A Daily Journey Through the Week's Market
Monday - 6.17.24: Gold and silver prices fell on Monday due to a lack of significant news, with traders focusing on external markets. The U.S. dollar strengthened, Treasury yields rose, and U.S. stock indexes neared record highs. August gold dropped $14.90 to $2,334.20, and July silver fell $0.132 to $29.34. Asian and European markets were mixed, and U.S. markets are expected to open mixed. Despite Wednesday's U.S. holiday, key economic data, including the retail sales report, will be released this week.
Tuesday - 6.18.24: Central bank gold purchases continue to shape the gold market, with 29% of central banks planning to increase reserves in the next year, the highest since 2018, according to the World Gold Council. The shift is driven by a need to rebalance holdings and concerns over financial markets. Despite China's recent halt in gold buying, overall central bank demand remains strong. The survey also highlights a declining confidence in the U.S. dollar as a reserve currency, with 62% predicting its diminished role within five years.
Wednesday - 6.19.24: The gold market was closed on Wednesday, June 19, 2024, in observance of the Juneteenth holiday. Major U.S. markets, including the gold market, did not operate on this federal holiday, which has been recognized since 2021
Thursday - 6.20.24: Gold prices rose sharply and silver prices surged in midday U.S. trading Thursday, both reaching nearly two-week highs. This increase is driven by bargain hunting and technical buying, as well as a bullish shift in market sentiment following a weak U.S. retail sales report. August gold increased by $21.60 to $2,368.70, and July silver rose by $1.151 to $30.72. Additionally, Switzerland’s central bank unexpectedly cut its main interest rate to 1.25%, boosting market optimism for easing monetary policies from major central banks.
Friday - 6.21.24: Gold prices reached a two-week high in early U.S. trading on Friday, boosted by improved technical charts and growing expectations of potential rate cuts by the Federal Reserve and other major central banks. August gold rose $11.10 to $2,380.00, while July silver fell $0.246 to $30.575. The upward movement in gold was driven by a weaker U.S. retail sales report and disappointing economic data from the Eurozone, which fueled speculation of eased monetary policies. Meanwhile, U.S. and European stock indexes saw declines, influenced by a NVIDIA-led sell-off. The U.S. dollar index was firmer, with Nymex crude oil prices steady around $81.25 per barrel. Gold bulls are aiming to close above the June high of $2,406.70, with current resistance at $2,390.00 and support at $2,368.60. Silver bulls are targeting a close above $31.67, with immediate resistance at $30.905 and support at $30.28
CBO Projects Federal Budget Deficit to Nearly $2 Trillion Amid Rising Spending
The Congressional Budget Office (CBO) forecasts the federal budget deficit will hit $1.9 trillion in fiscal 2024, the third-largest in U.S. history. This significant increase, driven by factors such as student loan debt cancellations and costs from bank failures, represents a $408 billion rise from previous estimates. The CBO projects the deficit will continue growing, surpassing $2 trillion annually by 2030. Rising mandatory spending on Social Security, Medicare, and interest expenses, along with higher interest rates, contribute to this unsustainable debt trajectory, emphasizing the need for urgent fiscal reforms.
Tech's Dominance: The Main Driver Behind the S&P 500's Bull Market
From June 18, 2019, to June 18, 2024, the S&P 500 index's impressive growth has been largely driven by technology stocks, particularly Nvidia and other megacaps. The tech sector's impact is profound, with the "magnificent seven" stocks (Apple, Nvidia, Microsoft, Meta, Alphabet, Amazon, Tesla) contributing approximately 75% of this year's gains. Without these tech giants, the S&P 500's performance would be significantly less impressive, showing only a 69% gain over five years compared to a 106% gain with tech stocks included. This highlights tech as the primary driver of the bull market, as the rest of the market still lags behind. While AI-driven productivity improvements might boost broader market growth in the future, the current bull market owes its strength predominantly to the dominance of U.S. technology giants.
Thailand Joins China in Pushing Gold Prices Amid Shifting Global Market Dynamics
Thailand has recently emerged as a significant player in the global gold market, shedding its historical sensitivity to gold prices and becoming a net importer alongside China. This shift, marked by substantial gold purchases since November 2023, reflects broader changes in global economic dynamics, particularly the eastward movement of gold pricing power. These developments are part of a larger trend towards de-dollarization, with countries in Asia increasingly favoring gold and local currencies over the US dollar for trade and reserves. Central to this transformation is mBridge, an international payments project utilizing central bank digital currencies (CBDCs) and distributed ledger technology (DLT), which promises more efficient and politically neutral cross-border transactions. This new system, coupled with geopolitical tensions and inflation, has driven both public and private sectors in Thailand to bolster their gold holdings as a hedge against uncertainty.
Société Générale Retains Gold Holdings Amid Pre-Election Uncertainty
Société Générale (SoGen) is steadfastly maintaining a 5% allocation in gold, even as it reduces its broader commodity exposure ahead of the U.S. elections in November. Citing geopolitical uncertainties and a strategic shift towards more secure reserves, the French bank underscores gold's role as a stable asset amid fluctuating oil prices and central banks' ongoing diversification away from USD assets. Despite potential market corrections, SoGen's bullish stance on gold persists, reflecting its value as a hedge against inflation and economic volatility.
Illusions of Prosperity: Unmasking the Truth Behind Biden’s Overestimated Job Growth
Despite the Biden administration's claims of robust job growth, new data from the Federal Reserve Bank of Philadelphia reveals a starkly different reality. Contrary to the Bureau of Labor Statistics' reports of a healthy 1.6% annualized job growth in late 2023, the Philadelphia Fed's comprehensive analysis shows a meager 0.3% rate, indicating that over 500,000 jobs reported as added simply do not exist. This significant discrepancy highlights a broader issue of official economic metrics, such as the Consumer Price Index, not accurately reflecting the real cost of living faced by Americans. With mortgage payments having more than doubled since January 2021 while reported shelter costs rose only 22%, it’s no surprise that many Americans are disillusioned with the state of the economy. This misalignment between reported data and the public’s economic reality calls for a critical reassessment of how economic health is measured and reported.
Japan Follows BRICS in Dumping U.S. Bonds Amid Financial Turmoil
Japan has joined the BRICS alliance in a significant move to dump U.S. and European sovereign bonds, offloading $63 billion by March 2024 to mitigate losses from adverse interest rate bets. This sale represents nearly one-sixth of the Central Bank of Japan's portfolio, mirroring actions taken by BRICS members like China, which has offloaded $73 billion in U.S. bonds. Faced with a plunging yen and rising foreign-currency funding costs, Japan's financial institutions, including Norinchukin Bank, are shifting their investment strategies to reduce interest-rate risk and diversify into corporate assets. This strategy aims to safeguard against the economic strain as Japan anticipates a substantial net loss of 1.5 trillion yen for the fiscal year. This financial repositioning highlights a growing trend of de-dollarization and a move away from traditional U.S. and European debt instruments amidst global economic uncertainty.
Gold Prices Steady Despite Unexpected Drop in Philly Fed Manufacturing Index
Gold prices remained stable after the Philadelphia Federal Reserve's manufacturing survey for June showed a significant decline to 1.3 from May's 4.5, falling short of economists' expectations. The survey indicated decreases in new orders and shipments, alongside ongoing employment declines and rising inflation pressures. Despite the disappointing economic data, spot gold traded at $2,341.62, showing resilience in the market. This stability underscores gold's role as a safe-haven asset amidst mixed economic signals.
Clash of Financial Titans: Robert Kiyosaki and Warren Buffett Diverge on Gold Investment Strategies
In a heated debate within the financial community, Robert Kiyosaki, renowned author of the "Rich Dad Poor Dad" series, has openly criticized Warren Buffett's longstanding aversion to gold investment. Buffett, the esteemed founder of Berkshire Hathaway, has consistently dismissed gold as a non-productive asset, preferring investments that generate income such as real estate and stocks. Kiyosaki, a staunch advocate for gold as a hedge against economic instability, vehemently disagrees, highlighting the precious metal’s value in preserving wealth during financial downturns. He argues that Buffett's perspective is flawed, pointing out that Buffett manages others' money rather than his own. This critique comes despite Buffett's significant personal stake in Berkshire Hathaway stock. As economic forecasts suggest rising gold prices, with some predicting a 1,400% increase by 2025, the debate underscores contrasting investment philosophies between prioritizing income-generating assets versus safeguarding against economic uncertainty.
Next Week’s Key Events
Monday, June 24
● None scheduled
Tuesday, June 25
● 9:00 am: S&P Case-Shiller Home Price Index (April)
● 10:00 am: Consumer Confidence (May)
Wednesday, June 26
● 10:00 am: New Home Sales (May)
Thursday, June 27
● 8:30 am: Initial Jobless Claims (June 22)
● 8:30 am: GDP (2nd revision) (Q1)
● 10:00 am: Pending Home Sales (May)
Friday, June 28
● 8:30 am: PCE index (May)
● 10:00 am: Consumer Sentiment (final) (June)
IMPACT ON PRECIOUS METALS MARKETS
S&P Case-Shiller Home Price Index: Rising home prices can signal economic strength, potentially leading to higher interest rates which can negatively impact gold and silver prices. Conversely, if home prices decline, it may indicate economic weakness, increasing demand for gold and silver as safe-haven assets.
Consumer Confidence: High consumer confidence suggests a robust economy, which can lead to increased risk appetite and lower demand for gold and silver. Low consumer confidence can increase demand for these metals as investors seek safe havens during economic uncertainty.
New Home Sales: Strong new home sales can indicate economic strength and potentially higher interest rates, which can negatively affect gold and silver. Weak home sales may boost demand for precious metals as safe-haven investments.
Initial Jobless Claims: Higher-than-expected jobless claims can signal economic distress, increasing demand for gold and silver. Lower-than-expected claims can indicate a strong labor market, reducing the appeal of precious metals.
GDP: A strong GDP growth rate can lead to higher interest rates, negatively affecting gold and silver prices. A weak GDP figure can increase demand for these metals as safe-haven assets.
Pending Home Sales: An increase in pending home sales indicates economic strength, potentially leading to higher interest rates and lower gold and silver prices. A decrease can signal economic weakness, boosting demand for precious metals.
PCE Index: The Personal Consumption Expenditures (PCE) index is a key inflation measure. Higher inflation can lead to higher gold and silver prices as these metals are seen as hedges against inflation. Lower inflation can reduce their appeal.
Consumer Sentiment: High consumer sentiment can indicate economic optimism, potentially reducing demand for gold and silver. Low sentiment can increase demand for these metals as investors seek safe havens during periods of economic uncertainty.
