A Daily Journey Through the Week's Market
Monday - 6.24.24: Gold and silver prices saw upward momentum on Monday. Gold futures on the COMEX rose by 0.2%, reaching $2,325.53 per ounce, while silver futures increased by 0.3%, trading at $29.59 per ounce. This price movement was driven by falling Treasury yields and investor anticipation of key US inflation data and Federal Reserve commentary expected later in the week. Additionally, global geopolitical tensions and economic uncertainties continued to bolster the demand for these precious metals as safe-haven assets
Tuesday - 6.25.24: Gold and silver prices edged up slightly in early trading. Since early March, gold prices have surged 18.6% to a record high of $2,425.3 per ounce in May. This rise is driven by factors such as the use of the US dollar in sanctions against Russia, highlighting the vulnerability of sovereign currencies; the first global inflation episode in a generation; and the projected rise in the US debt-to-GDP ratio to 166% by 2054, along with a Federal deficit expected to reach 8.5% of GDP, increasing long-term fiscal risks and making gold a more attractive reserve asset.
Wednesday - 6.26.24: Gold prices are slightly down in early U.S. trading, with gold at $2326.11, down $8.54, while silver is up 1 cent at $29.59. U.S. bank regulators have directed Bank of America, Citigroup, Goldman Sachs, and JPMorgan Chase to improve their "living wills," which detail how they would handle bankruptcy. The Federal Reserve and FDIC highlighted the need for better plans to unwind derivatives portfolios and improve contingency planning. The FDIC raised Citigroup's plan to a "deficiency" status, although the Fed disagreed. These measures aim to enhance the stability of major financial institutions and mitigate systemic risks.
Thursday - 6.27.24: Gold prices dipped slightly, trading at $2,321.20 per ounce, down $7.20. Silver, on the other hand, saw a modest increase, trading at $29.01 per ounce, up 9 cents. The precious metals market responded to mixed signals from economic data and investor sentiment, including anticipation of key U.S. inflation data and Federal Reserve commentary later in the week. Additionally, the stability in gold prices reflected ongoing concerns over inflation and geopolitical tensions, which continue to drive safe-haven demand
Friday - 6.28.244: Gold prices rose significantly in early U.S. trading, currently at $2320.82, but lack new momentum as the latest inflation data from the core Personal Consumption Expenditures (PCE) Price Index showed a 0.1% increase last month, aligning with expectations and offering no new direction for Federal Reserve policy. Silver, on the other hand, has seen a notable increase, trading above $30 an ounce following the PCE release, with analysts suggesting it may just be the beginning of a significant upward trend.
Gold Prices Remain Steady Amid Tame PCE Inflation Release
Despite solid gains, gold prices remained capped below $2,350 per ounce as the U.S. core Personal Consumption Expenditures (PCE) Price Index for May rose by 0.1%, aligning with market expectations. This slight increase, down from April’s 0.3% rise, indicated a mild inflationary environment, which provided no new impetus for the Federal Reserve's monetary policy direction. Gold futures for August last traded at $2,348.60 an ounce, down 0.51% on the day. Market analysts suggest that while the data does not alter the current narrative, it supports the Fed's potential future rate cuts, maintaining a cautious stance on inflation control.
BRICS Nations Lead the Way in Advanced CBDC Testing
Nineteen countries have reached advanced stages of testing Central Bank Digital Currencies (CBDCs), with the United Arab Emirates (UAE), a new BRICS member, among them, according to the International Monetary Fund (IMF). The Middle East is also seeing significant progress, with Bahrain and Saudi Arabia advancing in their CBDC initiatives, and Georgia and Kazakhstan moving forward with their proof-of-concept stages after successful pilot programs. The BRICS alliance aims to enhance financial inclusion and efficiency in cross-border transactions through CBDCs, potentially challenging the dominance of the US dollar in global trade. The IMF highlights the benefits for Middle Eastern and Gulf Cooperation Council countries, suggesting that CBDCs could reduce transaction costs by addressing the inefficiencies in cross-border payments.
Central Banks Pivot to Gold Amid Diminishing Faith in U.S. Dollar
Amid growing geopolitical uncertainty and persistent global inflation, central banks from advanced economies are increasingly shifting their reserves towards gold, as revealed in the World Gold Council’s latest survey. The survey, which included responses from 70 central banks, indicates that 29% plan to increase their gold holdings in the next year, with 81% expecting a rise in global central bank gold reserves. Notably, 57% of central banks from developed economies foresee a growing share of gold in global reserves over the next five years, up from 38% in 2023. This trend reflects a diminishing confidence in the U.S. dollar, particularly as U.S. government debt continues to climb, projected to reach $1.9 trillion for the 2024 fiscal year. The Federal Reserve's aggressive monetary policy and the looming U.S. elections further contribute to the uncertainty, prompting both retail investors and central banks to turn to gold as a safer asset.
NY Fed Warns of Major Risks in U.S. Banking System Amid Growing Concerns
The New York Federal Reserve has raised alarms about potential risks in the U.S. banking sector, with notable figures such as Gareth Soloway, Chief Market Strategist at VerifiedInvesting.com, highlighting troubling signs. Soloway reports that major banks are offloading bad debt, fearing a looming crisis similar to the 2008 financial meltdown due to high interest rates and a struggling commercial real estate market. He identifies technical breakdowns in bank stocks, including JPMorgan and Citigroup, as indicators of underlying issues. Despite Federal Reserve Chair Jerome Powell's reassurances about the banking system's strength and resilience, Soloway remains skeptical, pointing to the substantial risks posed by non-banks during periods of market volatility. The NY Fed's Liberty Street Economics blog echoes these concerns, warning of severe disruptions if non-banks' liquidity demands strain big banks. Furthermore, a joint statement from the Federal Reserve and the Federal Deposit Insurance Corporation revealed shortcomings in the "living wills" of JPMorgan, Bank of America, Goldman Sachs, and Citigroup, underscoring vulnerabilities in how these institutions would manage their failures.
Bank of America Predicts Gold Prices to Soar to $3,000 on Fed Rate Cuts and Geopolitical Tensions
Gold prices are projected to surge to $3,000 per ounce within the next 12 to 18 months, driven by factors such as Federal Reserve rate cuts, increasing investment demand, and central bank purchases, according to Bank of America's latest analysis. Michael Widmer, a commodity strategist at the bank, notes that geopolitical tensions and a shift in central bank reserves toward gold are also significant contributors. Despite a decline in assets under management for physically backed ETFs like the SPDR Gold Trust, private bar hoarding and central bank acquisitions have bolstered demand. The World Gold Council reports a continued appetite for gold among monetary authorities, with 29% of central banks planning to increase their reserves. China exemplifies this trend, having increased its gold holdings while reducing its U.S. Treasury holdings. Bank of America anticipates that if the Federal Reserve cuts rates and the U.S. dollar weakens, investor demand will further drive gold prices up, maintaining its status as a safe-haven asset amidst market volatility.
Fed Governor Michelle Bowman: No Interest Rate Cuts Expected This Year
Federal Reserve Governor Michelle Bowman announced on Tuesday that she does not anticipate any interest rate cuts this year and is prepared to hike rates again if inflation progress stalls. Speaking in London, Bowman emphasized that reducing rates prematurely could reignite high inflation, necessitating further rate increases. As a voting member of the Federal Open Market Committee, Bowman reiterated her readiness to tighten monetary policy if inflation shows signs of slowing or reversing. At the recent May meeting, the Fed maintained interest rates at 5.25% to 5.5%, the highest since 2001, and indicated a cautious approach to future rate cuts. Despite slight easing in inflation, with the May consumer price index dropping to 3.3%, it remains above the Fed's 2% target. Bowman highlighted the slow progress on inflation and projected it would stay elevated for some time. Meeting minutes revealed that officials are prepared to keep rates high longer and are willing to raise them if inflation does not move sustainably towards the 2% goal.
Permabear John Hussman Predicts S&P 500 Plunge of Up to 70% Amid Market Warning Signals
John Hussman, president of Hussman Investment Trust, warns that the S&P 500 could face a severe correction of 50% to 70%, citing a high concentration of market warning signals. Hussman notes that negative market leadership is at a five-year high, with stocks hitting fresh lows more rapidly than new highs, a key indicator of market instability. These red flags, coupled with broader speculative warnings, suggest a speculative peak similar to those preceding crashes in 2000, 2007, late-2018, and early-2020. Hussman's analysis, based on the ratio of nonfinancial market capitalization to corporate gross value-added, shows current market valuations surpassing even those of 1929, when the Dow plunged 89%. Despite these dire predictions, most of Wall Street remains optimistic, expecting the S&P 500 to stay above 5,000 this year. Hussman's track record includes accurately predicting the tech crash in 2000 and the financial crisis in 2007, though his recent fund performance has lagged significantly behind the market.
BRICS Leverages Gold and Oil to Challenge US Dollar Dominance
The BRICS economic alliance, comprising its five founding nations and newly inducted members, has intensified its de-dollarization mission in 2024, strategically using gold and oil production to undermine the US dollar's status as the global reserve currency. This multi-industry approach has enabled the bloc to counter US sanctions and bolster income, reinforcing its commitment to establishing a multipolar world. Significant investments in gold, particularly by China, which has accumulated over 300 tonnes worth $561 billion in the past 18 months, are central to the bloc’s strategy. This move towards a gold-backed currency aims to diminish reliance on the dollar. Concurrently, BRICS nations have leveraged their oil production to enhance economic resilience. These efforts have already contributed to a weakening of the US dollar's value and global prestige. Should BRICS and other countries continue to move away from the dollar, the US could face severe economic consequences, including hyperinflation, skyrocketing prices, stagnant wages, and potential job cuts. The ongoing geopolitical tensions between the US and BRICS countries suggest a prolonged battle for currency supremacy.
Next Week’s Key Events
Monday, July 1
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9:45 am: S&P Final U.S. Manufacturing PMI (June)
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10:00 am: ISM Manufacturing (June)
Tuesday, July 2
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9:30 am: Federal Reserve Chair Jerome Powell speech in Portugal
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10:00 am: JOLTS (May)
Wednesday, July 3
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6:30 am: New York Fed President John Williams speech in Portugal
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8:15 am: ADP Employment (June)
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8:30 am: Initial Jobless Claims (June 29)
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9:45 am: S&P Final U.S. Services PMI (June)
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10:00 am: ISM Services (June)
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2:00 pm: Minutes of Fed's June FOMC meeting
Thursday, July 4
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None scheduled, July 4 holiday
Friday, July 5
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8:30 am: Jobs Report (Employment Summary Situation) (June)
IMPACT ON PRECIOUS METALS MARKETS
S&P Final U.S. Manufacturing PMI: A strong PMI can indicate economic growth, potentially leading to higher interest rates, which can negatively impact gold and silver prices as they are non-yielding assets.
ISM Manufacturing: Similar to the PMI, a high ISM Manufacturing Index suggests robust economic activity, possibly resulting in higher interest rates and a stronger dollar, which can pressure gold and silver prices downward.
JOLTS: Job openings data can influence perceptions of labor market strength. A strong report may lead to expectations of tighter monetary policy, potentially lowering gold and silver prices.
ADP Employment: This report is often seen as a precursor to the official jobs report. Strong employment data can lead to expectations of higher interest rates, negatively impacting gold and silver.
Initial Jobless Claims: Lower jobless claims typically signal a strong labor market, which can lead to expectations of tighter monetary policy and a stronger dollar, pressuring gold and silver prices.
S&P Final U.S. Services PMI: Like manufacturing PMI, a strong services PMI can suggest economic strength, potentially leading to higher interest rates and a stronger dollar, which may negatively affect gold and silver.
ISM Services: A high ISM Services Index can indicate economic growth, potentially leading to higher interest rates and a stronger dollar, negatively impacting gold and silver prices.
Minutes of FOMC Meeting: The minutes can provide insights into the Fed's future policy direction. Dovish minutes may lead to expectations of lower interest rates, boosting gold and silver, while hawkish minutes could have the opposite effect.
Jobs Report (Employment Summary Situation): The non-farm payrolls report is a key indicator of labor market health. Strong job growth can lead to expectations of tighter monetary policy, potentially lowering gold and silver prices. Conversely, weak job growth can boost these metals as investors seek safe havens amidst economic uncertainty.
