The Precious Metals Week in Review

04/11/2024

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

                                 Gold                           Silver

Support                    2718/2688/2668         32.30/32.07/31.06

Resistance               2767/2788/2817         34.70/35.70/36.52

                                Platinum                     Palladium

Support                   990/978/945               1086/1047/1001

Resistance             1045/1047/1063          1231/1270/1323

1. Gold’s historic rise of approximately 35% this year is a result of a combination of factors creating a perfect storm scenario. Geopolitical political conflicts, Federal Reserve interest rate normalization, continued strong demand from global central banks, and uncertainties about the outcome of the upcoming presidential election and the possibility of more fiscal stimulus are the primary components driving gold higher. According to Dow Jones newswires, central banks, particularly in emerging markets, have been aggressive buyers as they seek to reduce their dependence on the U.S. dollar. This sustained institutional demand has provided significant support to gold prices throughout the year. The combination of geopolitical instability anticipated monetary easing, strong central bank demand, and U.S. political uncertainty has created what analysts describe as a "perfect storm" for gold prices. As these factors continue to evolve, market participants will be looking closely to see if gold can breach the psychologically significant $2,800 level in the near term. 

2. The U.S. economy grew at a slightly less rapid pace than economists had expected in the third quarter. The Bureau of Economic Analysis's advance estimate of third quarter gross domestic product showed the economy grew at an annualized pace of 2.8% during the period, below the 2.9% growth expected by economists surveyed. The reading came in lower than the 3% growth seen in the second quarter. Meanwhile, the "core" Personal Consumption Expenditures index, which excludes the volatile food and energy categories, grew by 2.2% in the second quarter, above estimates of 2.1% but significantly lower than the 2.8% gain in the prior quarter. 

3. American consumers are feeling quite a bit more confident this month as Election Day approaches, a business research group says. The Conference Board said Tuesday that its consumer confidence index jumped to 108.7 in October from 99.2 in September. It was the biggest monthly gain since March of 2021. Analysts forecast a more modest reading of 99.3. The consumer confidence index measures both Americans’ assessment of current economic conditions and their outlook for the next six months. The measure of Americans’ short-term expectations for income, business and the job market jumped to 89.1. The Conference Board says a reading under 80 can signal a potential recession in the near future. Consumer spending accounts for nearly 70% of U.S. economic activity and is closely watched by economists for signs how the American consumer is feeling. 

4. U.S. job openings tumbled last month to their lowest level since January 2021, a sign that the labour market is losing some momentum. The Labor Department reported on Tuesday that the number of job openings dropped to 7.4 million in September from 7.9 million in August. Economists had expected the level of openings to be virtually unchanged. The number of layoffs also rose. And the number of Americans who quit their jobs fell below 3.1 million, the lowest level since August 2020, a sign that more people are losing confidence in their ability to find better work elsewhere. 

5. Electric vehicles have been touted as an environmentally friendly solution to the climate crisis, giving passengers a smooth, emission-free ride. But it seems the electric revolution, deemed essential to curb carbon emissions, is running out of road. It’s been revealed that global EV sales have slumped in recent months for three top manufacturers, as the public struggles to fall in love with the technology. Tesla saw quarterly EV sales fall from a peak of 484,500 in Q4 2023 to just 386,800 in the first quarter of 2024. Chinese car manufacturer BYD, the world's largest seller of electric vehicles saw global EV sales crash earlier this year. In the first quarter of this year, it sold just over 300,000 EVs – dramatically down from 526,000 in the final quarter of last year. Similarly, German carmaker Volkswagen sold 239,500 EVs in Q4 2023, but only 136,400 the following quarter, although sales recovered to 180,800 in Q2 this year. It comes as Volkswagen has been forced to close three of its factories and slash jobs, partly due to a slower-than-expected transition to electric vehicles. Consumers are also concerned with electric vehicles depreciating faster than traditional cars, these concerns are particularly tied to battery degradation, which affects a car’s range and performance over time. Meanwhile, EV fires have made headlines globally, including a high-profile battery fire in a Korean parking lot in August – creating doubts among consumers. 

6. In the week ending October 26, the advance figure for seasonally adjusted initial claims was 216,000, a decrease of 12,000 from the previous week's revised level. The previous week's level was revised by 1,000 from 227,000 to 228,000. The 4-week moving average was 236,500, a decrease of 2,250 from the previous week's revised average. The previous week's average was revised up by 250 from 238,500 to 238,750. The advance seasonally adjusted insured unemployment rate was 1.2 percent for the week ending October 19, unchanged from the previous week's revised rate. 

7. Oil jumped more than 2% before paring gains Friday on a report Iran may be preparing an attack against Israel, a move that puts the market focus back on escalating tensions between Tel Aviv and the oil producing country. West Texas Intermediate futures rose to hover above $70 per barrel while Brent, the international benchmark, traded just below $74. 

8. EUR/USD loses its traction and declines toward 1.0850 after testing 1.0900 earlier in the session. Because Nonfarm Payrolls data for October missed the market expectation by a wide margin due to hurricanes and strikes, the U.S. Dollar manages to hold its ground. 

9. The Japanese Yen depreciated following the release of Manufacturing PMI on Friday. The headline Jibun Bank Japan Manufacturing PMI registered at 49.2 in October, reflecting a decrease from 49.7 in September. U.S. Nonfarm Payrolls are expected to increase by 113,000 jobs in October, a decline from the previous count of 254,000. 

The U.S. labour market added far fewer jobs than expected in October as weather disruptions and worker strikes weighed on the labour market. Data from the Bureau of Labour Statistics released Friday showed the labour market added 12,000 payrolls in October, less than the 100,000 expected by economists. Meanwhile, the unemployment rate held steady at 4.1%, partly due to a difference in how the BLS collects data for that metric versus monthly job additions. Workers who were employed but earned no money wouldn't be counted as unemployed in the household survey, which is where the unemployment rate comes from. October job additions came in far lower than the revised 223,000 added in September. Monthly job additions for August and September were also revised lower by a combined 112,000. 

Contracts to buy U.S. previously owned homes jumped by the most in more than four years in September on a mix of more attractive interest rates and improving inventory of properties for sale. The National Association of Realtors said on Wednesday its Pending Home Sales Index, based on signed contracts, rose 7.4% last month to 75.8 - the highest since March - from 70.6 in August. Economists polled had forecast contracts, which become sales after a month or two, would rise 1.0% after increasing 0.6% in August from a record low in July. September's month-on-month increase was the largest since June 2020's 14.9% gain, while on a year-over-year basis the national sales rate was up 2.6% - the biggest jump since May 2021. 

Mortgage rates rose for a fifth straight week as pre-election volatility continued to rock the bond market. The average 30-year fixed-rate mortgage was 6.72% in the week through Wednesday, according to Freddie Mac data, up from 6.54% a week earlier. Fifteen-year mortgage rates also increased to 5.99% from 5.71% a week ago. "With several potential inflection points happening over the next week, including the jobs report, the 2024 election, and the Federal Reserve interest rate decision, we can expect mortgage rates to remain volatile," Sam Khater, Freddie Mac’s chief economist, said in a statement. "Although uncertainty will remain, it does appear mortgage rates are cresting, and we do not expect them to reach the highs that we saw earlier this year.”

Average mortgage rates have been marching steadily higher after reaching a two-year low of 6.08% in late September. 

Volatility should be expected to remain high as investors will be closely watching for hints on the upcoming monetary policy direction. Many investors have redoubled their efforts to ensure that their portfolios are sufficiently diversified in the hope 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.