Welcome to this week’s installment of the Weekly Silver and Gold Rush Newsletter. This is your essential guide to understanding market trends, economic factors, and geopolitical dynamics that shape the climate for gold and silver. Dive into our analysis to get a comprehensive understanding of the dynamics shaping the precious metals markets. By reading this, you're not just keeping pace with the markets, you're staying a step ahead.
The Gold Trail: A Daily Journey Through the Week's Market
Monday - 11.06.23: Gold and silver prices have slightly declined in early U.S. trading Monday amidst increasing risk appetite indicated by a strong rally in U.S. stock indexes last week. The lack of new developments in the Israel-Hamas conflict has improved market sentiment, reducing the demand for gold and silver as safe havens.
Tuesday - 11.07.23: Gold and silver prices are down in early U.S. trading Tuesday, with October trade data from China showing a significant decline in exports and a modest increase in imports. China's central bank bought 181 tonnes amid inflation concerns and a move away from the U.S. dollar. Analysts are paying attention to these purchases, especially with discrepancies in China and Russia's reported acquisitions, signaling strong investment interest within China due to its economic challenges.
Wednesday - 11.08.23: Gold prices dipped this morning due to disappointing economic data from China, affecting the broader commodities market, with gold at $1966.78, down by $11.36, and silver at $22.61, down 22 cents. Despite these drops and an unfavorable environment of rising Treasury yields and a strong U.S. dollar, gold had previously seen its strongest October increase in nearly 50 years, surging 7.3%.
Thursday - 11.09.23: Gold and silver prices remain stable, with gold at $1964.23 (down $5.22) and silver at $22.73 (up 9 cents). Concerns are rising over the U.S. debt's growing cost, exceeding $1 trillion in 19 months, raising questions about fiscal policy. The recent Fitch Ratings downgrade of U.S. government debt underscores inflation and currency devaluation risks, emphasizing gold's role as a hedge. The market perceives this as a consolidation period, awaiting market direction.
Friday- 11.10.23: Gold and silver prices are down in early U.S. trading on Friday, influenced by Federal Reserve Chairman Jerome Powell's hawkish tone regarding U.S. monetary policy, as well as technical selling pressure due to deteriorating chart postures for both metals. December gold is down $19.30 at $1,950.50, and December silver has decreased by $0.38 to $22.525. Powell's comments at an IMF forum, hinting at further tightening of monetary policy if needed, led to a rise in bond yields and the U.S. dollar index, adversely affecting gold prices. Meanwhile, the global markets experienced weakness, and there were reports of a major ransomware attack on China's largest bank, ICBC, potentially impacting the U.S. Treasury market, as evidenced by a poorly received 30-year U.S. Treasury auction. The specifics of the attack's impact on the auction remain unclear.
Gold Prices Unmoved by Weak Consumer Sentiment and Persistent Inflation
Gold prices continue to face downward pressure, showing little response to the latest consumer sentiment and inflation data. The University of Michigan's preliminary Consumer Sentiment Index for November dropped to 60.4, a significant decline from October's 63.8, and below the anticipated stable reading of 63.7. This decline suggests a potential decrease in consumption growth. Despite these indicators and ongoing high inflation, the gold market remains unaffected. December gold futures have fallen by 1%, trading at $1,948.50 an ounce. The market's lack of reaction is thought to be influenced by recent comments from Federal Reserve Chair Jerome Powell, who expressed doubt about the sufficiency of current monetary policy in achieving the 2% inflation target.
Gold to Rise Amidst Fed's Faltering Resolve
As the shadows of economic uncertainty loom large, Federal Reserve Chair Jerome Powell's recent admission sends a chill down the spine of the financial world. With a voice tinged with doubt, Powell concedes that the Fed's aggressive tactics may yet fall short in their crusade against the stubborn demon of inflation. As the specter of continued inflation haunts the markets, the Fed's hesitation to escalate interest rates signals a retreat that could see gold reclaim its throne. Investors, brace yourselves: the glint of gold may soon be the beacon of refuge as the Fed grapples with its own faltering confidence, possibly ushering in a new era where gold, once again, becomes the investor's sanctuary in the face of a relentless inflationary tide.
ICBC Cyberattack Impacts U.S. Treasury Trades
The U.S. financial services division of the Industrial and Commercial Bank of China (ICBC), the world's largest bank by assets, suffered a significant ransomware attack, leading to disruptions in the trading of U.S. Treasuries. The attack, executed using LockBit 3.0 ransomware, was swiftly contained by ICBC, which isolated the impacted systems. Despite ICBC clearing U.S. Treasury and repo financing trades, reports suggest that the attack caused settlement issues in Treasury trades for other market participants. The U.S. Treasury Department is closely monitoring the situation, while ICBC confirms that its email and business systems in the U.S. operate independently from its China operations and other affiliated institutions, which remained unaffected. The Chinese Ministry of Foreign Affairs acknowledged the attack and ICBC's response efforts. LockBit, the group behind the ransomware, is known for its "ransomware-as-a-service" model and has been implicated in multiple high-profile attacks globally.
How Steady Jobless Claims Subdued Gold This Week
Despite a slight drop in weekly jobless claims in the U.S. to 217,000, gold prices remain subdued, resisting the anticipated support from signs of slack in the labor market. The market is not reacting significantly to these figures, with December gold futures experiencing a modest decline. This stability in jobless claims, coupled with a rising four-week moving average and continuing claims, suggests a challenging job environment. Some analysts believe this should bolster gold, traditionally a safe-haven asset, especially as the Federal Reserve looks for labor market weakness to consider rate cuts.
The Tight Grip of Scarcity: U.S. Housing Inventory Hits New Lows
The U.S. housing market is experiencing a sustained shortage, with the number of homes for sale dropping by 4% in October compared to the previous year. This exacerbates an already critical situation where housing supply is down 41.8% from pre-pandemic levels. Despite historically high mortgage rates, the market pressures result in high prices and quick sales for the limited inventory available. Realtor.com's Chief Economist Danielle Hale notes that the market is adjusting, with some buyers hastening to secure purchases before potential rate increases, indicating a complex interplay of demand, supply, and financial factors.
Gold's Potential Climb to $2,400 in the Forecast
Philip Petursson of IG Wealth Management predicts a significant rise in gold prices, despite the dampening effects of a strong U.S. dollar throughout 2023. He suggests that gold is currently undervalued by as much as 20% and poised for a breakout, potentially reaching $2,400 per ounce. The projection is based on the expectation that the U.S. dollar will soften, which is positively correlated with gold prices. This bullish outlook is maintained even amidst high bond yields and anticipates a soft landing for the U.S. economy, avoiding a recession and leading to cautious optimism for equities in the next year
CBDCs: Is Economic Liberty in Peril?
In the guise of progress, the BIS signals a financial revolution with CBDCs at its core, promising innovation but portending a surveillance state where every dollar you spend could be tracked, every investment monitored. Agustín Carstens may tout security and public service, but the truth is stark—this digital shift could strip away the last vestiges of our financial privacy. Brace for a future where 'Big Brother' isn't just watching; he's auditing every transaction. This isn't modernization; it's an economic panopticon.
Fiscal Fears: The Looming Risk of a Government Shutdown
Danielle DiMartino Booth, CEO of QI Research, warns that markets are underestimating the risk of an imminent U.S. government shutdown, with Congress deeply divided and a November 17th deadline approaching. Despite a dysfunctional Congress and unresolved demands from the far right, there is a glimmer of political hope she hints at. Meanwhile, the U.S. grapples with an already present recession and escalating bankruptcies, highlighted by WeWork's recent filing. DiMartino Booth projects this distress to deepen, affecting corporate bonds and leading to a surge in bankruptcies as businesses face untenable refinancing conditions, reflecting the broader economic strain.
Powell Indicates Further Rate Hikes on the Horizon Amid Inflation Challenges
In a cautious address, Federal Reserve Chair Jerome Powell highlighted the uncertainties in the ongoing fight against inflation, suggesting that the journey to the 2% inflation target is fraught with unpredictability and "head fakes." Although recent policy has seen interest rates maintained at their highest in over two decades, Powell intimated the possibility of further rate hikes if deemed necessary to tackle persistent inflation, underscoring a lack of confidence in having yet reached an effective policy stance.
Next Week’s Key Events
Monday, November 13:
- No major economic reports are scheduled.
Tuesday, November 14:
Wednesday, November 15:
- 8:30 am: Producer Price Index (PPI) for October
- 8:30 am: U.S. Retail Sales for October
- 8:30 am: Empire State Manufacturing Survey for November
Thursday, November 16:
- 8:30 am: Initial Jobless Claims for the week of November 11
- 8:30 am: Philadelphia Fed Manufacturing Survey for November
- 9:15 am: Industrial Production and Capacity Utilization for October
Friday, November 17:
- 8:30 am: Housing Starts for October
HOW THESE REPORTS MIGHT IMPACT THE GOLD AND SILVER MARKETS:
NFIB Optimism Index: A higher than expected reading can be bearish for gold and silver as it indicates a positive outlook among small businesses, which can lead to bullish stock markets and reduced demand for safe-haven assets.
Consumer Price Index (CPI): A higher CPI suggests rising inflation, which could be bullish for gold and silver as they are traditionally seen as hedges against inflation.
Producer Price Index (PPI): Like the CPI, a higher PPI indicates inflation at the production level, potentially pushing investors towards gold and silver as protective investments.
U.S. Retail Sales: Strong retail sales may strengthen the U.S. dollar, leading to a bearish impact on gold and silver prices as they become more expensive in other currencies.
Empire State Manufacturing Survey: An index that indicates better-than-expected growth can boost investor confidence in the economy, reducing the appeal of gold and silver as safe havens.
Initial Jobless Claims: Lower jobless claims are a sign of a healthy labor market, which can strengthen the dollar and be bearish for precious metals.
Philadelphia Fed Manufacturing Survey: Positive data can enhance risk appetite, reducing demand for gold and silver.
Industrial Production and Capacity Utilization: Higher industrial activity can increase the risk appetite, potentially decreasing the demand for gold and silver.
Housing Starts: Increased housing starts can signify an economic upturn, leading to reduced interest in precious metals as safe havens.