The Precious Metals Week in Review

28/05/2024 

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

                                    Gold                                  Silver

Support                       2320/2299/2266               29.10/26.71/25.48

Resistance                  2447/2480/2538               32.74/33.99/36.38

                                   Platinum                            Palladium

Support                      1022/959/925                     960/941/920

Resistance                 1119/1153/1216                  1033/1054/1090

1. After a relatively slow start in the first quarter, silver is making its move, significantly outpacing gold as it trades at an 11-year high. Just ahead of last weekend, silver prices have broken above $30 an ounce. Soaring silver prices have pushed the gold-silver ratio below 80 points, and it has been trading at its lowest level since August. According to some analysts, silver is just getting started as the precious metal has solid momentum. “Silver does not look overheated, as it is only now entering overbought territory on the RSI on the daily timeframes,” said Alex Kuptsikevich, FxPro senior market analyst, in a note last Friday. “Last month, silver was actively added for another three weeks after the RSI entered levels above 70. A two-week pullback in the second half of April later removed that overbought area. Technically, this clears the way up.” Kuptsikevich added that his near-term target for silver is $33 an ounce; however, he added that the precious metal could make a serious move to its all-time high of $50. 

2. The gold market had plenty of significant economic data and in-depth Fed speak to digest this week, and the result was one of the most dramatic moves for precious metals markets this year. Markets took comfort in comments from Fed chair Jerome Powell when he told the Foreign Bankers’ Association that he was confident the central bank would not need to hike again. Gold prices turned positive on the week early Wednesday morning, and when the April CPI report showed month-over-month improvement, that was all traders needed to begin pushing the yellow metal higher still. Wednesday evening’s triple top at the $2,400 level stalled momentum in the near term, with spot gold trending steadily downwards through Thursday's session. But by the North American market open on Friday, the bulls had returned in force, and once they propelled gold decisively through $2,400 per ounce, they never looked back. The latest Weekly Gold Survey has most industry experts believing gold prices could reach or surpass their all-time highs, while retail traders are more restrained on the precious metals prospects. James Stanley, senior market strategist at Forex also believes gold has further to fly in the near term. “Bulls put on a show this week and the move was pretty clean for the most part,” he said. “That continued the breakout from the falling wedge/bull flag in the prior week, and this week was all higher-highs and lows with a really strong move. Chasing fresh highs is always a challenge but the $2400 level has quite a bit of reference given the tests last month, and so far on Friday there’s been indications of acceptance above that price,” Stanley added. “This keeps the door open for a possible run up to $2500.” 

3. Government debt that has swelled nearly 50% since the early days of the Covid pandemic is generating elevated levels of worry both on Wall Street and in Washington. The federal IOU is now at $34.5 trillion, or about $11 trillion higher than where it stood in March 2020. As a part of the total U.S. economy, it is now more than 120%. Concern over such eye-popping numbers had been largely confined to partisan rancor on Capitol Hill as well as from watchdogs like the Committee for a Responsible Federal Budget. However, in recent days the chatter has spilled over into government and finance heavyweights, and even has one prominent Wall Street firm wondering if costs associated with the debt pose a significant risk to the stock market rally. “We’re running big structural deficits, and we’re going to have to deal with this sooner or later, and sooner is a lot more attractive than later,” Fed Chair Jerome Powell said in remarks Tuesday to an audience of bankers in Amsterdam. While he has assiduously avoided commenting on such matters, Powell encouraged the audience to read the recent Congressional Budget Office reports on the nation’s fiscal condition. “Everyone should be reading the things that they’re publishing about the U.S. budget deficit and should be very concerned that this is something that elected people need to get their arms around sooner rather than later,” he said. 

4. Gas prices are expected to rise this summer by about $0.10 per gallon amid falling refinery capacity and higher refining costs, according to government data. "U.S. retail gasoline prices will average about $3.70 per gallon for the summer driving season, which runs from May to September when the United States will have 3%, or 620,000 barrels per day less refinery capacity compared with the 2019 peak," cited in a recent Energy Information Administration report. Refineries are getting older; they may have to spend significant amounts of money replacing large pieces of equipment nearing the end of its useful life. U.S. crude futures have come down roughly 8% from their peak in April amid a ramp-up of diplomatic efforts for a ceasefire between Israel and Hamas. 

5. The Bank of Italy warned on Wednesday against fraudulent video messages circulating online, in which artificial intelligence (AI) technology is used to reproduce fake messages from financial authorities and other institutions. "Such content, known as deepfakes, is also generated using AI to modify real video or audio in order to convey and add credibility to messages that are untrue and shared with the aim of committing fraud," the central bank said. The Bank of Italy recommended users avoid sharing such messages and refrained from doing what they asked. 

6. A bankruptcy court judge has approved a plan by the cryptocurrency lender Genesis Global to return about $3 billion to its creditors and investors, including thousands of people who New York regulators say were defrauded by the company. The judge said the company misled investors about the risks of putting their money into a company program known as Gemini Earn. “This historic settlement is a major step toward ensuring the victims who invested in Genesis have a semblance of justice. Once again, we see the real-world consequences and detrimental losses that can happen because of a lack of oversight and regulation within the cryptocurrency industry.” Creditors whose claims were in U.S. dollars will be receiving 100 percent of their loan balances by the firm, which filed for bankruptcy last year. Those with claims in cryptocurrency will see some shortfall, according to the decision. Genesis was a partner for Gemini Earn, an investment program through the New York-based crypto exchange Gemini. The Winklevoss twins, Cameron and Tyler, founded Gemini in 2014 and helped pioneer the earn program in February 2021. Genesis received lent funds from Gemini while the earn program was still up and running, and when Genesis went bust in January 2023. After the collapse of FTX and Three Arrows Capital, Gemini Earn customers were looking for their money. The Winklevoss twins have said Genesis owed more than $900 million to some 340,000 Gemini Earn investors. 

7. In the week ending May 18, the advance figure for seasonally adjusted initial claims was 215,000, a decrease of 8,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 222,000 to 223,000. The 4-week moving average was 219,750, an increase of 1,750 from the previous week's revised average. The previous week's average was revised up by 250 from 217,750 to 218,000. 

8. Crude oil futures bounced back from three-month lows on Friday but are still heading to a weekly loss, as the summer driving season gets underway with the Memorial Day holiday. U.S. crude oil hit an intraday low of $76.15 in morning trading, the lowest level since Feb. 26. Global benchmark Brent fell to $80.65, the lowest level since Feb. 8. The two benchmarks turned positive later in the session but are on pace for a weekly loss of about 3.2% and 2.5%, respectively. 

9. EUR/USD seems well-supported, above the support of 1.0800 in Friday’s New York session. The strength in the major currency pair is majorly driven by strong Eurozone preliminary Purchasing Managers Index (PMI) data for May. The strong Composite PMI has improved the Eurozone’s economic outlook, but the likelihood of the European Central Bank (ECB) lowering interest rates in the short term remains firm. 

10. The Japanese Yen lost ground as Japanese CPI fell to 2.5% year over year in April from 2.7% prior. The Japanese inflation is still above the 2% target, keeping the BoJ under pressure to tighten policy further. The U.S. Dollar fails to hold gains even though uncertainty over Fed reducing interest rates in September has deepened. 

Gold and Silver especially closed higher last week, with silver surging to above $31/oz. while Gold closed at a weekly higher high, above $2400/oz. Gold is building on its cup and handle breakout, which has a measured upside target of $2900-$3000/oz. Silver is gaining strength after breaking resistance at $29-$30/oz. This was the highest weekly close for silver in over 11 years. It has a strong target of $34-$35/oz before major resistance at $50/oz. After three and a half years of correction and consolidation, gold and silver are in new bull markets and could reach price levels in the next few years, which would make some blush. Gold’s pattern has a measured upside target of $3000/oz. and a logarithmic target of $4000/oz. If Gold followed the 2005 to 2008 and 2008 to 2011 cyclical moves, it would surpass $4000/oz. Gold is only two months into its most significant breakout in 50 years. This will potentially carry silver much higher. 

Fed governor Chris Waller said Tuesday he favors holding interest rates steady for longer and needs to see several more months of favorable inflation data before lowering rates. "While the April inflation data represents progress, the amount of progress was small," Waller said in a speech in Washington. The latest April reading from the Consumer Price Index was a "reassuring signal" but also gave it a C+ grade, calling the easing "so modest" it didn’t change his view that more evidence of cooling inflation is needed. CPI on a ‘core’ basis, which strips out food and energy prices, rose 3.6% year over year, a cooling from the 3.8% increase seen in March. That followed a first quarter where the readings were consistently hotter than expected. The Fed's goal is to get inflation down to 2%. Waller became the latest central bank official to stress a higher-for-longer stance. 

Renewed interest rate concerns fueled Thursday's stock market rout, led by the Dow's more than 600-point decline. Meanwhile, U.S. Treasury yields pushed back up, with the benchmark 10-year yield hovering closer to 4.5%. A roaring mood turned sour after stronger-than-expected business data prompted a rethink on the Federal Reserve's path on interest rates. Traders are about evenly split on whether the central bank will slash rates at its September meeting. That marks a significant shift from a few days ago, when only around one-third expected the Fed to hold steady through the Fall's first meeting. Goldman Sachs on Friday said it no longer expects the Fed to make its first cut in July, instead suggesting September was most likely. 

Crypto is quickly becoming an election issue, and Ethereum is the biggest winner so far. From Monday to Tuesday, ether jumped 21%, its best two-day run since January 2021. But just before the giant surge, the prospects for the next big crypto rally had become shaky. The government had cooled on approving a suite of spot ether ETFs. The thinking was that widely available crypto ETFs would facilitate crypto adoption by latecomers. Jim Bianco of Bianco Research just poured cold water on that theory, but it seemed that spot ether ETFs wouldn't even get their chance at testing the theory. Suddenly, the cogs of bureaucracy improbably began churning again, and the surge in ether prices was underway. On Monday, Eric Balchunas and James Seyffart abruptly bumped up their odds of spot ether ETF approval to 75% from 25% after "hearing chatter that the SEC could be doing a 180 on this increasingly political issue." 

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.