Precious Metals Week in Review
The Precious Metals Week in Review 15/01/2024
Here are your Short-Term Support and Resistance Levels for the upcoming week. ￼
Support 2019/1994/1964 22.51/21.88/21.09
Resistance 2073/2103/2128 23.93/24.73/25.35
Support 911/887/860 976/956/913
Resistance 973/985/999 1004/1049/1070
1. Fresh from getting a big call right on yields toward the end of last year, former bond king Bill Gross just signalled he is now avoiding Treasuries. Ten-year U.S. debt is “overvalued,” with similar-dated Treasury Inflation-Protected Securities at a 1.80% yield the better choice if one needs to buy bonds. ‘I don’t,’ he wrote in a post. Gross earned the moniker of ‘bond king’ while at Pacific Investment Management Co., the firm he co-founded in the early 1970s. He warned in August that bond bulls were misguided, just before a two-month rout that sent yields to 16-year highs. Global bonds rebounded on Monday, after they slid in the opening days of 2024 on concerns the late 2023 rally had gone too far, too fast. Benchmark U.S. 10-year yields jumped 17 basis points last week, their biggest such climb since October, as robust labour-market data spurred traders to pare bets on rapid Fed easing. Treasury 10-year yields declined two basis points on Tuesday to 4.02% after oil prices tumbled on Monday and a consumer survey found that inflation expectations declined. The yields on 10-year Treasuries are about 35 basis points below those on two-year notes. The yield curve has been inverted since July 2022, which some see as signalling an impending recession. Investors have been betting the curve will disinvert for much of the past year.
2. According to many analysts, the gold market is off to a decent start after the first trading week of 2024 even as the price lost some ground as it consolidated at elevated levels between $2,000 and $2,050 an ounce. Gold prices are moderately higher and silver near steady in early U.S. trading Tuesday. Higher crude oil prices are also a bullish outside-market element. However, gains in the precious metals are being limited by a firmer U.S. dollar index and rising U.S. Treasury yields on this day. February gold was last up $8.80 at $2,042.30. March silver was last up $0.03 at $23.34. Technically, the gold futures bulls still have the overall near-term technical advantage but are fading. Prices are still in a three-month-old uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in March futures above solid resistance at $2,100.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $2,000.00. The silver bears have the overall near-term technical advantage. Prices are in a choppy, four-week-old downtrend on the daily bar chart. Silver bulls' next upside price objective is closing March futures prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at the November low of $22.26.
3. Among many economic headwinds, the strength of the consumer has surprised many on Wall Street. Data amassed by Mastercard showed holiday retail sales grew 3.1% year-over-year despite worries of inflation. Has consumers inflation worries eased? Michelle Meyer, Chief Economist gives insight into how the strength of the consumer and how it may affect the economy going forward. Meyers reflects on consumer sentiment in regard to inflation: "When you look at surveys of inflation expectations, what we've seen throughout the last several years, even when inflation was really quite elevated, is that consumers still expected lower and more stable inflation in the future, which meant that there was still the sentiment of disinflation or low and contained inflation that has remained with consumers this whole time. I think that's showing up now as well and that to me is actually a good thing. It's a good thing because it shows that consumers are taking back their power to some extent."
4. A meltdown in some of the most-hyped energy-transition metals is wreaking havoc across the mining world, stalling projects, sinking deals, and triggering a scramble for cash that promises to reverberate through the industry for years. Yet supply charged ahead as demand growth underwhelmed, and the result has been a price freefall. Lithium — the ultra-light metal used in electric-vehicle batteries has plunged more than 80% from a late-2022 record, as the market whiplashed from shortage fears to a mountain of surplus inventories. Nickel and cobalt have also tumbled, weighed down by an influx of new production amid concerns that the shift to EVs may not be as smooth and quick as predicted. Now, carmakers are getting cold feet and abandoning deal discussions. The low prices are making it harder for mine builders to raise money from more traditional sources as well, at a time when the industry is also grappling with rampant inflation driving up the cost to build new projects. The turmoil is likely to have long-term ramifications for supply and stands in stark contrast to the growing emphasis by governments on securing future access to critical minerals. Speaking privately, bankers say that multiple deals they were working on last year with automakers have failed, as the potential buyers start to take a view that the push for EVs will be slower than first expected and the need to secure materials is less urgent.
5. A staggering 19.6 percent of U.S. office spaces is unoccupied- the emptiest they've been in the last 40 years. The drastic shift has spiked due to impacts from the pandemic, work-from-home lifestyle, years of overbuilding and the office-market decline of the 1980s and 90s. Office spaces in major cities weren't leased at the end of the fourth quarter and the number of vacant spaces has gone up 18.8 percent compared to last year, according to Moody's Analytics. The newest record slightly passed the highest record, recorded at 19.3 percent in 1986 and 1991. The lowest percentage of vacant offices was in 1976 at approximately 6 percent. The excessive supply of buildings and lack of tenants to occupy them has continued to affect present-day spaces and has long been the reason that spaces in the U.S. are emptier than in Europe and Asia. Many of the deserted offices are ones that were originally built in the 1980s that previously struggled to find workers to fill them.
6. In the week ending January 6, the advance figure for seasonally adjusted initial claims was 202,000, a decrease of 1,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 202,000 to 203,000. The 4-week moving average was 207,750, a decrease of 250 from the previous week's revised average. The previous week's average was revised up by 250 from 207,750 to 208,000.
7. Oil prices rose after Britain and the United States carried out military strikes against targets in Houthi-controlled areas of Yemen, as tensions in the Red Sea mount further. West Texas Intermediate and Brent futures spiked more than 4% to hit their highest levels since Dec. 27. WTI and Brent were both trading above their 50-day moving averages for the first time since late October. Brent was last trading around $78.60 a barrel, while WTI was at $74.08. This incident caps a period where oil benchmarks initially increased over $2 a barrel but later faced downward adjustments, influenced by unexpected rises in U.S. inflation and a decrease in China's demand for Saudi oil.
8. EUR/USD climbed above 1.0950 and erased its daily losses in the early American session on Friday. The data from the U.S. showed that the monthly Core PPI was unchanged in December for the third straight month, weighing on the USD and helping the pair edge higher. Fears of widening conflicts in the Middle East region after airstrikes on Iran-backed Houthi rebels in retaliation for striking on commercial oil shipments from Red Sea has dampened the market sentiment.
9. The U.S. dollar has been very noisy during the course of the week against the Japanese yen, which does make quite a bit of sense considering that we were challenging the 145-yen level. If we can break above the top of the candlestick, that would be very bullish, and it could send this market to the 147.33-yen level and then the 149.80-yen level. We’ve got a hotter than expected CPI number followed by a weaker than anticipated PPI number. So, there are a lot of questions about what the Fed’s going to do.
Inflation rose to 3.4 percent in December - above economists' predictions, sparking fears the Federal Reserve could stave off interest rate cuts this year. It marks an increase from 3.1 percent in November and is still well above the Fed's 2 percent target. The Consumer Price Index was pushed up by housing which drove more than half of the monthly growth, the Department of Labor said. Food prices rose just 0.2 percent between November and December. Economists had predicted that the rate of annual inflation would edge up slightly to 3.2 percent at the end of the year. Inflation must cool in order to pave the way for interest rate cuts this year after the Fed hiked rates to a 22-year high of between 5.25 and 5.5 percent. The next Fed meeting is January 31, but it was widely expected that officials would vote to hold rates steady at their current level on this date. Instead, economists had put all their hopes on the following March 20 meeting. Traders had priced in a 70 percent-plus probability that the central bank will announce cut rates by 25-basis points on this date. However, experts today agreed with the latest data, but this plan is in jeopardy.
According to some analysts, the gold market is still caught in a tug-of-war as investors try to anticipate the Federal Reserve’s next move. Markets are currently pricing in a 68% chance of the first rate cut at the March monetary policy meeting. However, some economists have said that after December’s employment numbers, it is unlikely that the U.S. central bank will be ready to cut rates that early in the new year. The latest employment data shows 216,000 jobs were created last month and wages grew by 0.4%. At the same time, Philip Streible, chief market strategist at Blue Line Futures, said that rate cut expectations stay elevated because some analysts believe the latest jobs report shows cracks in the labour market are starting to appear. He noted that many government jobs in the December report seem to be skewing the data. Streible added that with a March rate cut on the table, gold should be well supported above $2,000 an ounce; however, he added that he doesn’t know if there is enough momentum to push prices solidly above $2,050 an ounce. “Right now, it is a coin flip and that will keep gold in this consolidation range,” he said. James Stanley, senior market strategist said that the price action this week indicates that gold is capped at $2,050 in the near-term; however, he added that the gold bears will find a difficult path on the downside as the Federal Reserve is still expected to lower interest rates this year. “Think this resistance will hold long enough to give a dip... but that may take a month or two,” Stanley said. “When the Fed does formally pivot this thing can take off. But real rates will need to get higher first before they can declare a ‘W’ on inflation, and with an election year I think they'd want to have that pivot a little closer to November. Ideally gold should push below 2k and wash out some longs first. Then, more money on the side-lines could further propel higher.”
U.S. home prices have continued to climb, according to CoreLogic data, with tumbling mortgage rates helping prop up the nation's supply-starved housing market. The analytics firm said Tuesday that prices jumped 5.2% year-on-year nationwide in November, up from a 4.7% gain the previous month. It expects them to rise another 2.5% over the next 12 months, despite expectations that slowing economic growth could chip away at Americans' spending power in 2024. The housing market stagnated last year – but there have been signs of a thaw in recent months, with mortgage rates falling away from 23-year highs. The average 30-year fixed-rate mortgage has dropped from 7.9% in late October to 6.6% as of January 4, per data from Freddie Mac. Lower borrowing costs tend to boost demand, driving house prices higher. Consistently low inventory levels have further fuelled the run-up in prices, with the U.S. short anywhere between 1.5 million and 5.5 million homes, according to estimates by the Biden Administration and the National Association of Realtors.
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.
This is not a solicitation to purchase or sell.