Precious Metals Week in Review 25/11/2023
- Microsoft emerged on Monday as the big winner of the upheaval at OpenAI, hiring ousted CEO Sam Altman and other key staff of the startup to avert a potential flight to rivals and help deepen its lead in the artificial intelligence race. The turmoil at OpenAI since Friday had raised fears about the fallout for Microsoft, which has pumped in billions of dollars and uses the pioneer's technology for most of its AI offerings. The move ensured "the golden child of AI" will stay with Microsoft, analysts said, as the company competes with Alphabet-owned Google to dominate the nascent industry. UPDATE: Sam Altman makes dramatic RETURN to OpenAI as CEO after board that fired him is replaced with new members including Bret Taylor and former Treasury Secretary Larry Summer. Sam Altman has made a stunning return to OpenAI as CEO just five days after he was ousted and poached by Microsoft. The AI firm had on Monday named ex-Twitch boss Emmett Shear as interim chief executive, sparking a staff mutiny that led to 'intense discussions' among bosses. But on Tuesday night it was announced Altman would return and be joined by a new initial board. Altman was pulled as CEO of ChatGPT-maker OpenAI over fears he was flouting the dangers of artificial intelligence, a report revealed. The concerns, aired by a fellow OpenAI board member, culminated with the 38-year-old's sudden firing Friday - sending the tech world into frenzy, and a storm of speculation.
- Binance Co-Founder and CEO Changpeng "CZ" Zhao has pleaded guilty to federal charges connected to operating as an unregistered crypto exchange within the U.S. while enabling terrorist groups and sanctioned geopolitical figures through its platform. Moses Singer Partner and Former SEC Trial Attorney Howard Fischer describes a criminal investigation into Binance as a "foregone conclusion" since the first SEC probe into the exchange. Fischer discusses the ripple effect this could have on the cryptocurrency ecosystem and how U.S. regulators will be monitoring Binance more closely now. "There was some concern about the disruptive effects that would have not just in the cryptocurrency world, but in the global economy with large," Fischer explains. "I think that in some ways this has to be seen as somewhat optimistic for the cryptocurrency sector precisely because as you pointed out, they are not shutting down the company”.
- Analyst and financial writer John Rubino has a new warning about being fooled into thinking the economy is improving because inflation and interest rates have fallen some recently. Rubino says, “If the U.S. government is running crisis level deficits, which it is right now, borrowing money and paying interest on it means we are in a financial death spiral. The debt goes up, the interest on the debt goes up and that raises the debt even further, and you just spiral out of control. We are there right now. The official U.S. debt is $33.5 trillion. It’s growing by $1.7 trillion a year, and $1 trillion of that is interest costs. Interest costs are rising as the overall debt goes up. Then throw in this incredibly reckless military spending in the guise of foreign aid, and you get a society that has completely lost control. That’s where we are now. We are potentially in the blowoff stage of a 70-year credit super-cycle. Those things do not end with a whimper, and they certainly do not end with a soft landing. They end with a bang, and the bang is going to be centred on the currency. People are going to look at this and say,
‘Do I really want to hold the currency or bonds of a country that is destroying its finances at this trajectory and this scale?’ The answer will be ‘No.’ At that point, it is game over for a deeply indebted economy. We are headed that way fast, and these wars are taking us that way even faster.” If the Fed keeps raising interest rates, the economy tanks, but you protect the dollar. If you cut interest rates, you spike inflation even more, and the U.S. dollar tanks. Rubino says in the end, we get a “massive reset,” and the everything bubble explodes. Rubino also talks about plunging home prices, more trouble coming in the commercial real estate market and why you need gold and silver as core assets during a currency reset.
- The Conference Board's Leading Economic Indicators (LEI) continued its decline in October, dropping 0.8% MOM (worse than the 0.7% decline expected). The biggest positive contributor to the leading index was building permits at +0.03. The biggest negative contributor was ISM N new orders and average consumer expectations both at -0.22. This is the 19th straight MOM decline in the LEI (and 18th month of 19) - the longest streak of declines since 'Lehman' (22 straight months of declines from June 2007 to April 2008). Among the leading indicators, deteriorating consumers’ expectations for business conditions, lower ISM® Index of New Orders, falling equities, and tighter credit conditions drove the index’s most recent decline. After a pause in September, the LEI resumed signalling recession in the near term. The Conference Board expects elevated inflation, high interest rates, and contracting consumer spending, due to depleting pandemic saving and mandatory student loan repayments - to tip the U.S. economy into a short recession. It is forecasted that real GDP will expand by just 0.8 percent in 2024. Despite 'soft landing' hype, the LEI is showing no signs at all of 'recovering', tumbling back in line with the peak in March 2006. And on a year-over-year basis, the LEI is down 7.6% (down YoY for 16 straight months) - close to its biggest YoY drop since 2008 (Lehman) outside of the COVID lockdown-enforced collapse.
- The modern American version of ‘the environmental emperor has no clothes’ until now has been the rise and fall of Enron. As former Ken Lay speechwriter Robert Bradley, Jr., says, “The cause of Enron’s financial bankruptcy was at root philosophical… Enron’s leaders were certainly engaged in massive philosophical fraud, an attempt to cheat reality itself.” Lay’s idea was to embrace a ‘revolution always’ business philosophy, which was called ‘a perpetual search for the first-mover advantage.’ His “illusion-making” in effect created a smokescreen so strong that nearly everyone was caught by surprise when the bubble burst. Today, the collapse of FTX and the recent criminal conviction of founder and CEO Sam Bankman-Fried brings Enron, Skilling, and Lay to mind. But, despite the magnitude of SBF’s fraud, it pales in comparison to the ongoing fraud being perpetrated mostly on America and its Western allies in the name of “climate change.” A bit like FTX, but unlike Enron, there are plenty of warning signs that the “Green Revolution” is about to come tumbling down and its loudest advocates brought to account. While the “Green Revolution” has been under way for decades, it is the Biden Administration that has imposed mandates, attacked popular energy sources and transportation options, and waged war against traditional industrial development. Europeans and states like California had earlier imposed their own mandates with supposedly “hard” deadlines for abolishing the use of oil, natural gas, coal, and every tool or vehicle that uses them.
The green war on fossil fuels is perhaps history’s greatest example of philosophical fraud. To “dream the impossible dream” and turn it into reality would mean sacrificing an estimated 6,000 useful products that rely on byproducts from crude oil refineries – products that range from asphalt for highways to fertilizers, cosmetics, synthetic rubber, medicines and medical devices, cleaning products, plastics, so many more. The 3 billion who live without the benefits of fossil fuels are also the poorest, sickest, and most vulnerable humans on the planet. Several problems stand in the way of their utopian dream. Even EV advocates are now admitting the “EV-olution” must overcome serious issues - like the use of child labour in lithium mining, the woefully inadequate EV charging infrastructure, and an unprepared power grid. EVs are not for construction equipment, airplanes, or even urban buses, as evidenced by the recent horrific scene in San Francisco when a Google-operated electric bus lost power and slid backwards downhill into nine vehicles. Today’s EVs are wholly impractical for mountain and prairie residents or others making long trips. Like Ken Lay with Enron, the Green revolution has relied heavily on government subsidies and a “revolution always” business philosophy aimed at making pariahs of anyone who dares oppose the grandiose – but fatally flawed plan.
- On Wednesday, the U.S. Labour Department said weekly jobless claims fell by 24,000 to 209,000 in the week ending Nov. 18, down from the previous week's upwardly revised estimate of 233,000 claims. The latest labour market data was much better than expectations, as consensus estimates called for a 225,000 print. Initial unemployment claims posted their highest reading since late August during the previous week. 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 – fell to 220,000, down from the previous week's revised average of 223,750. Continuing jobless claims, representing the number of people already receiving benefits, were 1.840 million during the week ending Nov. 11, below the previous week's revised level of 1.862 million and lower than the expected level of 1.875 million.
- Brent crude futures were steady on Friday as traders kept their powder dry ahead of an OPEC+ meeting that could bring agreement on further supply cuts. Brent crude futures were down eight cents, or 0.1 percent, at $81.34 a barrel by 0913 GMT, having settled 0.7 percent down in the previous session. U.S. West Texas Intermediate crude lost 70 cents, or 0.91 percent, from Wednesday’s close to $76.40. There was no settlement for WTI on Thursday owing to a U.S. public holiday. Both contracts were on track to register for their first weekly gain in five weeks, supported by some hope that the Saudi-led OPEC+ producer group could reduce supply to balance the market into 2024.
- EUR/USD holds gains below 1.0950 after mixed U.S. PMIs. EUR/USD is consolidating gains as the U.S. dollar fails to react to the mixed S&P Global PMI data. The pair remains supported, despite the downbeat Germany’s IFO sentiment data. U.S. bond and stock market will close early on Black Friday.
- The Japanese Yen strengthens a bit on Friday amid hawkish BOJ expectations. A weaker risk tone further benefits the JPY’s safe-haven status against the USD. The exchange rate is likely to remain almost entirely dependent on the USD in the coming weeks.
Open AI staff warned its board about a powerful AI breakthrough that could pose threats to humanity before CEO Sam Altman was fired then later rehired. Several researchers sent a letter to the directors warning the progress made on Project Q had the potential to endanger humanity. Altman had made progress on Q, which some internal sources believe could be a breakthrough in the startup's search for superintelligence. OpenAI defines superintelligence, also known as artificial general intelligence, as AI systems that are smarter than humans. Elon Musk founded OpenAI with Sam Altman, the company's CEO, but in 2018 the billionaire attempted to take control of the start-up. Musk has since attacked the company and says the AI is 'woke' and deviates from OpenAI's original non-profit mission. “OpenAI was created as an open source (which is why I named it 'Open' AI), non-profit company to serve as a counterweight to Google, but now it has become a closed source, maximum-profit company effectively controlled by Microsoft,” Musk tweeted in February. He signed a letter calling for a pause on the 'dangerous race' to develop AI, which they fear poses a 'profound risk to society and humanity' and could have 'catastrophic' effects.
During the Obama Administration, Solyndra Solar went under despite a $535 million government-guaranteed loan, none of which was paid back. Taxpayers were left holding the notes for $400 million given to Abound Solar, $280 million wasted by CaliSolar, $193 million doled out to Fisker Automotive (with another $336 million cancelled), and $132 million to A123 Systems (a failed battery maker). Undaunted, the Biden Administration’s $2.3 trillion “jobs” package was rife with more subsidies for technologies that by their own admission are unsustainable. Yet despite all the free money, Ford, General Motors, and many other automakers are backing away from multibillion-dollar investments in new EV factories as new EV sales have slowed despite increased rebates. Ford in March projected a loss of $3 billion on electric vehicles in 2023, offsetting profits of as much as $14 billion from its other divisions. Ford also admitted losses of $900 million in 2021 and $2.1 billion in 2022 in its EV division. China has been quietly moving toward total dominance in the global EV marketplace, largely because it controls the lithium battery market. Biden’s reliance on huge subsidies to underwrite the “Green Revolution” has brought soaring inflation to the U.S. that is taking away purchasing power faster than it can increase subsidies and “incentives.” President Biden, now facing pre-impeachment hearings for other alleged mistakes, may not live to see his name smeared as Lay’s once was.
Ivy Zelman is a financial analyst with a reputation for delivering bad news, especially about housing. “Existing home sales are right now probably at the lowest since the GFC (Global Financial Crisis),” she said in a recent interview referring to the Great Financial Crisis. She added that she sees existing home sales remaining at “extremely depressed levels” through 2025. In other words, housing activity, at least on the existing-homes side of the market, will largely remain frozen as homeowners hold onto their homes amid potentially higher-for-longer mortgage rates. The latest numbers released by the National Association of Realtors back up this critique. Data released on Tuesday morning show that existing home sales receded 4.1% in October compared to the previous month, and 14.6% compared to the year prior, to a seasonally adjusted annual rate of 3.79 million. That’s the lowest pace since 2010 (in line with September’s existing home sales), when the housing market was reeling from the aftermath of the GFC. Nevertheless, there’s only one thing that can change that, Zelman says: mortgage rates. We need a much “further decline in rates to reignite the existing home market,” she said, pointing to the lock-in effect that’s kept homeowners from selling their homes. Whether we’ll see mortgage rates fall much further, though, is unclear, with analysts and investment banks’ differing forecasts. It’s not clear when the shortage of homes will ever work itself out, particularly as the lock-in effect continues to constrain supply. Housing will continue to be largely unaffordable.
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 – GCILbullion.
Here are your Short-Term Support and Resistance Levels for the upcoming week.
Support 1937/1895/1867 22.34/20.96/20.03
Resistance 2008/2036/2078 24.65/25.58/26.96
Support 890/882/871 1035/1018/1003
Resistance 940/955/970 1081/1098/2011
This is not a solicitation to purchase or sell.