 active drilling rigs. This week’s count is 450 fewer rigs than the rig count at the beginning of 2019 prior to the pandemic. Oil prices slipped around 2% on Friday following a volatile week, as the market kept a wary eye on the latest round of OPEC+ production cuts. Brent crude futures for February fell by $1.53, or 1.89%, to $79.33 a barrel by 2:01 p.m. EST on their first day as the front-month contract. U.S. West Texas Intermediate crude futures (WTI) dropped $1.53, or 2.01%, to $74.43 a barrel. Both benchmarks were on track to post weekly losses, with WTI set to fall about 1.2% and Brent 1.3%.
8. EUR/USD bounced from a fresh weekly low of 1.0827, as the U.S. Dollar lost steam following a weak ISM Manufacturing PMI report and words from Federal Reserve Chair Jerome Powell. Powell reiterated its hawkish message, dismissing potential rate cuts in the near future.
9. The USD/JPY trims some of its Thursday gains on Friday, diving below the Ichimoku Cloud (Kumo) early in the North American session. At the time of writing, the pair is exchanging hands at 147.35, registering losses of 0.58%. The sudden U.S. Dollar weakness was triggered by a softer Institute for Supply Management (ISM) reading for November, which showed that business activity remained subdued at 46.7, unchanged from the October reading, and the 13th straight month standing below 50, the expansion/contraction threshold, which indicates the manufacturing sector is underperforming.
Gold's upward trend above $2,000 per ounce is prompting calls for a rally to a new all-time high. Futures were 0.5% higher on Monday, just north of $2,013 per ounce. Prices are at six-month highs and up two weeks in a row. That has boosted hopes that the precious metal could top its all-time high of $2,074.88 reached in August 2020. "Gold is showing additional proof that a rally back to new all-time Highs is underway," Mark Newton, head of technical strategy at Fundstrat, wrote in a note to clients. Most traders consider $2,050 as the breakout level for momentum to send prices to that level. "My technical target for gold is $2500/oz, and it looks appealing to be long precious metals given falling real rates, rising cycles and ongoing geopolitical conflict," said Newton. Michele Schneider, director of trading education at MarketGauge.com, said that she thought gold could hit $3,000, noting that gold has held up "in the face of a stable dollar and higher rates." Gold is seen as a safe-haven asset during times of uncertainty. Its rise in price comes amid escalating geopolitical tensions in the Middle East following the surprise attack by Hamas on Israel last month. Anticipation of an end to the Fed's tightening cycle is also attracting buyers. The market's speculation that the Federal Reserve is done raising interest rates has sent longer-term Treasury rates lower. A declining 10-year Treasury yield makes gold more attractive to investors than bonds. Central banks have been among the biggest gold buyers in the last couple of years, with a record-breaking first half of 2023. Global official gold reserves are 120% higher quarter over quarter and the second highest third quarter total following the same period last year, according to industry group World Gold Council.
Silver prices will benefit from the growing demand for EVs and solar panels in 2024 and could also get a boost from a potential rebound in industrial demand, according to metals strategists. In their recently published Metals and Mining Outlook for 2024, the analysts said that several of the key factors that supported prices this year in an otherwise weak macro environment should also carry over into 2024. “1) green spending is increasingly offsetting weakness in the traditional economy; and 2) supply growth has generally been subdued,” they wrote. “While the start of 2024 may be challenging, if those trends are accompanied by 3) a wider economic rebound, then mined commodities may push higher again, potentially also supported by 4) a weaker USD/ end to the hiking cycle, along [with] 5) an end to destocking.” However, if the continued focus on the energy transition is accompanied by stronger global growth, silver prices should push higher.
The U.S. dollar is heading toward its worst month in a year, as predictions mount that the Federal Reserve may start to cut interest rates in 2024. The dollar index slid 3.6 percent through November 28, which is the sharpest monthly drop since it fell 5 percent in November 2022. Between mid-July and October, the index surged by more than 7 percent, as data indicated the Fed would keep rates high for longer. Higher interest rates tend to boost the value of a currency by making it more attractive to global investors hoping to make bigger returns. When the Fed began hiking interest rates in 2022 to combat inflation, the dollar rose 20 percent. But a weaker dollar means Americans and U.S. businesses end up having to pay more for imported goods - and consumers will also be forced to spend more on vacations abroad. It comes amid mixed results for the economy as fresh Commerce Department data showed the economy grew at an even stronger pace in the third quarter than previously indicated. Experts suggest economists will need to look at forecasts for next year to determine where the U.S. dollar could move next.
Volatility should be expected to remain high as investors will be closely watching for hints on upcoming monetary policy direction. Many investors have redoubled their efforts to ensure that their portfolios are sufficiently diversified in the hopes that they will be able to withstand corrections in multiple market sectors. Many of these investors have included physical precious metals as part of their diversification plans, given their long history as a hedge against both inflation and during times of economic turmoil. Remember, the key to profitability through the ownership of physical precious metals is to own the physical product and hold it for the long term. Always remember that you should never overextend your ability to maintain ownership of your precious metals over the long run.
Trading Department – Precious Metals International Ltd.
Here are your Short-Term Support and Resistance Levels for the upcoming week. ￼
Support 1975/1949/1933 23.58/22.85/22.47
Resistance 2097/2133/2159 25.78/26.06/26.68
Support 904/877/858 1005/982/960
Resistance 950/969/995 1095/1117/1144
This is not a solicitation to purchase or sell.