Precious metals investors entered last week looking for the kind of spark that could lift gold and silver out of its spell of sideways, one step forward, two steps back, trading. They got an explosion. It came in a litany of reports exposing a deteriorating U.S. economy – including data showing that job creation among private employers slowed for a third straight month, an increase in workers applying for unemployment benefits, and an unexpected rise in the unemployment rate. The reports boosted confidence among investors that federal policymakers would finally step in to cut interest rates – maybe even twice by the end of 2024 if the economy and labor market slide even further. By Friday, market sentiment estimated a nearly 80% likelihood that easing would begin by September.
GOLD & SILVER:
A string of dismal economic reports and increased expectations of a Fed rate cut propelled gold and silver to one-month highs last week. Both precious metals were aided by a weaker dollar and softer Treasury yields at home, as well as anticipated moves by the Bank of England and People’s Bank of China to ease monetary policy abroad. Gold prices crossed $2,388 per ounce in Friday afternoon trading, the highest showing for the yellow metal since the record $2,450 per ounce it notched toward the end of May. Silver also logged an impressive week, benefitting from the same economic conditions as its yellow cousin. By mid-week, it already had crashed through the $30 ceiling and was trading late Friday at $31.36 per ounce – its highest price since May when it hit $32 per ounce. Chinese demand for power and silver’s critical role in solar panel production provide a path for silver to soar even higher in the near term.
ASSET SPOTLIGHT: Copper comeback?
Even as sluggish global manufacturing data has caused a pullback in copper prices, a recent analysis by CitiGroup, Inc. suggests that China’s renewed demand for the versatile metal could soon retest $10,000 per ton levels. The bullish outlook anticipates China will move toward an easing policy focused on grid upgrades for renewable energy – among other monetary easing favoring copper – during its Third Plenum meeting later this month. Even with a slowdown in demand, analysts note that overall copper consumption for the first half of 2024 shows year-over-year growth of 4%, largely driven by China’s focus on electric vehicles and its renewable energy sector. On Friday, copper hit a four-week high to trade at $4.64 per ounce and was on track to gain more than 5% on the week – its best weekly showing since May. Add to the mix the increasing confidence at home that the Fed will move to cut interest rates as early as September, and the table could be set for copper to see plenty of daylight.
THE FED SAID:
Federal Reserve Chairman Jerome Powell struck a hawkish tone during remarks at an overseas monetary conference last week when he said that policymakers wanted more underlying economic data “to be more confident” that inflation is truly cooling before cutting interest rates. Although Powell noted that the U.S. has logged “quite a bit of progress” in bringing inflation back down to the Fed’s 2% target, he offered neither a timeline for when officials will be assured of its downward trajectory nor when rate cuts would be appropriate.
“We just want to understand that the levels that we’re seeing are a true reading on what is actually happening with underlying inflation,” Powell said during a roundtable discussion last Tuesday in Portugal with European Central Bank President Christine Lagarde and Brazil Central Bank Governor Roberto Campos Neto. “We want to be more confident, and frankly, because the U.S. economy is strong … we have the ability to take our time.”
BEAT THE STREET:
After last week’s flurry of downbeat economic reports, we could get further insight into how serious the situation is this week. Consumer credit data is due Monday, followed by June’s NFIB optimism index on Tuesday, which gauges how healthy U.S. small businesses are. Wholesale inventories come Wednesday, followed by several pieces of data on Thursday, including initial jobless claims and last month’s Consumer Price Index, which measures how much consumers are paying for goods and services. St. Louis Federal Reserve President Alberto Musalem is also scheduled to speak on Thursday. And we’ll close out the trading week with June’s Producer Price Index, which tracks changes in the prices that domestic producers get for the goods they produce.
GOLD RUSH:
An intricately detailed gold belt recovered more than two decades ago at the site of a Turkish city that thrived in the Middle Ages is finally going on display. Arkeonews reports that the belt, weighing nearly 1 pound, was discovered 22 years ago during excavations at the ancient city of Ani in Kars, Turkey. Ani, often called the “City of 1001 Churches,” was a trade and cultural hub that prospered during the 10th and 13th centuries. Archaeologists are still excavating eight separate locations across the sprawling dig site. The ornate belt, discovered in 2002 and is still under protection, has three components and is fashioned entirely from gold. “We know that Ani lived its glorious period in the Middle Ages, and archaeological excavations were started by Russian-born Nikolay Marr in Ani ruins in the late 1800s,” says Hakim Aslan, acting director of the Kars Archaeological and Ethnography Museum, where the belt will be displayed for only three months. “The artifact is very important.”
