The Gold Trail: A Daily Journey Through the Week's Market
Monday - 12.04.23: Gold and silver prices declined in early U.S. trading on Monday, following recent highs, with gold peaking at $2,152.30 and silver at a seven-month high. This correction is attributed to short-term traders taking profits. The precious metals are still buoyed by favorable technical charts, a weakening U.S. dollar, falling bond yields, safe-haven demand, and expectations of central banks slowing interest rate hikes. Meanwhile, global stock markets showed mixed trends, and increased Middle East tensions, including missile strikes and military actions, heightened risk aversion among investors.
Tuesday - 12.05.23: Gold prices are steady while silver prices have declined in early U.S. trading Tuesday. Factors influencing the markets include a strengthening U.S. dollar and weaker crude oil prices. However, positive technical charts, a generally downward-trending dollar, lower bond yields, ongoing safe-haven demand, and expectations of relaxed central bank interest rate policies continue to support the metals. Escalations in Middle East tensions could rapidly increase gold and silver prices. Moody's revised China's credit outlook to negative, impacting gold and silver markets due to its implications on the Chinese economy and its demand for gold.
Wednesday - 12.06.23: Gold prices are modestly up, while silver prices are slightly down in early U.S. trading on Wednesday. After spiking to a record high on Monday, the gold market is adjusting. Investors are focusing on upcoming key U.S. economic data, including the significant non-farm payrolls report due Friday. Stock markets in Asia and Europe were mostly up, with U.S. stocks also expected to open stronger. The U.S. dollar index is slightly down, crude oil prices have dropped, and the yield on the U.S. 10-year Treasury note is at 4.205%.
Thursday - 12.07.23: Gold and silver prices remain stable in early U.S. trading, with minor fluctuations as markets consolidate following significant earlier movements. Traders are anticipating Friday's critical U.S. employment report, expected to show a rise in non-farm payrolls. Mixed trends in Asian and European stock markets and modest changes in Chinese trade figures contribute to the market's current state.
Gold and silver prices are down in early U.S. trading following a U.S. employment report showing a slightly better-than-expected increase in non-farm payrolls and a decrease in the unemployment rate to 3.7%. The mixed nature of the jobs data, seen as mildly hawkish for U.S. monetary policy, has led to a decrease in gold prices to $2,033.80 and silver to $23.85. The report's balanced outcome is being described by some as a "Goldilocks" situation, neither too positive nor too negative for the market.
Gold Prices Rebound as Consumer Confidence Rises and Inflation Expectations Drop
Gold prices have started to recover after a new report showed an unexpected rise in consumer confidence and a significant decrease in expected inflation. The University of Michigan's preliminary Consumer Sentiment Index for December jumped to 69.4, a notable increase from November's 61.3 and higher than the predicted 62. This boost in consumer confidence is largely due to better expectations about inflation in the future. The report indicated a big drop in short-term inflation forecasts, from 4.5% last month to 3.1% now, the lowest since March 2021. Additionally, long-term inflation expectations also decreased. Following these positive signs, gold prices, which had dropped earlier due to the jobs report, saw an upswing, with spot gold rising from session lows of $2,002.67 to $2,011.50, although it's still down for the day. The report also noted increased optimism across various demographics and a growing number of consumers factoring in potential impacts of next year’s elections on the economy.
Gold Prices Fall as U.S. Job Numbers Exceed Expectations and Unemployment Drops
Gold prices are falling due to recent U.S. job reports showing more jobs added than expected and a decrease in the unemployment rate. The latest report showed that 199,000 jobs were added last month, more than the predicted 184,000, while the unemployment rate dropped to 3.7% from 3.9%. This news has caused a decline in gold prices, with the price of gold futures now at $2,033.70 per ounce. The strong job market is affecting how people think the government might change interest rates, with fewer people expecting a cut in rates soon. This situation, along with a 4% increase in wages compared to last year, is raising worries about rising prices in general, which is also putting pressure on gold prices.
The Elusive American Dream: A Grim Reality Beyond U.S. Borders
The American Dream, once a beacon of hope and achievement within the United States, has become a distant, almost unattainable ideal for the majority of Americans. This dream, traditionally encompassing higher education, homeownership, a family, and financial security without the burden of debt, is now ironically more achievable overseas, particularly in developing economies. However, this transition is not without its profound challenges. Cultural and language barriers, the complexities of relocating families, and the increasing social and political instability globally pose significant risks. Additionally, adapting to new cultures and navigating local expectations add to the difficulties. Despite these hurdles, there are advantages such as career opportunities, affordable healthcare, and a lower cost of living in these foreign lands. This shift signifies a grim reality: the American Dream, once the heart of American ethos, now seems more like a relic of the past, accessible only to those willing to venture far from home.
Gold's Potential Surge Linked to Three Key Market Events
For a significant surge in gold prices, three pivotal market events need to align. Firstly, a downturn in the U.S. equity market is seen as a crucial factor. This shift could change investor sentiment, driving more towards gold as a safe-haven asset. Secondly, a change in the Federal Reserve's current monetary policy stance, specifically moving from rate hikes to cuts, is essential. This policy shift would likely affect the strength of the U.S. dollar. Finally, a weakening U.S. dollar is the third critical element. A softer dollar typically boosts gold prices, as it becomes cheaper for holders of other currencies. These factors, amidst a backdrop of rising global yields due to extensive government spending on various global challenges, are key to unlocking gold's potential for a substantial price breakout.
Robust Gold Acquisitions by Central Banks in October 2023: A Detailed Analysis
In October 2023, central banks globally sustained their robust gold purchasing trend, adding 42 tonnes to their reserves, as reported by Krishan Gopaul of the World Gold Council. This figure, although 41% lower than September's 72 tonnes, remains 23% above the average monthly purchase from January to September. The People’s Bank of China led these purchases, adding 23 tonnes, marking its twelfth consecutive monthly increase and bringing its total reserves to 2,215 tonnes. Turkey's central bank also made notable acquisitions, buying 19 tonnes. Other significant buyers included the National Bank of Poland, the Reserve Bank of India, the Czech National Bank, the National Bank of the Kyrgyz Republic, and the Qatar Central Bank. Interestingly, October also witnessed higher sales volumes, primarily by the Central Bank of Uzbekistan and the National Bank of Kazakhstan. Analyst Jan Nieuwenhuijs speculates that Poland's aggressive buying, increasing its gold reserves substantially since 2017, may align with a covert strategy among eurozone nations to prepare for a potential future gold standard.
Gold Price Stays High Amid Steady US Jobless Claims
Gold prices maintained near session highs, testing the critical resistance level of $2,050 an ounce, amid signs of stabilization in the U.S. labor market. The recent data from the U.S. Labor Department indicated a slight increase in weekly jobless claims to 220,000, aligning with economists' expectations and reflecting a stable job market. Despite this, the gold market showed limited reaction, continuing its recovery from Monday's technical downturn. With the four-week moving average for new claims experiencing a minor rise and continuing jobless claims decreasing, the focus remains on the U.S. labor market's health, which is a crucial factor in shaping the Federal Reserve's monetary policy decisions.
Diminishing Momentum in Private Sector Jobs and Stagnant Wage Growth in November 2023
November 2023 marked a concerning slowdown in the private sector's job market, with a mere 103,000 positions added, lagging behind the previous month and falling short of market expectations. This tepid growth, the lowest since the pandemic's onset, was accompanied by the most sluggish wage increase in over two years, at just 5.6% annually. Significantly, the leisure and hospitality sector, once the backbone of post-pandemic job recovery, witnessed a decline, shedding 7,000 jobs. The overall gains were solely in service industries, overshadowed by a net loss in goods-producing sectors, highlighting a weakening economic vigor. ADP's chief economist, Nela Richardson, underscored this shift, predicting a future of subdued hiring and stagnant wage trends. Mid-sized businesses showed some resilience, but the overall picture painted by these figures, ahead of the Labor Department's comprehensive nonfarm payrolls report, suggests a labor market grappling with uncertainty and diminishing dynamism.
Wall Street Chiefs Challenge Basel 3 Rules, Citing Widespread Economic Risks
In a critical development, the CEOs of America's leading banks, including JPMorgan, Bank of America, and Citigroup, have vociferously opposed the proposed Basel 3 endgame regulations in a Senate Banking Committee hearing. They argue that these new rules, aimed at increasing capital reserves by about 25%, would have far-reaching negative consequences, not just for the banking sector but for the broader economy. Jamie Dimon of JPMorgan Chase warned of higher costs and reduced access to mortgages and small business loans, particularly impacting low- to moderate-income borrowers, and potentially leading to lower returns for savings and investments. The CEOs cautioned that these regulations could inadvertently favor non bank entities, like Apollo and Blackstone, in market areas where banks have retreated due to existing regulations. They also highlighted the risk of pushing more financial activities to less regulated 'shadow banks'. Democratic Senator Sherrod Brown, chair of the committee, criticized the banks' lobbying efforts, pointing to the 2008 financial crisis and recent bank failures as examples of the need for stringent oversight. This partisan divide in responses reflects the ongoing debate over the balance between financial stability and economic growth.
Next Week’s Key Events
MONDAY, DEC. 11
- None scheduled
TUESDAY, DEC. 12
- 8:30 am: Consumer Price Index, Nov.
WEDNESDAY, DEC. 13
THURSDAY, DEC. 14
- 8:30 am: Initial Jobless Claims, Dec. 9
- 8:30 am: U.S. Retail Sales, Nov.
- 8:30 am: Philadelphia Fed Manufacturing Survey, Dec.
FRIDAY, DEC. 15
- 8:30 am: Empire State Manufacturing Survey, Dec.
- 9:15 am: Industrial Production and Capacity Utilization, Nov.
IMPACT ON GOLD AND SILVER MARKETS:
Consumer Price Index (CPI): This report measures inflation by tracking changes in the prices paid by consumers for goods and services. Higher inflation often leads to increased gold and silver prices as they are seen as hedges against inflation.
Producer Price Index (PPI): It measures the average changes in prices received by domestic producers for their output. This can affect gold and silver prices because changes in producer costs can signal inflationary or deflationary trends.
FOMC Interest Rate Decision: The Federal Reserve's decision on interest rates can significantly impact gold and silver markets. Lower interest rates tend to weaken the dollar, making gold and silver more attractive as they are priced in dollars.
Initial Jobless Claims: This report gives an indication of the health of the job market. A weaker job market can lead to lower interest rates, which may increase gold and silver prices.
U.S. Retail Sales: Strong retail sales might indicate a healthy economy, which can lead to a stronger dollar and potentially lower gold and silver prices.
Philadelphia Fed Manufacturing Survey: This survey provides a measure of manufacturing sector health. A strong manufacturing sector may strengthen the dollar, potentially negatively impacting gold and silver prices.
Empire State Manufacturing Survey: Similar to the Philadelphia survey, it reflects the health of the manufacturing sector in New York State. Stronger results can lead to a stronger dollar and lower gold and silver prices.
Industrial Production and Capacity Utilization: This report indicates the level of industrial activity. Higher industrial activity can signal a stronger economy and a stronger dollar, which might negatively affect gold and silver prices.