A Daily Journey Through the Week's Market
Monday - 10.28.24: Gold and silver saw significant gains, with silver reaching a 12-year high above $33 per ounce. The rally was largely fueled by geopolitical uncertainties and election-related concerns in the U.S., pushing demand for these metals as safe-haven assets. Rising tensions, particularly in the Middle East, boosted demand despite pressures from a strong dollar and rising U.S. bond yields. Investors continued to favor gold amidst ongoing geopolitical risk and speculation on monetary policy shifts in major economies such as China and the Eurozone, where easing measures have increased gold's appeal as a hedge against economic instability.
Tuesday - 10.29.24: Gold prices remained high as investors responded to heightened volatility across global markets. The precious metal surpassed $2,750 per ounce, reflecting sustained demand amid safe-haven buying and strong technical market signals. With further price pressures on the horizon due to unresolved global conflicts and central bank asset adjustments. Meanwhile, a renewed interest in silver investments also contributed to a favorable environment for both metals.
Wednesday - 10.30.24: Gold and silver held their elevated levels, with gold reaching near-record highs, fueled by global inflation fears and investor moves into precious metals as protection against economic turbulence. ETF demand for gold surged as central banks worldwide continued to increase their holdings. In anticipation of potential rate cuts by the Federal Reserve, market sentiment around gold remained bullish. Analysts pointed out that ETF inflows, particularly from Asian markets, were increasingly offsetting previous outflows from Western markets, underscoring the sustained confidence in gold despite economic headwinds.
Thursday - 10.31.24: gold and silver maintained their elevated positions as global inflationary concerns and recession fears drove persistent demand for safe-haven assets. Spot gold climbed further, approaching record levels amid heightened expectations for central bank gold buying, particularly from Asian economies where ETF inflows surged, counterbalancing outflows from Western markets. Analysts noted that with the Federal Reserve potentially signaling upcoming rate cuts, investors appeared increasingly bullish on gold’s potential as a hedge against economic instability. Meanwhile, silver mirrored gold's strength, benefiting from dual industrial and precious metal demand, as market sentiment remained steady amid fluctuating equity markets.
Friday - 11.01.24: Gold prices saw a modest rise as the U.S. reported only 12,000 new jobs in October, well below the expected 100,000, with potential hurricane impacts adding uncertainty to the data. Despite the low job gains, wage inflation increased by 0.4%, keeping inflation concerns elevated and making a 25-basis-point Fed rate cut likely next week. Revisions to August and September job numbers further signaled a softening labor market, with gold futures reaching $2,769 per ounce as investors weighed the Fed’s next moves amid economic slowdown signals.
Gold holds steady as weak U.S. job data suggests Fed could stay on course
Driving the news
The U.S. economy created just 12,000 jobs in October, falling sharply below expectations of 100,000 and sparking a modest rally in gold. December gold futures are trading near session highs at $2,769 an ounce, up 0.72% on the day.
By the numbers
- Nonfarm payrolls: +12,000 (vs. expected +100,000)
- Unemployment rate: 4.1% (unchanged)
- Wage growth: +0.4% in October, totaling a 4.0% annual increase
Context
Economists suggest hurricane impacts in Southern states may have skewed the job figures, complicating analysis of labor market trends.
“The establishment survey isn’t designed to isolate effects from extreme weather,” noted the Bureau of Labor Statistics.
What they’re saying
- Michael Brown, Senior Research Strategist at Pepperstone: “This report isn’t likely to alter the FOMC’s stance much, but if labor markets continue weakening, a 50-basis-point cut could be in play.”
- Despite the job growth miss, a 25-basis-point rate cut next week remains anticipated, with more cuts expected until the Fed reaches a neutral rate target of around 3% by next summer.
Revisions reveal labor weakness
The latest data follows significant downward revisions for August and September, with 112,000 fewer jobs than initially reported
Inflation rate nears Fed target at 2.1% in September
The personal consumption expenditures (PCE) price index rose 0.2% in September, bringing the annual rate to 2.1%—right on target with Dow Jones estimates. Core inflation, which excludes food and energy, came in at 2.7% on a 0.3% monthly rise, slightly above expectations.
Behind the numbers: Inflation gains were driven by services, up 0.3%, while goods saw a 0.1% dip—marking the fourth decline in five months. Housing costs slowed to a 0.3% rise, and energy prices continued to drop, down 2%.
Job market signals: Unemployment claims dropped to 216,000, below the expected 230,000, reflecting a steady job market as companies hold onto workers.
Consumer behavior: Personal income rose 0.3%, aligning with projections, while consumer spending exceeded expectations, climbing 0.5%. However, the personal savings rate hit a year low of 4.6%.
Looking ahead: The data has intensified market expectations for a rate cut in the Fed’s upcoming meeting, following the half-point reduction in September. Policymakers are cautiously optimistic about inflation nearing target levels, while keeping a close watch on labor market resilience and consumer activity.
Linking Gold to the U.S. Dollar: The Risks of America’s Debt and Fiat System
The big picture: America's soaring debt is raising alarms about the stability of the U.S. dollar, prompting calls to revisit a gold-linked monetary system.
What's happening: Dr. Judy Shelton, a Senior Fellow at the Independent Institute and former economic advisor to President Trump, warns that U.S. debt—approaching $36 trillion—poses an "existential threat" to economic stability.
- The cost of servicing this debt now exceeds what the U.S. spends on defense annually.
- Projections from the Congressional Budget Office (CBO) estimate that over the next decade, interest on U.S. debt will total $10.6 trillion—nearly double earlier forecasts.
Why it matters: Shelton argues the U.S. needs to return to "sound money" principles, possibly by re-establishing a gold standard, to prevent further erosion of the dollar’s value.
- Since the gold-dollar link was severed in 1971, federal debt has skyrocketed from $400 billion to today’s levels.
- Shelton’s new book, Good as Gold, suggests the world experienced greater prosperity when currencies were tied to gold.
Zoom in: The Federal Reserve's current role and its "no-limit" powers are contributing to the problem, says Shelton.
- She believes the Fed’s ability to create money and influence interest rates has become too extensive and politically entangled.
- Shelton suggests Congress should consider limiting the Fed's powers to prevent it from dominating U.S. economic policy.
Shelton's proposal: Create new Treasury Trust Bonds backed by the U.S.'s gold reserves—the largest in the world at over 8,100 metric tons.
- Bondholders could choose to redeem their bonds for a pre-specified amount of gold or the dollar value at maturity.
- This would symbolize a commitment to maintaining the dollar's purchasing power.
Between the lines: The U.S. currently values its gold reserves at a historical book price of $42.22 per ounce, despite market prices exceeding $2,700—suggesting a significant gap that could be leveraged.
The bottom line: Shelton is pushing for reforms that could either restore aspects of the Bretton Woods system or develop a new gold standard, aiming to stabilize the dollar and restore long-term economic security.
Gold Prices Soar Amid Rising Debt and Elevated Bond Yields
What's happening: Gold has surged to a record $2,800 an ounce, even as U.S. bond yields remain high, underscoring the metal's appeal in uncertain economic times.
Driving the news: Elevated U.S. debt and bond yields have raised concerns among investors, with some questioning the stability of the dollar.
- The yield on U.S. 10-year notes recently climbed above 4%, reflecting a resilient economy and job market.
- But according to Sprott Inc.'s Ryan McIntyre, the real issue lies in rising U.S. debt, now over $35 trillion, which could lead to inflation and dollar devaluation.
What they're saying: “The question is, as U.S. debt continues to rise, what yield will attract new investors?” said McIntyre. He suggests that concerns over future inflation and currency debasement are drawing investors to safe-haven assets like gold.
Why it matters: Elevated bond yields typically pressure non-yielding assets like gold. However, record U.S. debt and high bond yields are pushing gold to new highs, as investors look for alternatives to the dollar and ways to protect their portfolios.
Alternative assets: Bitcoin has also surged, surpassing $70,000, reflecting a similar desire for dollar alternatives. However, McIntyre noted that gold holds an edge over digital currencies with its long-standing status as a safe haven.
Investor takeaways:
- Gold holdings: McIntyre recommends that investors consider holding around 10% of their portfolio in physical gold as a hedge.
- Mining stocks: For added leverage, a 5% allocation in precious metals mining stocks may benefit from rising gold prices.
The bottom line: Despite high bond yields, gold's rally shows no signs of slowing as debt concerns and economic uncertainty grow, making it a valuable addition to risk-averse portfolios.
BRICS’ Big Move: More Than De-Dollarization
What's happening: At the recent BRICS summit in Kazan, the coalition revealed plans to go beyond de-dollarization—it's aiming for “de-Westernization.” According to French economist Jacques Sapir, the bloc's actions could reshape the global economy and reduce the West’s dominance.
Key takeaways from the summit:
- BRICS Zone Expansion: The summit institutionalized a “partner countries” category, incorporating nations like Indonesia and Thailand. This forms a "BRICS Zone" that could make BRICS the dominant force in Asia.
- BRICS Clear System: A new settlement system, BRICS Clear, will enable trade among BRICS and partner nations without relying on the dollar or SWIFT. Instead, it’ll use a stablecoin to facilitate multilateral transactions.
- BRICS (Re)Insurance Company: BRICS will create its own insurance company to support intra-zone trade, reducing reliance on Western insurers.
Why it matters: BRICS now represents over 33% of global GDP, surpassing the G7’s 29%, and Sapir argues that de-Westernization initiatives like BRICS Clear and the (Re)Insurance Company could reshape global trade flows.
What they're saying: “The de-dollarized portion through BRICS Clear could reach 19-25% of global trade within five years,” said Sapir. This could bring the dollar’s share in central bank reserves down from 58% to around 35-40%, potentially triggering massive sales of U.S. Treasury bonds and causing instability in the public bond market.
The bottom line: As BRICS moves away from dollar dependence, its reach could cause a rebalancing in global finance, altering trade patterns and diminishing the U.S. dollar's role in international transactions.
Next Week’s Key Events
Monday, November 4
- No Major Reports
Tuesday, November 5
- 10:00 am - ISM Services Index for October
Wednesday, November 6
- 9:45 am - S&P Final U.S. Services PMI for October
Thursday, November 7
- 8:30 am - Initial Jobless Claims for the week of November 2
- 2:00 pm - FOMC Interest-Rate Decision
- 3:00 pm - Consumer Credit for September
Friday, November 8
- 10:00 am - Consumer Sentiment for November
IMPACT ON PRECIOUS METALS MARKETS
ISM Services Index
This indicator reflects the strength of the service sector, a major economic component. A robust report can boost confidence in economic growth, potentially pressuring gold and silver prices due to reduced safe-haven demand. However, a weak reading might increase demand for these metals as protective assets amid economic concerns.
S&P Final U.S. Services PMI
Similar to the ISM Services report, this PMI data provides insight into economic health. High performance in the service sector can signal resilience, possibly lessening the appeal of gold and silver. Conversely, a low reading could signal economic softness, possibly prompting a move to safe-haven investments.
Initial Jobless Claims
An increase in claims may imply labor market weaknesses, potentially raising concerns over economic stability and bolstering safe-haven demand for precious metals. A decrease in claims would likely signal job market resilience, which could weigh down gold and silver demand if economic optimism rises.
FOMC Interest-Rate Decision
The Fed's rate decision has a critical impact on the dollar and bond yields, both key influences on precious metal prices. A rate hike can strengthen the dollar, making gold and silver more expensive for foreign investors and potentially lowering demand. Conversely, a pause or cut might weaken the dollar, boosting demand for gold and silver as hedges.
Consumer Credit
Rising consumer credit suggests increased borrowing, often signaling economic confidence but also risk of higher personal debt levels. High credit growth may imply future inflation risks, increasing the appeal of gold and silver as inflation hedges.
Consumer Sentiment (Prelim)
Consumer confidence affects spending and economic optimism. A strong reading might reduce safe-haven demand for gold and silver as confidence rises. A weak sentiment report, however, may indicate consumer caution, potentially increasing safe-haven demand.
