The Precious Metals Week in Review 11/09/2023

04/09/2023

1. Stocks opened higher across the board on Monday as investors continued to wade through the fallout from Fed Chair Jay Powell's speech last Friday and braced for key inflation and jobs data due out this coming Thursday and Friday. Stocks finished last week's trading mixed, with the Dow falling about 0.5% while the Nasdaq rose 2.2% after Nvidia's strong earnings report on Wednesday and a market rally that followed Powell's speech in Jackson Hole Friday morning. The week's key events will come on Thursday and Friday morning when core PCE (Personal Consumption Expenditure) inflation and the August jobs report are released, respectively. Coming out of Powell's speech in Jackson Hole on Friday many on the Street see another rate hike in September as unlikely, with the path to an additional rate hike November now more demanding.
2. Bitcoin and other cryptocurrencies were dropping Monday. Crypto traders looked to still be cautious after Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole symposium on Friday kept the door open to future interest-rate increases. The largest cryptocurrency was giving up gains made over the weekend that had kept the price largely above $26,000 after choppy trading in the immediate aftermath of Powell’s speech, which left markets unsure whether the Fed’s interest-rate hiking cycle was over or not. The bears have the overall near-term technical advantage.
3. Silver’s 7.95% gain over the past week to Aug. 23 means “silver is on the cusp of reversing all the past month’s losses” and the recent bearishness in the overall market is also quickly ending, according to Nitesh Shah, Head of Commodities for Europe at WisdomTree. “Net speculative positioning in silver futures fell 88% in the month with positioning now 1 standard deviation below its 5-year average,” Shah said. “However, we suspect that excessive shorts were being covered in the past week.” He said the technical indicators for silver have also become increasingly supportive. Since hitting an intra-day local low of U.S. $22.35/oz. August 15th, silver prices have bounced up to $24.27/oz. on August 23rd (+8.6%). Shah also pointed out that silver investors appear to be less negative about the precious metal’s prospects, noting that the silver inventories in London Bullion Market Association vaults, which declined by 28% in 2022, have since stabilized and have posted gains of 3% for the year to July 2023. “That indicates more institutional investors are allocating to silver this year, but from a very low base last year,” he said. He also noted that overall interest in the metal appears to be rising. “WisdomTree have witnessed a whopping 198% rise in silver web page views in the ten days to 23 August 2023 over the prior ten days, possibly indicating that silver is once again grabbing the attention of investors.”
4. The U.S. led West will soon potentially witness the end of the dollar’s preeminent position in international trade, and all of fiat will follow, writes Patrick Barron on behalf of The Mises Institute, which endorses the Austrian school of economics in the tradition of Ludwig von Mises. 

Barron says the recent BRICS summit in Johannesburg, South Africa, included “an agreement on a first step toward establishing an alternative international trade settlement system based on commodities, which would certainly include gold.” “Although the coming change may be characterized as one between the Western democracies and the BRICS nations, the real battle is one of ideas, between Keynesian economic theory and gold,” he writes. “The winner will be gold.” Barron argues that even with the end of Bretton Woods in 1971, gold has never actually been proven inferior to fiat. “The gold standard was not replaced by a better monetary system,” he says. “It was suppressed in stages to satisfy the state’s insatiable need for money, first to make war and then to corrupt the people via welfare. The result, of course, has been never-ending wars, a creeping expansion of the welfare state, unsustainable public deficits, and the accelerating debasement of the currency.”

11. Germany is heading for a recession that is being caused by the bureaucracy around its green energy policies, the country's opposition party has warned. Once one of the world's strongest economies, Germany is now expected to have the worst performing economy of any leading nation in the world. Friedrich Merz, the leader of the Christian Democrats opposition party, claims that this slump is a direct result of the government's overly bureaucratized green energy policies, which are being led by The Greens in coalition with the Social Democrats. 'If the insane amount of bureaucracy isn't stopped soon, if energy prices don't fall quickly, then 2024 won't be a good year either.” The populist leader pledged to 'lower the tax and levy burden on energy', 'immediately reconnect decommissioned nuclear power plants to the grid', and 'adopt a moratorium on bureaucracy. He elaborated, saying:” Not a single new law should trigger additional bureaucracy.” That means, for example: We would stop the heating law. In this form, it is not only technologically flawed, but also sets in motion a huge new bureaucracy.' Nearly three quarters of Germans, 73%, are unhappy with the current coalition government, according to an opinion poll published over the weekend. Germany, long lauded as Europe's industrial powerhouse is deteriorating, with its economy registering zero growth from April to June compared to the previous quarter.
12. BlackRock is reportedly scaling back its support for shareholder proposals that push Environmental, Social, and Governance (ESG) regulations in a shocking move that indicates the anti-ESG movement is working. Environmental, Social, and Governance policies stem from a widespread investment strategy that accounts for a company’s support for environmental causes, involvement in social justice issues, and compliance with governmental ordinances. The ESG agenda has been spearheaded by investment firms and asset management groups, and BlackRock, the largest money manager in the world, has been its biggest proponent. In recent years, these policies have become the driving force for left-wing agendas in corporate culture, responsible for racial bias training, diversity, equity, and inclusion audits, and carbon emission caps. However, in the last year, public backlash against the effects of ESG investing has intensified as Republican lawmakers zero in on the agenda. This has led to significant cracks developing in the ESG push, including the purging of the acronym from corporate websites and banking strategies, as well as the S&P dropping the ESG scale from its debt rating system. According to an annual company report, BlackRock supported just 7% of the nearly 400 shareholder proposals that involved environmental and social matters in the last year. For reference, earlier cycles have seen the company support between 25% and 47% of such proposals in the past.
13. The U.S. housing market may be broken, and the Federal Reserve's aggressive interest rate hiking cycle over the past year could be to blame, according to top economist Mohamed El-Erian. "There's a real issue as to whether we've broken the housing market," the Allianz chief economic advisor said in an interview on Monday, pointing to high mortgage rates weighing on the market. The average rate on the 30-year fixed mortgage notched a fresh 23-year-high last week, clocking in at 7.48%. High rates have frozen the housing market over the past year by crimping both supply and demand. Many prospective buyers are priced out of the market due to higher costs of borrowing. Meanwhile, existing homeowners are discouraged from putting their properties up for sale, as many are looking to cling onto the low interest rates at which they financed their homes years ago. This has kept prices elevated even as demand slips. The result is a housing market in a state of limbo, with affordability unlikely to improve unless mortgage rates dial back more significantly, experts say. "When you go from record-low mortgage rates to levels that we haven't seen for almost 20 years, you've destroyed both demand and supply. And that's the irony, is that supply has come down and demand has come down as well. That is the way you destroy the housing market," El Erian said. "We've got to be really careful because the housing market is central to the economy."
14. In the week ending August 26, the advance figure for seasonally adjusted initial claims was 228,000, a decrease of 4,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 230,000 to 232,000. The 4-week moving average was 237,500, an increase of 250 from the previous week's revised average. The previous week's average was revised up by 500 from 236,750 to 237,250.
15. The per barrel price for the WTI (West Texas Intermediate) grade of crude oil reached $85 on Friday, the highest price point yet this year as falling inventory levels spook the market. WTI crude oil briefly reached $85 per barrel before sagging to $84.90 around 10:00 a.m. ET. The last time WTI traded at a level that high was November 2022. Brent crude oil was also trading up on the day, by $1.05 per barrel, or 1.21%, at $87.88, also a new 2023 record. A key factor in the rising price of crude oil are the falling inventories in the United States, which dipped another 10.6 million barrels according to the Energy Information Administration for the week ending August 25. The price rise will make it more difficult for the Biden Administration to continue the painstakingly slow process of refilling the nation’s Strategic Petroleum Reserve, which has grown by an average of 600,000 barrels per week for the last few weeks, after draining 300 million barrels out of the SPR over the last few years.
16. EUR/USD reversed its direction and fell below 1.0800, reaching 1.0780, the lowest level in a week. Following an initial negative reaction to NFP data, the U.S. Dollar experienced a significant rally and is maintaining its strength towards the end of the week. Following the release of a mixed Nonfarm Payrolls report, which saw employment rising higher than expected, wages decelerating and the unemployment rate rising above expectations in August.
17. USD/JPY trades lower around 145.40, extending losses for the second consecutive day during the European session on Friday. The pair is experiencing downward pressure as a result of an announcement by the People's Bank of China (PBoC) regarding the recent fiscal measures. USD/JPY trades nearly flat at 145.46 after dropping to a three-week low of 144.44.

The U.S. economy added 187,000 jobs in August, while unemployment unexpectedly increased as the labor market continued to show signs of cooling, data from the Bureau of Labor Statistics showed Friday. In August, the unemployment rate rose to 3.8%, up from 3.5% and the highest since February 2022. Economists had expected unemployment to remain unchanged at 3.5%. Economists surveyed had expected the economy would add 170,000 nonfarm payroll jobs in August. Revisions to the July and June jobs reports released Friday showed there were 110,000 fewer jobs created during those months than previously reported. Over the last 12 months, job gains have now averaged 271,000 per month; the economy has exceeded this pace of hiring only twice in the last nine months.

Home prices climbed for the fifth straight month in June as demand continued to outweigh supply and amid higher mortgage rates. The S&P Case-Shiller National Home Price Index increased by 0.7% in June compared with May on a seasonally adjusted basis. That was in line with the 0.7% increase the month before. The index is still just 0.02% off its all-time peak exactly a year ago. The index measuring home prices in the 20 largest U.S. cities also gained in June, rising 0.9% month over month, and exceeding the consensus estimate of a 0.8% gain. "With 2023 half over, the National Composite has risen 4.7%, which is slightly above the median full calendar year increase in more than 35 years of data," Craig J. Lazzara, managing director at S&P DJI, said in a statement. "We recognize that the market’s gains could be truncated by increases in mortgage rates or by general economic weakness, but the breadth and strength of this month’s report are consistent with an optimistic view of future results.” Home price acceleration is most notable in markets that remained relatively affordable throughout the pandemic and saw less volatility from household migration, such as those in the Midwest and New England. "Home prices in these markets are now catching up with more expensive ones." The index uses the repeat sales method to measure home price growth. This method uses data on properties that have sold at least twice to calculate the change more accurately in each home's value and is based on a three-month moving average. Speaking last week at the Jackson Hole Economic Symposium, Fed Chair Jerome Powell said inflation is still too high.

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.

 Here are your Short-Term Support and Resistance Levels for the upcoming week. 

Gold                                                               Silver

Support 1891/1868/1852                               23.12/22.03/21.47

Resistance 1947/1970/1995                          24.85/25.48/26.55

Platinum                                                        Palladium

Support 934/924/915                                     1209/1193/1172

Resistance 972/1015/1045                            1245/1265/1281

This is not a solicitation to purchase or sell.

Trading Department – Global Commodity Investments Ltd.