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    Metals Market Broadsheet June 24-28

    It seemed gold and silver were beginning to run out of steam around midweek, bobbing and weaving around dismal economic reports that revealed just how far new U.S. home sales plummeted in May and consumer confidence dipping last month. A much-needed jumpstart came on the heels of Thursday’s report on U.S. durable goods orders that beat Wall Street expectations and Friday’s personal consumption expenditures data showing that core inflation cooled to 2.6% year over year. The PCE report also rekindled market hopes that the Fed would be convinced to cut interest rates as soon as its September policy meeting.

    GOLD & SILVER:

    As of Friday afternoon, gold was holding its ground – barely – after trading in the red for a spell and was on track for a third consecutive quarterly gain. The yellow metal, which is up nearly 13% this year, was buoyed by a decline in U.S. Treasury yields, continued demand from central banks and optimism on Wall Street that an interest rate cut could be just around the corner. Midday Friday, gold seemed to have one foot in the black, then in the red and back again hours before markets closed. It was up $0.18 at $2,327 per ounce – nearly a carbon copy of the price it posted to end Thursday trading.

    Silver, which is up nearly 22% this year, was in positive territory heading into the home stretch Friday afternoon, up $0.16 at $29.17 per ounce. Like its yellow cousin, silver spent the first part of last week bogged down by dismal reports that once again revealed the toll inflation was taking on key economic sectors, like housing. The precious metal regained its footing at the tail end of the week as investors pinned hopes that Friday’s positive core PCE report would be enough for federal policymakers to loosen interest rates.

    ASSET SPOTLIGHT:

    Gold bulls, bears or something in between?

    For the past several weeks, investors have been treated to some wildly conflicting reports on where the price of gold is heading.

    Last week, an analysis by Bank of America took a bold outlook on the yellow metal’s short-term future, predicting that several market forces – including increasing demand from investors and central banks, geopolitical unrest and federal monetary policy – could set the table for $3,000 per ounce gold by the end of 2025.

    A week before that, analysts with RBC Capital Markets, part of the Royal Bank of Canada, said in a note that gold was overvalued and took a much more cautious approach, warning of “unrealized vulnerabilities to the pillars of gold’s rally.” The bank questioned whether investors were fully committed to the commodity after its record highs in May, as well as China’s decision to halt purchases of gold in May after a buying spree that lasted 18 consecutive months.

    As if things weren’t confusing enough, a Financial Post article entered the fray last week, explaining how gold has confounded markets and commodity prognosticators alike. Titled, “The Mystery of Gold Prices Just Got More Mysterious: Is it Time to Cash in Your Bullion? Maybe,” the article aptly sums up that the precious metal “is apparently breaking all the rules.”

    Marc-Antoine Dumont, a senior economist for Fédération des caisses Desjardins du Québec, who’s featured throughout the lengthy piece, makes a case for why gold has become such an enigma. Normally reliable indicators of how gold will perform, such as the strength of the U.S. dollar, aren’t behaving. Typically, the dollar shares an inverse relationship with gold, yet as the currency continues to ride high, so has the commodity, Dumont says.

    That leaves two questions on the minds of plenty of bullion buyers: How long and how much will gold continue to buck market convention?

    THE FED SAID:

    Most of the flurry of Federal Reserve officials who spoke last week telegraphed a “wait on more data and see” message to investors eager to see at least one interest rate cut this year.

    And even though Atlanta Federal Reserve Bank President Raphael Bostic echoed those sentiments – specifically wanting to see progress in the inflation-plagued housing industry and in service prices, like the cost of everything from haircuts to hotel rooms – he continued to back one rate cut later this year.

    In an essay posted last Thursday, he said policymakers risk “sapping too much momentum from the economy and the labor market” if they wait too long for inflation to meet the Fed’s 2% target.

    “Taking all the circumstances into account, I continue to believe conditions will likely call for a cut in the federal funds rate in the fourth quarter of this year,” Bostic wrote.  “Still, the pandemic years have brought many surprises, and so I’m not locked in to any particular policy path. There are plausible scenarios in which more cuts, no cuts, or even a raise could be appropriate. I will let the data and conditions on the ground be my guide.”

    BEAT THE STREET: 

    Even with the July 4 market holiday on Thursday, key economic reports on construction, manufacturing, unemployment, and wages are scheduled. On Monday, data on construction spending and U.S. manufacturing are due, with June auto sales and May’s job openings coming on Tuesday. Additionally on Tuesday, Federal Reserve Chairman Jerome Powell will speak in Portugal. Reports on factory orders, initial jobless claims and ADP employment come Wednesday, along with the release of the minutes from June’s Federal Open Market Committee meeting, when policymakers decided to leave the benchmark interest rate unchanged. On Friday, we’ll get numbers on employment and hourly wages to close out the shortened week.

    GOLD RUSH:

    A dive team has notched an impressive haul as treasure-hunting season in Florida kicks into full gear, discovering 214 silver coins that had been buried under sand and seashells for more than 300 years. The coins, which were recovered over two days, are believed to have been the cargo on board one of several Spanish ships when they sank around 1715. Treasure-seekers have spent decades exploring the waters along the Florida coastline in hopes of hitting paydirt. The salvage team that discovered the silver coins has been working together for years, searching for treasure off the coast of Indian River County located in the southeastern part of the state. “It was kind of numbing in a way, you know. You don’t expect that. You always hope for it, but you never expect it,” said Grant Gitschlag, the boat captain on the historic find.

    Disclaimer: All Market Updates are provided as a third party analysis and do not necessarily reflect the explicit views of JM Bullion Inc. and should not be construed as financial advice.

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