The Precious Metals Week in Review

22/07/2024 

 

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

                                    Gold                            Silver

Support                       2365/2320/2290         29.10/28.79/28.50

Resistance                  2440/2470/2515         31.55/32.34/32.90

 

                                    Platinum                     Palladium

Support                       960/885/844                933/895/860

Resistance                 1010/1023/1045         1066/1104/1152

 

1. The stock market’s fixation on quarterly earnings and short-term performance makes it a suboptimal funding venue for companies critical to the energy transition. Money managers overseeing private equity and debt portfolios are now emerging as a powerful force in climate finance. It’s a timely development, as capital-intensive green tech companies struggle to attract sufficient investment and high-carbon large caps face diminished interest from shareholders for ambitious decarbonization plans. An energy crisis, as well as higher inflation and interest rates, have complicated the energy transition. And add to that a protracted stock market selloff: Since the beginning of last year, the S&P Global Clean Energy Index is down 28%, compared with the 45% increase in the S&P 500 Index. There’s a mismatched time horizon between the demands of public market investors and the requisite period for decarbonization. And some corporate leaders are now concluding that shareholders focused on short-term returns will not support them anymore. It’s very difficult for the CEO of a company to go to their shareholders and say I’m going to invest 3 billion in a new asset that’s going to radically change our carbon footprint and create new growth, but the cash flows are coming in five or seven years. That doesn’t work. 

2. Expectations that the Federal Reserve will cut interest rates are pushing gold prices to fresh record highs, but one market strategist says that the best is yet to come for gold. In an interview Robert Minter, Director of Investment Strategy said Federal Reserve Chair Jerome Powell’s testimony before Congress last week appears to be the watershed moment markets have been waiting for. Following last week’s comments, gold prices managed to hold support at $2,400 and have now broken the top range of their two-month consolidation with August gold futures hitting a new all-time high of $2,470.20 an ounce. The rally comes as markets have all but fully priced in a rate cut in September. As to how high gold prices can go, Minter added that he is no longer focused on a specific price target, as he pays more attention to the trend and upside potential. With its new all-time highs, gold prices are up more than 19% in 2024, but Minter said this is just the start of the precious metal’s full potential. “Powell, with his comments last week, sent investors an invitation to gold’s party and now we are just waiting for the RSVPs,” he said. “When you look back at the last three Fed fund cycles, they’ve resulted in gold eventually rising 57%, 235%, and 69%.” At the same time, Minter said that he doesn’t expect central banks will stop their gold purchase programs anytime soon as they continue to diversify away from the U.S. dollar. While gold is attracting the most attention, Minter said that he is also bullish on silver and copper. While investors are all jumping on the AI bandwagon, he said that few people are paying attention to the infrastructure needed to drive this new technology. 

3. S. import prices were unchanged in June as lower prices for energy products offset a rebound in the cost of food, the Bureau of Labour Statistics said on Tuesday. The flat reading in import prices followed a 0.2% drop in May. Economists polled by Reuters had expected import prices, which exclude tariffs, to dip 0.1%. In the 12 months through June, import prices increased 1.6%. That followed a 1.4% advance in May. Government data last week showed consumer prices fell in June for the first time in four years. 

4. At some of the world’s biggest asset managers, ESG fund launches are quietly stalling. BlackRock, Deutsche Bank AG’s DWS Group, Invesco, and the asset management arm of UBS Group AG are among firms that have cut the number of new funds with environmental, social and governance mandates, according to data provided by Morningstar Direct. This year through the end of May, just over 100 ESG funds were launched globally, putting the industry on track to fall well short of levels seen in recent years, the data show. By comparison, there were 566 ESG fund launches during all of 2023, which was down from the 993 seen in 2022. What’s more, the 16 ESG funds opened in May represent the lowest monthly tally since the beginning of 2020. Against a backdrop of political attacks in the U.S. combined with a crackdown on greenwashing in Europe, it’s the latest sign that the finance industry is cooling to the ESG label. According to Morningstar, BlackRock has started four new ESG funds this year, compared with 36 in 2022 and 23 last year. DWS is down to three this year from 25 in 2023. Invesco has launched just one ESG fund so far in 2024, compared with 12 in 2023. UBS has introduced six sustainable funds this year, down from 16 last year and 26 in 2022. “Launches of ESG funds have plummeted due to adverse performance, poor product design and politics,” said Huw van Steenis, partner and vice chair at Oliver Wyman. “Once again, investors have learned the hard way that investing by acronym is never an enduring way to allocate capital.” 

5. Weekly jobless claims rose more than expected last week in the latest sign of a cooling labor market. New data from the Department of Labor showed 243,000 initial jobless claims were filed in the week ending July 13, up from 222,000 the week prior and above the 229,000 economists had expected. This tied with a weekly jobless claims reading from June for the highest level of weekly filings since August 2023. Meanwhile, the number of continuing applications for unemployment benefits hit its highest level since November 2021, with nearly 1.87 million claims filed in the week ending July 6, up from 1.85 the week prior. The bottom line is clear, while layoffs remain subdued, the unemployment rate is gradually trending higher because hiring is not strong enough to absorb all new native- and foreign-born labor force entrants. The updrift in the unemployment rate has been welcomed by Fed officials so far, but we agree with Chair Powell’s assessment that the labor market is now fully back in balance. 

6. S. oil futures on Thursday held to gains after jumping 2.6% in the previous session as crude inventories fell for the third week in a row. U.S. commercial crude inventories fell by 4.9 million barrels last week, though gasoline stocks rose by 3.3 million barrels and motor fuel demand weakened by 615,000 barrels per day. West Texas Intermediate August contract: $82.82 per barrel, down 3 cents. Year to date, U.S. crude oil has gained 15.6%. Brent September contract: $85.11 per barrel, up 3 cents. Year to date, the global benchmark is ahead 10.5%. 

7. The Euro first rallied a bit during the week, but as we got through the ECB meeting, it was clear that the Europeans may still be cutting rates later, perhaps even in September. So, with that, the Euro gave up some of the gains and now it just looks like a market that is staying in the same compressed area that it’s been in for a while. EUR/USD stays on the back foot and trades below 1.0900 following Thursday's sharp decline. Dovish comments from European Central Bank officials and the risk-averse market atmosphere make it difficult for the pair to stage a rebound on Friday. 

8. The U.S. dollar plunged during a major portion of the week, but it looks like the 155-yen level is trying to hold out of support. This of course is a large round psychologically significant figure and an area that people will be paying close attention to. So, with that being said, it looks like we are going to do something along the lines of forming a hammer. If we can break above the top of the candlestick, then it could open up the possibility of a move to the 160-yen level. And then perhaps to the 162-yen level. 

U.S. stocks wavered on Friday as worries over a global IT outage calmed, with Wall Street looking for recovery from a sell-off that saw the Dow snap a run of wins and a tech rout continue. Stocks are facing weekly losses after a wobbly handful of sessions that saw a dive in techs, with AI-focused chip stocks bearing the brunt. Investors are rotating out of the tech heavyweights that have fueled the recent rally and into small caps, seen by some as benefiting more from interest-rate cuts. In the early hours, investors assessed the potential impact of an "unprecedented" failure in computer systems worldwide that grounded flights and hit banks, telecoms and media companies, among others. But concerns eased after CrowdStrike said a fix was in place for the glitch, a botched update that affected Microsoft-based systems. CrowdStrike shares plunged as much as 20% as the outage spread, but pared losses to around 12% at the open. Shares in Microsoft, which was working on problems with its Azure cloud services were slightly lower but also recovering.

Gold rallied toward a record as expectations for Federal Reserve rate cuts grow and traders ramp up bets on a second Donald Trump presidency. Spot bullion rose 0.8% to just below $2,443 an ounce after increasing Monday to within $11 of the peak set in late May. Traders see two quarter-point rate reductions this year, a move that would traditionally benefit the non-interest-bearing yellow metal, as inflation cools. Gold is almost 20% higher for the year, supported by anticipation of Fed rate cuts, as well as significant buying by central banks. Ongoing geopolitical tensions have also supported the precious metal, which is traditionally seen as a safe-haven asset. “Optimism about U.S. interest rate cuts as more economic data supports the case for a Fed pivot is supporting gold,” said Ewa Manthey, a commodities strategist at ING Bank NV. “Gold is poised to keep its positive momentum going amid the current global geopolitical and macroeconomic landscape, while central bank demand is expected to grow.” On Monday, Fed Chair Jerome Powell said recent data had given policymakers greater confidence that inflation is heading down to the central bank’s 2% goal.

U.S. stocks tumbled on Thursday, reversing early gains as investors continued to rotate away from high-priced mega-cap growth stocks and second-quarter earnings season gathered steam. All three major U.S. stock indexes suffered steep losses, and the blue-chip Dow fell the most, halting a series of consecutive record closing highs. Tech stocks failed to make a comeback, as a sell-off broadened after the Nasdaq's worst day since 2022. The tech-heavy Nasdaq Composite fell more than 0.7%, while the S&P 500 lost around 0.8%. The Dow Jones Industrial Average slipped more than 1%, or nearly 550 points. Meanwhile, the small-cap Russell 2000 index, which had recently been on a historic rip higher, fell nearly 2% on the day. The rally on Wall Street hit increasing turbulence this week as political, geopolitical, and trade risks unsettled a market that was finally confident that the Fed would cut interest rates this year. A sign the labor market is cooling further bolstered those rate-cut hopes on Thursday. The number of continuing applications for unemployment benefits once again hit its highest level since November 2021.

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 buy or sell