Precious Metals Week in Review 25/09/2023
The Precious Metals Week in Review 25/09/2023
- This week, we’re shining a spotlight on silver. Did you know that in over 14 languages, the word for "silver" is synonymous with "money?” It’s far more than your ordinary metal, silver is a versatile marvel that has fascinated humanity and been used as money for thousands of years. Many people are familiar with silver’s history as an investment, but unfortunately its numerous industrial applications are often overshadowed. The truth is nearly 50% of the annual silver supply is used in industrial applications and manufacturing. And silver is truly indispensable in modern society. Known for its unparalleled electrical conductivity, silver is the perfect material for a wide array of applications. It's found in everything from printed circuit boards and switches to TV screens, telephones, microwave ovens, children's toys, and even the keys beneath our computer fingertips. As of 2023, there are over 15 billion devices connected to the internet worldwide, and that figure is expected to double by 2030. As we further embrace the digital age, the demand for silver in these sectors is poised to rise. In the pursuit of sustainability, silver has been proven to be a vital part, particularly in the photovoltaic cells that make up solar panels. As many nations around the world increase their clean energy investment, the demand for silver is set to rise in tandem, further solidifying its critical role in our sustainable future. It is only in recent years that scientists have unravelled the mechanisms behind silver's antibacterial effects. Silver ions have the unique ability to penetrate bacterial cell walls without harming mammalian cells. This disrupts the essential chemical and structural bonds within the bacteria, effectively neutralizing them. Today, the medical community is leveraging silver's unique properties in innovative ways. Medical devices like breathing tubes and catheters are now coated with silver to ward off infections. The metal is also applied to artificial bones and scaffolding materials to aid in the healing process. Silver-infused bandages and ointments are increasingly common, as they inhibit bacterial growth, allowing wounds to heal more quickly. Remarkably, silver has proven effective against bacteria that have developed resistance due to the overuse of chemical antibiotics.
- Tens of millions of people are now exposed to toxic water runoff from metal mining, a new study has found. The report lays bare the devastating impacts that can follow a reckless transition to 'green' energy’, compounding the ecological damage wrought by over 150 years of drilling and mining for fossil fuels. The researchers found that 23 million people worldwide, as well as 5.72 million in livestock, over 16 million acres of irrigated farmland and over 297,800 miles worth of rivers have been contaminated by mining's toxic by-products seeping into the water. This metal mining includes many so-called 'rare earth elements' essential to the manufacture of high-tech electronics, solar cells, wind turbines and all the batteries needed to store sustainable 'green' energy’. North America stood out as the most affected, at 123,280 miles of tainted river systems, and approximately 10.7 million acres of polluted floodplains. But the damage was not much better in South America with 50,766 miles of rivers and over 9.5 million acres of floodplain impacted; nor in Asia with about 37,842 river-miles and about 8.3 million acres of floodplain polluted by metal mining waste. Concerns over just how bad the ecological impact of metal mining for sustainable technology might be is complicated by the diverse variety of resources involved, which can lead to 'apples to oranges' comparisons.
According to the MIT Environmental Solutions Initiative, green energy technologies like wind turbines and electric cars often do require many more mined minerals than the present fossil fuels infrastructure. One electric car, for example, requires six times more metallic and mineral materials than a combustion engine. And a wind power plant requires nine times more of these mined compounds than a traditional gas-fired plant.
- The only ones that were optimistic about housing don't feel as upbeat anymore. More homebuilders think housing conditions are poor versus good this month, according to the National Association of Home Builders/Wells Fargo Housing Market Index, with confidence retreating for the second straight month in September. The index reading fell to 45 from 50 in August, dipping below the key break-even measure of 50 for the first time in five months and falling further than expected. Economists polled anticipated an index reading of 49 for September. The waning sentiment reflects the latest uptick in mortgage rates, which have stayed above 7% for five straight weeks, stifling affordability, plus escalating costs for construction materials and labour. "The two-month decline in builder sentiment coincides with when mortgage rates jumped above 7% and significantly eroded buyer purchasing power," NAHB Chairman Alicia Huey, a custom homebuilder and developer from Birmingham, Ala., said in a statement. "And on the supply-side front, builders continue to grapple with shortages of construction workers, buildable lots and distribution transformers, which is further adding to housing affordability woes. Insurance cost and availability is also a growing concern for the housing sector."
- The latest projections from the International Energy Agency (IEA) suggest that demand for oil, gas and coal will peak before 2030. "This is the first time that a peak in demand is visible for each fuel this decade, earlier than many people anticipated," Fatih Birol, executive director of the IEA, wrote in an op-ed recently. That forecast does not sit well with the Organization of the Petroleum Exporting Countries (OPEC). "It is an extremely risky and impractical narrative to dismiss fossil fuels or to suggest that they are at the beginning of their end," OPEC said in a statement. "In past decades, there were often calls of peak supply and in more recent ones, peak demand, but evidently neither has materialized. The difference today, and what makes such predictions so dangerous, is that they are often accompanied by calls to stop investing in new oil and gas projects." According to OPEC Secretary General Haitham al-Ghais, the IEA's claims could have significant global repercussions. "Such narratives only set the global energy system up to fail spectacularly. It would lead to energy chaos on a potentially unprecedented scale, with dire consequences for economies and billions of people across the world," al-Ghais said. OPEC argued that the IEA's reasoning on fossil fuels is "ideologically driven" instead of fact-based. It also noted that fossil fuels still make up more than 80% of the global energy mix and that they provide "vital" energy security for the world.
- In the week ending September 16, the advance figure for seasonally adjusted initial claims was 201,000, a decrease of 20,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 220,000 to 221,000. The 4-week moving average was 217,000, a decrease of 7,750 from the previous week's revised average. The previous week's average was revised up by 250 from 224,500 to 224,750.
- The total number of active drilling rigs in the United States fell by 11 this week, after seeing a brief 9-rig rise last week, according to new data from Baker Hughes published Friday. It is the fewest number of active drilling rigs since February 4, 2022. At 12:21 p.m. ET on Friday, the WTI benchmark was trading up $0.12 (+0.13%) on the day at $89.75—down roughly $1 per barrel from this time last week. The Brent benchmark was trading down $0.10 (-0.11%) at $93.20 per barrel on the day—down roughly $0.60 per barrel from a week ago.
- EUR/USD trades in the upper half of its daily range slightly above 1.0650 in the American session on Friday. Following the mixed PMI data releases from the US, the Dollar struggles to find demand helps the pair holds its ground ahead of the weekend. In the long run, however, EUR strength is unlikely to be sustainable. According to our economists, the ECB is likely to succeed in controlling inflation to a lesser extent than the Fed in the long term. Regardless of which of the two central banks offers the highest real interest rate on its respective currency, this is likely to result in the Euro suffering from an increased inflation risk premium.
- USD/JPY retraces the recent losses due to the BoJ’s decision on no-interest rate change. BoJ could consider adjusting its ultra-loose monetary policy when reaching a 2% inflation target is within reach. Investors await data to gain valuable insights into the economic conditions in the country. The USD/JPY is set to close out the trading week just south of the 148.50 level after peaking at an intraday high of 148.40 as the U.S. Dollar (USD) covers its bids on a mixed Purchasing Manager Index (PMI) reading. The Bank of Japan (BoJ) kept the bottom band of its main policy rate at -0.1% early on Friday, which shook off some bullish momentum for the Yen (JPY).
From 2021 to 2022, the number of electric cars sold almost doubled, breaking records, and increasing from 3.75 million to 6.75 million globally. Electric cars depend heavily on silver. Much like many other devices these days, the electrical and thermal conductivity of silver makes it an ideal material as part of an automobile battery. It is also ideal for use in EVs because it’s non-toxic and hypoallergenic. As it stands, the automotive industry consumes a staggering 55 million ounces of silver each year. By 2025, this figure is projected to leap to 90 million ounces. So, where is all this silver coming from? If these electric vehicle companies all want to continue their rapid growth, it will require a huge increase in silver production. According to the World Silver Survey 2023, the global appetite for silver surged by 18% last year, reaching a record-breaking 1.24 billion ounces and resulting in a significant supply deficit. In 2021, the silver market faced a shortfall of 51.1 million ounces. However, the situation deteriorated dramatically in 2022, with a staggering undersupply of 237.7 million ounces. The Silver Institute has labeled this as "possibly the most significant deficit on record," and forecasts indicate that the shortages are likely to continue in the years ahead. With global sustainable investments reaching an astonishing $35.3 trillion, the demand for silver, integral in many green technologies, is poised to skyrocket. For many, alarm bells are ringing. When record high demand meets a tightening supply, at some point, something has to give. Either the supply of silver somehow increases a great deal, or the price of silver will increase. Given these market conditions, the logical outcome could be a surge in silver prices in the years ahead. The evidence is clear: silver is not just a precious metal – it's a critical component in modern technology, renewable energy, and healthcare. With supply constraints and rising demand, the future for silver looks incredibly promising.
U.S. Treasury Secretary Janet Yellen said that a "soft-landing" scenario for the U.S. economy can withstand near-term risks including a United Auto Workers strike, a government shutdown threat, a resumption of student loan payments and spill overs from China's economic woes. Yellen said on Monday that she sees evidence that the economy is keeping to a path of making substantial progress to reduce inflation while maintaining a strong labour market and healthy consumer
spending. "What I'm seeing in the economy is a cooling in the labour market that's taking place in a healthy way, that does not involve mass layoffs," Yellen said on Monday. "It's some of the heat coming out of the job market." She acknowledged that the soft-landing outlook, which has gained traction among economists in recent weeks as recession predictions fade, may be buffeted by headwinds such as the UAW strike against Detroit automakers. The union has threatened to widen the strike, already idling some 13,000 workers, to more plants if no progress was made towards a deal by Friday. She added that since the government has poured in resources including tax breaks to ensure a strong future for electric vehicles in the United States, it was important to Biden that "the jobs that are created in that industry are good jobs."
High mortgage rates have effectively frozen the housing market. Sales of previously owned homes declined 0.7% in August from the month prior to an annualized rate of 4.04 million. The pace, which was down 15.3% from a year ago, is the third slowest of the current housing cycle. And while lower rates could be on the horizon, Americans might have to wait awhile. The average rate for a 30-year fixed-rate mortgage is over 7%, up from roughly 3% at the beginning of 2022. This has deterred prospective first-time homebuyers from taking the plunge and made existing homeowners reluctant to sell their homes and buy another, they'd rather stick with the super low rates they already locked in. Meanwhile, the lack of people selling their homes has contributed to a shortage of housing inventory and helped prop up prices, which may not drop anytime soon. The Federal Reserve has raised interest rates to combat inflation, but many experts predict it will move more cautiously, and perhaps even cut rates over the next 12 to 18 months, in response to slowing inflation and the prospect of a weakening U.S. economy.
Geopolitical, economic, and environmental uncertainty can be expected to continue in the near-term. Astute investors continue to seek out alternative investments for their portfolios to aid in diversifying them away from overexposure to any single asset class. Some are seeking out buying opportunities from temporary price dips to add more physical precious metals into their portfolios.
Remember that one of the keys to profitability through the ownership of physical precious metals is to acquire the physical product and hold on to it for the long term without overextending your ability to maintain its ownership.
Trading Department – GCILBullion.
Here are your Short-Term Support and Resistance Levels for the upcoming week.
Support 1906/1888/1876 22.43/21.86/21.43
Resistance 1936/1948/1966 23.87/24.44/25.85
Support 911/898/887 1229/1210/1186
Resistance 936/946/960 1272/1297/1316
This is not a solicitation to purchase or sell.