The Precious Metals Week in Review

18/11/2024

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

                                   Gold                            Silver

Support                       2565/2528/2510         30.21/29.55/28.29

Resistance                  2692/2741/2799         31.68/32.55/33.82

                                    Platinum                     Palladium

Support                       941/916/911                956/927/904

Resistance                  979/992/1016             1001/1018/10471.

1. There was another quarter-point cut to short-term interest rates last Thursday from the Federal Reserve. With the election over, stocks soaring, and rates declining, frothy optimism is bubbling up in the capital markets. With inflation at 2.4% in September, within fractions of the 2% target, Fed officials decided to cut interest rates by another 0.25%. The challenge remains: soft-land the economy. The Fed controls one interest rate: the federal funds rate, the short-term rate banks use to borrow from each other. The target range for the federal funds rate currently stands at 4.50-4.75%. As the Fed lowers interest rates, businesses have greater access to cheaper capital. That encourages expansion, hiring, and often: stock performance. However, stocks in banks and the financial services industry may dip under profit pressure as their margins tighten. That's why a proper mix of investments, called asset allocation, helps moderate the risk you take

2. The global silver market is on pace to record a physical deficit in 2024 for the fourth consecutive year, with the growth of demand from industry as the main driver, according to the latest Interim Silver Market Review from the Silver Institute. “Record industrial demand and a recovery in jewelry and silverware will lift demand to 1.21 billion ounces in 2024, while mine supply will rise by just 1%,” they said. “Exchange-traded products are on track for their first annual inflows in three years as expectations of Fed rate cuts, periods of dollar weakness and falling yields have raised silver’s investment appeal. The silver price has posted a remarkable rally during 2024-to-date, nearly touching $35 for the first time since 2012,” they wrote. “Through to November 7, prices have surged by 34% since the beginning of this year. Leaving aside a brief drop to a three-year low of 73, the gold: silver ratio has largely held between 80 and 90 so far in 2024.” Global demand for silver is projected to rise by 1% year-over-year to 1.21 billion ounces in 2024, which would make this year the second highest for demand since Metals Focus began its series in 2010. “Most of silver’s demand segments are expected to strengthen this year, led by industrial applications,” the authors wrote. “This leaves physical investment as the only key demand component to post a meaningful decline"

3. Oil clung to November lows, trading near $68 a barrel, as increasingly bearish fundamentals capped gains. In the physical market, a key supply gauge suggests a glut is coming sooner than expected while, in the futures market, time spreads are flashing signs of oversupply. Also weighing on oil: OPEC cut its demand growth forecasts for a fourth consecutive month and the dollar hit a one-year high, making commodities priced in the currency less attractive. “It’ll be a choppy trade in the mid-60s to mid-70s until the market gets more clarity on the driving narratives,” said Jon Byrne, analyst at Strategas Securities. Traders continue to track tensions in the Middle East, the prospects of a second Trump presidency, and OPEC+ decisions on output. The outlook remains weak, with global supply expected to outpace demand next year. China’s latest measures to kick-start its economy stopped short of direct stimulus, and inflation remains weak.

4. Inflation continued to push prices up in October, with prices rising at the fastest monthly rate since April. The consumer price index rose 0.2 percent in October, matching the prior month, the Department of Labor said Wednesday. Before rounding, prices were up 0.244 percent, the first time since April the unrounded figure has risen above two percent. This was the third consecutive month of prices rising 0.2 percent on a month-to-month basis. On a year-over-year basis, inflation picked up from the 2.4 percent rate recorded in September to 2.6 percent. Core prices, which exclude food and energy, rose 0.3 percent and were up 3.3 percent from a year earlier. Housing prices rose 0.4 percent, accounting for over half of the overall increase. The food increase climbed 0.2 percent, with groceries rising 0.1 percent and dining-out prices rising 0.2 percent.

5. U.S. stocks sank on Friday, on track for steep weekly losses as investors absorbed Chairman Jerome Powell's signal that the Federal Reserve won't hurry to make interest-rate cuts. The S&P 500 dropped 1.4%, while the Dow Jones Industrial Average slid 0.8%. The tech-heavy Nasdaq Composite led decliners, falling nearly 2.3%. The S&P has already reversed one-third of its post-election rally, and the Nasdaq is poised for a weekly loss of over 3%. Retail sales data released on Friday reflected continued resilience in the American consumer, a sign of the economic strength Powell suggested would allow the Fed to take its time. October sales rose 0.4% month on month, versus 0.3% expected, including a revision higher for September's reading to 0.8% from 0.4%.

 6.The number of Americans filing new applications for unemployment benefits fell last week, suggesting the labor market continued to chug along and that the abrupt slowdown in job growth in October was a potential aberration. Initial claims for state unemployment benefits dropped 4,000 to a seasonally adjusted 217,000 for the week ended Nov. 9, the Labour Department said on Thursday. Economists polled had forecast 223,000 claims for the latest week. Easing labour market conditions are expected to encourage the Federal Reserve to deliver a third interest rate cut next month, even as progress lowering inflation has stalled

7. Crude oil prices looked set for yet another weekly loss, pressured by the perception of softer-than-expected demand in China. The decline comes in spite of the International Energy Agency’s recent upward revision of oil demand growth for this year. Brent crude was trading at $71.63 per barrel at the time of writing, and West Texas Intermediate was changing hands for $67.82 per barrel, both down from the opening in Asia.

8. Further losses could see EUR/USD testing its 2024 low at 1.0495 (November 14), before the 2023 bottom at 1.0448 (October 3). On the upside, immediate resistance lies at the 200-day SMA of 1.0865, seconded by the November high at 1.0936 (November 6) and the provisional 55-day SMA at 1.0947. In addition, the short-term technical outlook remains bearish as long as EUR/USD stays below the 200-day SMA. EUR/USD stayed under pressure on Thursday, marking its fifth consecutive decline and dipping to new 2024 lows in the sub-1.0500 region.

9. The Japanese Yen appreciates as the U.S. Dollar corrects downwards ahead of Retail Sales data. Japan’s GDP annualized growth for Q3 was 0.9%, slowing down from the 2.2% growth recorded in Q2. Japan’s Kato stated that he would take appropriate action to address excessive fluctuations in foreign exchange rates.

 October retail sales grew from the prior month, reflecting continued resilience in the American consumer. Retail sales rose 0.4% in October. Economists had expected a 0.3% rise in spending, according to the data. Meanwhile, retail sales in September were revised up to a 0.8% increase from the prior reading that showed a 0.4% increase in the month, according to Census Bureau data. Auto sales drove the majority of the gains in October's reading, with sales in the sector rising 1.6%. October sales, excluding auto and gas, rose just 0.1%, below consensus estimates for a 0.3% increase. The control group in Tuesday's release, which excludes several volatile categories and factors into the gross domestic product reading for the quarter, decreased by 0.1% in October, below estimates for 0.3% increase. However, both categories saw large revisions for September sales. Revisions showed sales in both groups increased 1.2% in September, up from a previous reading of 0.7% growth. "The underlying weakness in October’s retail sales was accompanied by an upward revision to September’s gain, suggesting that consumption growth is still going strong," Capital Economics North America economist Bradley Saunders wrote in a note to clients Friday morning. 

Mortgage rates stalled an upward rise this week as financial markets adjusted to a second Trump presidency. The average 30-year mortgage rate was essentially unchanged at 6.78% for the week through Wednesday, compared to 6.79% a week earlier, according to Freddie Mac data. Average 15-year mortgage rates followed the same pattern, hitting 5.99% this week versus 6% a week earlier. “After a six-week climb, rates have leveled off, but overall affordability continues to be an issue for potential homebuyers,” said Sam Khater, Freddie Mac’s chief economist. “Our latest research shows that mortgage payments compared to rents on the same homes are elevated relative to most of the last three decades."

 Markets are pricing in the central bank's third interest rate cut as it inches closer to its inflation target of 2% over the long run. Why is the target set at 2%? Inflation data has long been a precursor of Fed policy changes because of the central bank's dual mandate to promote maximum employment and price stability. While the central bank has never explicitly defined a number for maximum employment, inflation expectations have been anchored to 2% since 2012. David Wilcox, an economist with the Peterson Institute for International Economics, said that the 2% target gives the central bank ample room to adjust policy to maintain the health of the economy. “You want a little bit of a buffer for the Fed to be able to cut interest rates when times are normal so that if the economy tips into recession, there's room for the Fed to take action against it,” Wilcox said. “You want to start out with interest rates high enough above zero so that there's latitude for the Fed to ease conditions, to lower interest rates, to bring mortgage rates down, and borrowing rates for cars.” The 2% target has been widely adopted by central banks around the world today. 

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.