The Precious Metals Week in Review

December 9, 2024   

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

                                           Gold                          Silver 

Support                              2598/2543/2482         30.57/29.66/28.72 

Resistance                         2714/2776/2831         31.51/32.42/33.36 

                                            Platinum                   Palladium 

Support                                920/910/901              961/944/926 

Resistance                           956/967/980              997/1015/1032 

1. Job openings rose more than expected in October as investors continue to dissect the pace of the labor market slowdown amid questions over how much further the Federal Reserve will slash interest rates over the next year. New data from the Bureau of Labor Statistics released Wednesday showed there were 7.74 million jobs open at the end of October, an increase from the 7.37 million seen in September. Openings in September had been at their lowest level since January 2021. Economists surveyed had expected Tuesday's report to show 7.51 million openings in October. The data kicks off a busy week of labor market reports. The November jobs report is slated for release on Friday morning. Economists expect the report to show a reversal from the dismal October employment report that many believed was heavily impacted by hurricanes and worker strikes. 
2. The U.S. trade deficit contracted sharply in October as imports declined by the most since late 2022, potentially positioning trade to contribute to economic growth in the fourth quarter. The trade gap narrowed 11.9% to $73.8 billion from a revised $83.8 billion in September. Economists polled had forecasted the trade deficit easing to $75.0 billion from the previously reported $84.4 billion in September. Imports dropped 4.0%, the biggest decrease since November 2022, to $339.6 billion. Goods imports tumbled 5.5% to $269.3 billion. Trade subtracted 0.57 percentage point from GDP in the July-September quarter. It has been a drag on economic growth for three straight quarters. The economy grew at a 2.8% annualized rate in the July-September quarter. 
3. For much of the past 17 years the Federal Reserve has been the central player in U.S. economic policy, throwing multi-trillion-dollar safety nets under the financial system, offering nearly a decade of ultra-cheap money, jumping redlines during the COVID-19 pandemic, and delving more into areas like equity and climate change. But that expansive role has now shrunk to one of terse policy statements, a meat-and-potatoes debate over interest rates, a declining stash of bonds, and a growing possibility that Fed Chairman Jerome Powell may be remembered both as the man who got the U.S. through the economic crisis triggered by the pandemic and the one who made central banking boring again. The 2020 framework tried to address all of those issues with a new commitment to ‘broad-based and inclusive’ employment amid expectations that interest rates would remain low and end up near the zero level "more frequently than in the past." The ‘zero lower bound’ is the bane of a central banker's existence: Once interest rates go to zero, only bad and politically difficult options remain to further support the economy. Interest rates can be pushed into negative territory, in effect taxing people for saving, or other unconventional steps can be taken, such as large-scale bond purchases to suppress long-term rates and promises to keep rates low for a long time. The solution for the 2020 Fed was to promise periods of higher inflation to offset periods of weak price growth, which its policymakers hoped would keep inflation at the central bank's 2% target on average. What followed, for a variety of reasons, was the worst inflation in 40 years, which spurred the Fed to aggressively raise interest rates in 2022 and 2023. Whatever else that meant for the U.S. economic and political landscape, it may have also juiced the entire economy out of its lethargy and put fiscal and other policies back in the driver's seat. 
4. The U.S. economy is on solid footing right now. Economists at Bank of America expect it to stay that way through next year. In a research note released to reporters on Monday, BofA's economics team projected the economy will grow at an annualized rate of 2.4% in 2025, higher than current forecasts for 2% growth, according to the latest consensus estimates. Higher rates, coupled with a hawkish tariff policy, would strengthen the dollar and create spillover effects to global financial conditions, representing "a major shock, not only for the U.S. economy but the rest of the world," according to BofA.  
5. South Korea’s president Yoon Suk Yeol has unexpectedly declared emergency martial law, a move that came as a surprise to both investors and analysts, prompting a sharp sell-off in South Korean stocks listed in the U.S. and UK. "This has really come out of the blue," said Gareth Leather, a strategist at Capital Economics." It’s not really clear what martial law is aimed at. It serves as a reminder that Korea’s political system isn’t as stable as many people thought it was." “This is not a normal thing to happen in a developed economy,” said Lee Hardman, a currency analyst at MUFG, adding that he expected the won to come under further pressure. In the coming days, investors will be watching the performance of South Korea’s largest and most influential companies. These include Samsung Electronics, SK Hynix, a major chip maker, LG Energy Solution, a key player in the electric vehicle battery sector. 
6. Applications for U.S. unemployment benefits rose to the highest in a month during a week that included the Thanksgiving holiday. Initial claims increased by 9,000 to 224,000 in the week ended Nov. 30. The median forecast in a survey of economists called for 215,000 applications. The four-week moving average, a metric that helps smooth out volatility, edged up to 218,250. 
7. Oil prices were little changed on Thursday after OPEC+ members agreed to delay crude production increases. U.S. crude oil fell 24 cents, or 0.35%, to close at $68.30 per barrel. Brent crude futures pulled back 22 cents, or 0.3%, to settle at $72.09 per barrel. Eight OPEC+ members led by Saudi Arabia and Russia will keep voluntary production cuts of 2.2 million barrels per day in place until the end of March 2025.  
8. The EUR/USD pierced the top of the last three weeks’ trading range on Friday as the outcome of the U.S. Nonfarm Payroll report triggered some risk appetite, although the immediate reaction was quickly reversed. U.S. employment increased above expectations in November with wage inflation steady. The unemployment rate, however, has ticked higher, which keeps hopes of a December rate cut alive.
9. The Japanese Yen is seen oscillating in a narrow trading band against the U.S. Dollar on Friday. A softer risk tone, trade war fears, and geopolitical risks underpin benefit the safe-haven JPY. The USD/JPY bears seem reluctant to place aggressive bets ahead of the key U.S. NFP report.  

The U.S. economy added more jobs than forecast in November while the unemployment rate ticked higher as the labour market rebounded from a month negatively impacted by severe weather and labour strikes. Data from the Bureau of Labour Statistics released Friday showed 227,000 new jobs were created in November, just above the 220,000 expected by economists. The unemployment rate increased to 4.2%. Hurricanes and a strike by Boeing workers weighed heavily on the October report, which was revised to show there were 36,000 jobs created last month. The unemployment rate stood at 4.1% in October. Job growth for September was also revised higher on Friday, with revisions now indicating the economy added 56,000 more jobs than initially reported over those two months.  

U.S. Treasuries advanced after a weaker-than-expected gauge of service-sector activity boosted bets the Federal Reserve will cut interest rates this month. The rally left yields lower by at least three basis points, with short maturities, more sensitive to Fed policy changes, falling the most. The two-year notes yield erased an increase of three basis points and fell by more than five basis points to 4.12%, the lowest since Nov. 1. With just two weeks remaining before the Fed’s next policy decision on Dec. 18, the outlook for another quarter-point rate cut remains uncertain. Comments by Fed policymakers this week broadly show support for additional cuts, tempered by awareness of the risks of acting too quickly. “The market is just waiting on Powell and the jobs number,” said Kim Rupert, an economist at Action Economics. “We are priced for a rate cut on the 18th with the onus on the data to keep the Fed sidelined.”  

Mortgage rates were little changed this week as financial markets reacted to President-elect Donald Trump’s slate of Cabinet picks. The average 30-year mortgage rate dropped slightly to 6.81% in the week from 6.84% a week earlier. Interest rates have been hovering in the 6.8% area for four weeks straight. The 15-year mortgage rate rose to 6.1%, compared with 6.02% a week prior. “Rates have been relatively flat over the last few weeks as the market waits for more clarity on specific economic policies,” Sam Khater, Freddie Mac’s chief economist, said in a statement. Housing market activity has stayed somewhat resilient even as mortgage rates have risen from as low as 6.1% in late September. Pending home sales, a measure of housing contract activity tied to existing homes, jumped 2% in October from a month earlier. Mortgage applications also trended higher last week.  

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. 

This is not a solicitation to purchase or sell. 

Trading Department, GCILBullion.