A Daily Journey Through the Week's Market

Monday - 12.09.24: Gold rose 0.5% to $2,660.46 per ounce as China's central bank resumed gold purchases after a six-month break, signaling a shift in global monetary trends and supporting safe-haven demand. Silver gained 0.8% to $31.25 per ounce, with markets eyeing key U.S. inflation data later in the week and speculating on the Federal Reserve's upcoming rate decision.

Tuesday - 12.10.24: Gold climbed to $2,693.82 per ounce as China pledged new economic stimulus, boosting investor sentiment and offsetting concerns ahead of U.S. inflation data. Silver followed, rising to $31.65 per ounce on optimism over industrial demand, with analysts noting a potential dollar weakening as the Fed prepares to cut rates.

Wednesday - 12.11.24: Gold prices surged to a nine-week high on Wednesday, with February gold up $38.70 at $2,757.20 and March silver rising $0.263 to $33.01, as both metals gained on safe-haven demand and chart-based buying. The U.S. Consumer Price Index for November met expectations at a 2.7% year-on-year increase, easing market fears of hotter-than-expected inflation and fueling bullish momentum in precious metals, which are now eyeing record highs.

Thursday - 12.12.24: old and silver prices plunged Thursday, with February gold down $47.40 to $2,709.20 and March silver off $1.217 to $31.755, following a hotter-than-expected U.S. producer price index (PPI) report showing a 0.4% montly rise, double forecasts. Despite the inflation data, markets expect the Fed to cut rates next week, though the pace of future cuts remains uncertain.

Friday - 12.13.24: Gold and silver prices extended their losses in early U.S. trading Friday, following sharp declines Thursday after a hotter-than-expected U.S. producer price inflation report. Profit-taking and weak long liquidation by short-term futures traders pressured the markets, with February gold down $23.00 at $2,686.20 and March silver down $0.399 at $31.22. While the Federal Reserve is still expected to cut interest rates next week, the 3% annual rise in November PPI—well above the Fed's target—has raised questions about its monetary policy trajectory for early 2025.

Inflation Rises 2.7% in November, Matching Expectations

The big picture: Inflation rose 2.7% year-over-year in November, with monthly consumer prices up 0.3%, according to the Labor Department. These numbers matched economists' expectations and signaled persistent inflationary pressures ahead of the Federal Reserve's December meeting.

By the numbers:

• Headline CPI: +2.7% YoY, up from 2.6% in October.
• Core CPI (excludes food and energy): +3.3% YoY, unchanged from October.
• Shelter costs: +4.7% YoY, accounting for nearly 40% of the CPI increase.
• Energy prices: +0.2% MoM, but -3.2% YoY. Gasoline prices rose 0.6% MoM but are down 8.1% YoY.
• Food prices: +0.4% MoM, with eggs up 8.2% for the month and 37.5% YoY.

What they’re saying: Morgan Stanley’s Ellen Zentner noted that while inflation remains elevated, "the underlying details were more favorable," with housing costs showing their smallest rise since 2021.

Why it matters: The Fed is widely expected to announce a 25 basis-point rate cut at its upcoming meeting, with traders pricing a 97.9% probability. Despite stubborn inflation, markets believe recent data gives the Fed room to ease policy further.

Wholesale Prices Rise More Than Expected in November

Wholesale inflation outpaced expectations in November, casting doubt on the Federal Reserve’s progress toward taming inflation. The Producer Price Index (PPI) jumped 0.4% for the month, surpassing forecasts of 0.2%, according to the Bureau of Labor Statistics (BLS).

By the Numbers

• Headline PPI: Rose 0.4% in November, up 3% year-over-year — the highest annual gain since February 2023.
• Core PPI: Excluding food and energy, increased 0.2%, in line with estimates.
• Food Costs: Surged 3.1%, with a 54.6% spike in egg prices driving the increase.

Labor Market Check

Unemployment claims rose sharply, suggesting cracks in the job market:

• Initial Jobless Claims: 242,000 last week (vs. 220,000 forecast), up 17,000 from the prior period.
• Continuing Claims: Climbed to 1.89 million, marking the highest level in over four years.

Why It Matters

Inflationary pressures remain persistent despite the Federal Reserve’s efforts. While final-demand goods prices surged 0.7%, services costs nudged up by 0.2%. Markets, however, remain optimistic about a near-term rate cut.

The Fed’s Dilemma

The Federal Reserve is balancing mixed signals:

• Inflation Gauges: The Consumer Price Index (CPI) climbed to 2.7% annually in November, while Atlanta Fed data projects Personal Consumption Expenditures (PCE) inflation at 2.6%.
• Labor Concerns: Slower job growth and rising layoffs are prompting concerns over economic momentum.

What’s Next

Markets overwhelmingly expect the Federal Open Market Committee (FOMC) to cut rates by 0.25% next week, despite stubborn inflation. Economists believe disinflation trends remain intact, barring external shocks.

“Only an exogenous shock such as dramatic tariff policy shifts could derail inflation’s return to the Federal Reserve’s 2% goal,” said Kurt Rankin, senior economist at PNC.

Market Reaction

• Stocks: Futures dipped slightly following the data.
• Bonds: Treasury yields showed mixed movements.
• Rate Cut Odds: Traders still see a 98% chance of a December rate cut, according to CME Group data.

Stay tuned as the Fed’s next moves could set the tone for 2024’s economic landscape.

Job Openings Plummet: Signals of a Major Economic Downturn

The U.S. job market is sending alarming signals, with job openings experiencing a dramatic decline. Analysts and everyday Americans alike are bracing for the impact as economic conditions deteriorate further.

By the Numbers

• Job Openings: Fell from 12 million to under 8 million in 2024, with September recording just 7.4 million — down from 7.86 million in August.
• Industries Hit Hard: Health care, social assistance, and government saw the sharpest declines in job availability.
• Manufacturing Losses: 78,000 jobs lost over three months, including 46,000 in October alone.

Why It Matters

• Recession Warning: A drop of 2 million job openings often signals a recession is imminent.
• Retail Crisis: Thousands of stores, including 670 Family Dollar locations, have shut down, with more closures expected post-holiday season.
• Inflation Strain: Over a third of U.S. households have cut spending to afford basic utilities, according to a Lending Tree study.

Layoffs and Unemployment

Layoff announcements are piling up, with initial jobless claims surging:

• First-Time Claims: Jumped to 242,000 last week, far exceeding expectations of 220,000.
• Continuing Claims: Hit their highest level in over four years.

Retail Fallout

• Party City: Facing potential bankruptcy after struggling to pay rent on some locations.
• Dollar Tree: Closed 670 underperforming Family Dollar stores, with more closures planned.
• Boarded-Up Businesses: The U.S. is seeing an increasing number of abandoned retail spaces.

Inflation Squeeze

The cost of living continues to pressure households:

• Food and Housing Costs: Straining budgets, forcing families to cut back on basic necessities.
• Energy Struggles: 34% of households reduced essential expenses to pay energy bills last year.

What’s Next

Hopes rest on the incoming administration to reverse the economic momentum, but the current trajectory points to more pain ahead.

“We’re on a freight train steamrolling in the wrong direction,” warns Michael.

Stay alert as the economic landscape evolves, with potential policy shifts and market reactions setting the stage for 2025.

Central Banks Back Up the Bullion Trucks

Central banks are on a gold-buying spree, hitting the highest monthly net purchases of 2024 in October with 60 tonnes of gold added to reserves.

By the numbers

• Central banks have reported 694 tonnes of gold purchases through Q3 2024.
• Some estimates suggest actual purchases, factoring in China, Russia, and others, could top 1,400 tonnes for the year.
• Global annual gold production is roughly 3,000 tonnes, meaning central banks could be absorbing up to 45% of newly mined gold.

Between the lines

• October's data marked a sharp divergence: virtually no sales were reported, unlike prior months that saw both substantial buying and selling.
• The largest buyers? BRICS countries like China and Russia, suggesting an acceleration in de-dollarization efforts.

Who’s buying and who’s selling?

• Gold buyers: Poland, Turkey, Czech Republic, and Hungary – notably nationalist NATO members.
• Gold sellers: The Philippines and Thailand, key U.S. allies in Asia, likely remain in the "king dollar" camp or need cash.

Confiscating Russian Assets

What happened

The U.S. transferred $20 billion from frozen Russian assets to support Ukraine, marking a significant moment in monetary geopolitics.

Why it matters

• The confiscation of over $300 billion in Russian reserve assets after the Ukraine invasion in 2022 was a turning point for the global monetary system.
• Central banks now view dollar reserves as risk-laden rather than risk-free, spurring demand for gold as a safer alternative.

Context

• Gold was trading at $1,860/oz when the invasion began. It’s now up 44% – a stunning move in such a short period.
• Central bank demand, not retail or professional investors, has been the primary driver of this rally.

What’s next

• Central banks appear unlikely to slow gold purchases as they adapt to a shifting global monetary order.
• Retail and institutional investors may eventually follow suit, with silver potentially poised for a breakout when the trend goes mainstream.

The bottom line: Gold’s resurgence reflects a world grappling with de-dollarization, shifting power dynamics, and a renewed preference for hard, apolitical assets.

Silver Set to Shine in 2025

Silver is projected to outperform gold in 2025, with spot prices potentially reaching $40/oz, according to Heraeus Precious Metals.

By the numbers

• 2024 performance: Silver led precious metals with a 26.82% gain through November.
• Gold-to-silver ratio: Elevated levels suggest silver remains undervalued compared to gold. A reversion to the 27-year average ratio of 67 implies a $40/oz price target.
• Industrial silver: Solar demand, particularly from China, continues to surge, supporting long-term growth.

What to watch

• Recession risk: A potential U.S. recession by Q2 could dampen industrial demand for silver, especially in non-solar sectors.
• Indian demand: After a strong 2024, silverware and jewelry demand in India may weaken due to cyclic trends and higher prices.
• Supply growth: New mines and increased production from existing operations could boost silver supply by 1.2% in 2025.

Next Week’s Key Events

Monday, Dec. 16

• 8:30 am: Empire State Manufacturing Survey (Dec.)
• 9:45 am: S&P Flash U.S. Services PMI (Dec.)
• 9:45 am: S&P Flash U.S. Manufacturing PMI (Dec.)

Tuesday, Dec. 17

• 8:30 am: U.S. Retail Sales (Nov.)
• 9:15 am: Industrial Production & Capacity Utilization (Nov.)
• 10:00 am: Home Builder Confidence Index (Dec.)

Wednesday, Dec. 18

• 8:30 am: Housing Starts & Permits (Nov.)
• 2:00 pm: FOMC Interest-Rate Decision
• 2:30 pm: Fed Chair Powell Press Conference

Thursday, Dec. 19

• 8:30 am: Initial Jobless Claims (Dec. 14)
• 8:30 am: GDP (Second Revision, Q3)
• 8:30 am: Philadelphia Fed Manufacturing Survey (Dec.)
• 10:00 am: Existing Home Sales (Nov.)
• 10:00 am: U.S. Leading Economic Indicators (Nov.)

Friday, Dec. 20

• 8:30 am: PCE Index (Nov.)
• 10:00 am: Consumer Sentiment (Final, Dec.)

IMPACT ON PRECIOUS METALS MARKETS

Empire State Manufacturing Survey: Indicates manufacturing health in New York. A strong report could reduce gold's safe-haven appeal, while a weak one might increase demand for precious metals.

S&P Flash Services & Manufacturing PMI: These provide early insights into economic activity. Weak data could signal economic slowing, boosting gold and silver as hedges.

U.S. Retail Sales: Reflects consumer spending, a key economic driver. Weak sales may increase gold and silver appeal as investors hedge against slower growth.

Industrial Production & Capacity Utilization: Indicates industrial strength. Weak data could support precious metals if it signals an economic slowdown.

Home Builder Confidence Index: Strong confidence may lower gold demand by indicating economic stability, while weaker confidence might have the opposite effect.

Housing Starts & Permits: Housing activity is an economic bellwether. Weak data could boost gold demand as a safe-haven.

FOMC Interest-Rate Decision: A decision to hold or lower rates typically supports gold and silver by reducing the opportunity cost of holding non-yielding assets. A hawkish surprise could pressure prices.

Fed Chair Powell Press Conference: Provides context to the rate decision. Dovish remarks may boost gold and silver, while hawkish comments could depress prices.

Initial Jobless Claims: Higher claims may indicate labor market weakness, supporting precious metals.

GDP (Second Revision, Q3): A downward revision could boost gold and silver as hedges against slowing growth, while an upward revision might weaken their appeal.

Philadelphia Fed Manufacturing Survey: Similar to the Empire State survey, weak data could lift gold and silver as safe-haven assets.

Existing Home Sales: Weak sales may indicate economic slowing, supporting precious metals.

U.S. Leading Economic Indicators: A decline in this index could signal future economic slowing, boosting gold and silver demand.

PCE Index: The Fed’s preferred inflation measure. Rising inflation typically supports gold and silver as hedges.

Consumer Sentiment: A drop in sentiment may boost precious metals as investors seek safety, while strong sentiment could lower demand.