A Daily Journey Through the Week's Market
Monday - 7.15.24: Gold prices are near unchanged, and silver prices are lower in early U.S. trading Monday, following a tumultuous weekend and ahead of remarks from Federal Reserve Chairman Jerome Powell. Traders are digesting a failed assassination attempt on former President Trump and expecting an interest rate cut following the Fed's dovish stance last week.
Tuesday - 7.16.24: Gold prices hit a seven-week high in early U.S. trading Tuesday, with August gold up $16.30 at $2,445.20 and September silver up $0.144 at $31.08. Bullish sentiment is driven by technical buying and expectations of U.S. interest rate cuts, as signaled by Fed Chairman Powell. The market awaits June's retail sales report, expected to show a 0.4% decline from May's 0.1% rise.
Wednesday - 7.17.24: Expectations of Federal Reserve interest rate cuts are driving gold prices to record highs, with one strategist predicting further gains. Robert Minter, Director of Investment Strategy at abrdn, told Kitco News that Fed Chair Jerome Powell’s recent congressional testimony was a pivotal moment. Powell highlighted balanced economic risks, noting that elevated inflation is not the sole concern. Following these comments, gold held support at $2,400 and broke out of its two-month consolidation, with August gold futures reaching a new high of $2,470.20 an ounce.
Thursday - 7.18.24: Gold prices are nearing the all-time high of $2,487.40, driven by bullish technical factors, expectations of Federal Reserve rate cuts, and safe-haven demand. Meanwhile, silver prices lag despite gold's rally, though they might gain if gold continues to rise. August gold increased by $10.10 to $2,470.00, and September silver rose by $0.253 to $30.63. Reports indicate increased gold purchases by Chinese consumers due to economic concerns and negative U.S. rhetoric. Asian and European stock indexes were mixed overnight, and U.S. indexes are set for a mixed opening.
Friday - 7.19.24: Gold prices plunged in early U.S. trading Friday due to heavy profit-taking and weak long liquidation after reaching a record high earlier this week. August gold dropped $50.60 to $2,406.30, while September silver fell $1.039 to $29.185, hitting a three-week low. Analysts partly attribute the gold sell-off to concerns about China's weakening economy, potentially reducing demand for commodities. A major Microsoft/CrowdStrike software glitch has also disrupted businesses and computers globally, including airlines and banks.
Global Chaos: Massive Cyber Glitch Disrupts Services Worldwide
A massive global technology outage early Friday, caused by a software glitch in CrowdStrike's cybersecurity update, led to widespread chaos as airlines, medical services, TV broadcasts, banks, and emergency call centers were shut down. Britain's National Health Service was particularly hard hit, unable to access critical computer systems. Although systems are gradually recovering, the event is being compared to the 2017 WannaCry ransomware attack, affecting numerous countries. Despite the turmoil, gold prices remained largely unaffected, continuing to see profit-taking after reaching an all-time high earlier in the week.
IMF Urges U.S. to Delay Rate Cuts and Increase Taxes to Address Mounting Debt
The International Monetary Fund (IMF) has recommended that the U.S. hold off on reducing interest rates until late 2024 and raise taxes to curb the rapidly growing federal debt. The advice follows an Article IV consultation, highlighting the strong performance of the U.S. economy post-pandemic, yet uneven income distribution and persistent poverty. Despite the Federal Reserve's policy rate hikes stabilizing inflation, the IMF warns that premature rate cuts could undermine progress. They suggest fiscal adjustments, including tax increases for households earning under $400,000, eliminating tax expenditures, and reforming entitlement programs, to achieve a sustainable debt-to-GDP ratio. Additionally, the IMF advocates for policy changes to bolster competitiveness through investments in worker training and infrastructure rather than trade restrictions.
Gold Demand Surges Amid September Rate Cut Expectations and Trump's Economic Policies
The anticipated September rate cut from the Federal Reserve and former President Donald Trump's advocacy for lower interest rates and tariffs are driving increased demand for gold. Spot gold reached an intraday high of $2,475 per ounce, with market forecasts predicting a 93-98% likelihood of a rate cut. Lower interest rates generally enhance the appeal of non-yielding assets like gold, and Trump's economic policies are seen as potentially inflationary, which could weaken the dollar and boost gold prices as a safe-haven asset. Despite these supportive factors, the strong U.S. dollar and stable retail sales are moderating gold’s momentum. Technical analysis indicates a bullish trend for gold, with key resistance levels to watch at $2484.03 and $2508.05, while a break below $2462.54 could trigger a selloff.
Russia Eyes Cryptocurrencies for Cross-Border Payments Amid Sanctions Strain
As Russia faces economic pressure due to Western sanctions, the government is considering legislation to allow cryptocurrencies for international transactions. Yuri Chekhanchin, head of the Federal Financial Monitoring Service, emphasized the need for this shift to support Russian businesses struggling with payment delays from major partners like China. The new law, set for a parliamentary vote on July 23, will enable cross-border crypto payments but maintains a domestic ban. President Putin has praised the progress on a digital rouble but highlighted energy supply concerns from mining operations. Amid these developments, trade with China has become riskier due to tightened U.S. sanctions, causing payment issues even with direct yuan transactions. This move toward digital currencies aims to mitigate the impact of sanctions on Russia’s economy, which has seen reduced trade openness and increased reliance on domestic demand.
J.P. Morgan Forecasts Gold Prices to Average $2,500 per Ounce in Q4 2024
Despite recent sharp gains, J.P. Morgan remains bullish on gold, predicting it will average $2,500 per ounce in the fourth quarter of 2024. This forecast is driven by a weaker U.S. dollar, anticipated rate cuts, and strong central bank demand. According to the firm's strategists, gold's decoupling from real yields and the persistent geopolitical uncertainties will continue to support its price. Additionally, any retracement is seen as a buying opportunity ahead of the expected Fed rate cuts. With gold already reaching new highs, the firm also predicts that prices could hit $2,600 per ounce in 2025.
Gold Hits Record High Wednesday Before Easing on Profit-Taking
Gold reached an all-time high of $2,487.40 (basis August Comex futures) overnight before easing to $2,461.40 by midday Wednesday due to routine profit-taking by short-term traders. Despite this pullback, the bullish outlook for gold remains strong, driven by expectations of lower interest rates from major central banks, including the Federal Reserve. Silver, although sharply lower, is likely to follow gold's upward trend if the rally continues. Key market influences include a lower U.S. dollar index and rising crude oil prices. Technically, gold bulls aim to close above $2,500, while bears target support at $2,400. Silver's near-term resistance is at $32.015, with support at $28.90.
Gold Keeps Climbing Despite Powell's Ambiguity on Rate Cuts
Gold surged to $2,424 on speculation of a rate cut, underscoring the precious metal's resilience despite Federal Reserve Chair Jerome Powell's mixed signals. Despite a brief retreat after hitting an all-time high, gold remains buoyed by inflation easing and economic uncertainties. Robert Minter of abrdn noted that high consumer debt and potential labor market stress support the case for a September rate cut. Additionally, central bank gold demand, geopolitical tensions, and economic weakness continue to drive gold prices upward. Investors are advised to stay ahead of these shifting dynamics as gold's long-term outlook remains bullish.
Zimbabwe's Desperate Dependence on US Dollars: A Stark Contrast to BRICS' De-Dollarization Agenda
While BRICS promotes ditching the US dollar, Zimbabwe’s reality paints a grim picture. Plagued by a decade of hyperinflation, Zimbabweans have abandoned their worthless local currency for the US dollar, their only financial lifeline. In a shocking testament to this crisis, US fintech companies are flying millions of dollars in hard cash to Zimbabwe weekly.
Private jets, landing in the dead of night at Harare's guarded airport, offload boxes of US dollars for distribution. This clandestine yet legal operation, spearheaded by the mobile money app Mukuru, highlights the absurd lengths Zimbabwe must go to for economic survival. As BRICS champions de-dollarization, Zimbabwe’s reliance on the greenback only deepens.
The severity of Zimbabwe’s plight is undeniable. People scramble to acquire US dollars, abandoning their rapidly devaluing local currency. The demand is so intense that even hyperinflation experts are taken aback. The contrast couldn’t be starker: while BRICS envisions a world less dependent on the US dollar, Zimbabwe’s desperate measures reveal a harsh truth—without stable foreign currency, their economy is doomed.
Biden’s Debt Mirage: Judicial Smackdown Leaves Borrowers in Limbo
In a staggering blow to President Biden’s misguided attempt to offload billions in student loan debt onto taxpayers, the U.S. Eighth Circuit Court of Appeals has decisively blocked the administration’s latest version of its debt relief scheme. This ruling, propelled by seven Republican states, exposes the hollow promises and legal missteps of a plan that sought to unjustly burden working Americans with astronomical debts from Ivy League elites. As the administration scrambles to salvage its crumbling agenda, millions of borrowers are left in a precarious financial limbo, victims of a government more interested in political handouts than lawful governance.
Biden’s Campaign on the Brink: Will He Be Forced to Step Down?
As President Biden faces mounting pressure from within his own party, former President Obama has dealt a significant blow by urging Biden to reconsider his re-election bid. Democratic insiders, alarmed by dwindling donor support and Biden's faltering approval, are pushing for his withdrawal. With whispers of Biden's acceptance growing louder, the party braces for a potential shake-up. The internal discord, driven by financial concerns and strategic miscalculations, underscores a tumultuous prelude to the 2024 election, threatening to upend the Democratic nomination process.
Trump Picks Vance: A MAGA Ticket for 2024
As the Republican National Convention unfolds, Donald Trump has made a bold move by selecting Ohio Senator J.D. Vance as his vice-presidential nominee. This choice underscores Trump's commitment to his MAGA agenda, distancing himself from the Republican establishment. Despite criticisms from party consultants who favored a more centrist pick, Trump’s decision highlights his alignment with populist values. Vance, a Yale Law graduate with a compelling rags-to-riches story, embodies the struggles and aspirations of Trump’s base. His deep-rooted opposition to globalism and advocacy for American workers resonate strongly with the core MAGA supporters, making this a defining moment in the 2024 election campaign.
Next Week’s Key Events
Monday, July 22
- None scheduled
Tuesday, July 23
- 10:00 am: Existing Home Sales (June)
Wednesday, July 24
- 10:00 am: New Home Sales (June)
Thursday, July 25
- 8:30 am: GDP (Q2)
- 8:30 am: Initial Jobless Claims (July 20)
Friday, July 26
- 8:30 am: PCE Report (June)
- 10:00 am: Consumer Sentiment (July)
IMPACT ON PRECIOUS METALS MARKETS
Existing Home Sales
A strong existing home sales report can indicate a healthy economy, potentially increasing confidence in the stock market and decreasing demand for safe-haven assets like gold and silver. Conversely, weak sales could lead to higher demand for these metals as investors seek safer investments.
New Home Sales
Similar to existing home sales, strong new home sales can reflect economic strength, reducing demand for gold and silver. Weak sales might boost demand for precious metals as a hedge against economic uncertainty.
GDP (Q2)
A higher-than-expected GDP growth rate can signal a robust economy, leading to a potential drop in gold and silver prices as investors move towards riskier assets. A lower GDP growth rate could increase the attractiveness of gold and silver as safe-haven investments.
Initial Jobless Claims
This report indicates the number of people filing for unemployment benefits. Lower-than-expected claims suggest a strong labor market, which could lead to higher interest rates, potentially pressuring gold and silver prices downward.
Personal Consumption Expenditures
The PCE (Personal Consumption Expenditures) report is a key inflation indicator. Higher inflation rates can increase demand for gold and silver as hedges against inflation. Low or stable inflation might reduce demand for these metals.
Consumer Sentiment
High consumer sentiment typically reflects confidence in the economy, potentially lowering the demand for gold and silver. Low consumer sentiment can increase demand for these metals as safe-haven investments in times of economic uncertainty.
