Heading into the weekend, some investors were easing on the doomscrolling because gold and silver had largely weathered a string of dismal news on a weakened labor market. Then Friday took a wrecking ball to the whole thing with the U.S. Bureau of Labor Statistics report detailing payroll additions that trounced Wall Street expectations. That data sent gold plummeting nearly 3% and kneecapped silver by nearly 6.5%. With interest rate cuts the previous two days by the Bank of Canada and the European Central Bank, coupled with data showing China paused its 18-month gold buying streak in May, the economic dominos began falling. As the Fed convenes this week to consider interest rates, chances of a meaningful September cut may now be off the table as signs indicate that stubborn inflation may stick around longer than many hoped.
GOLD & SILVER
Gold had been on a bit of a slide last week, but Friday’s report that nonfarm payrolls rose by 272,000 jobs in May – besting April’s downward revision of 165,000 added jobs – became a propellant for the yellow metal’s further plunge. Midday Friday, the commodity was trading $68 lower at $2,309 per ounce – a 2.87% decline.
Additional economic forces only fanned the flames, including a pair of rate cuts by two foreign banks and figures that showed gold’s major global buyer, China, put the brakes on purchasing the commodity following an 18-month streak of snapping it up. The question for the week ahead is when the bleeding will stop.
Silver also fell victim to the surprise jobs report, trading midday Friday down $2.02 at $29.32 an ounce – about a 6.5% decrease.
The upside for both metals is the prevailing wisdom that prices can’t be suppressed for too long, simply based on supply and demand market conditions. China will most likely restart its gold-buying spree after sitting out May, and significant global demand for silver – particularly in China – for use in technology and other manufacturing could show the commodity’s recent surge above $30 wasn’t a fluke.
ASSET SPOTLIGHT
It’s a precious metal that’s 30 times more rare than gold, used by a wide range of industries to make everything from medicine to computer components, and some experts predict the undervalued metal is long overdue for a breakout. Since its 2008 peak at $2,200 per ounce, platinum has been on a rocky road to reclaim just half of its highest trading price in recent years. Last November, for example, it was trading around $845 an ounce as it limped along post-COVID.
But a growing number of precious metals analysts say the tide could be turning sooner than later. Industrial demand, an increasing sentiment for more environmentally friendly products, and desire by investors to diversify their physical asset portfolios in the face of unpredictable times all play in platinum’s favor.
One technical analyst, Clive Maund, took an even bolder stance, recently writing in a column that, “we could see an upside breakout by platinum relative to gold before much longer that would lead to a long period of outperformance by platinum, and also given that we know where gold is headed, the gains made by platinum could be spectacular.”
Platinum was flirting with $1,000 an ounce at one point last week, even with the shaky economic situation. Is the stage set for it to make another run?
THE FED SAID
With the Fed in a blackout period heading into its meeting this week, let’s take a look at a technical analysis released by the Federal Reserve Bank of Cleveland that’s been making the rounds. It suggests that it could actually take several more years – maybe into 2027 – to reach the Fed’s 2% inflation goal.
The findings by Cleveland Fed senior research economist Randal Verbrugge run counter to the majority of forecasters who’ve estimated that the 3.4% inflation rate will continue to gradually tick lower until it hits the desired 2% benchmark by the middle of 2025.
Verbrugge cautions in “Inflation’s Last Half-Mile: Higher for Longer?” that there’s evidence to suggest that,“absent Xfactors such as continued favorable supply shocks or strong productivity gains, the last half-mile could well take several years.”
Recent economic reports pointing to continued supply chain hiccups, price fluctuations, and uneven productivity across several manufacturing sectors appear to bolster Verbrugge’s findings.
Right now, he suggests, there are too many unknowns to be completely confident in 2% inflation by next year.
BEAT THE STREET
It’s sure to be a newsmaking week as the Fed convenes in Washington. The question will be how policymakers weigh Friday’s jobs data. For most of the week, conditions seemed favorable for an interest rate cut as early as September, but now that timeline doesn’t seem like such a sure thing anymore. Expect plenty of reading between the lines as to the Fed’s appetite for near-future rate trims in the face of an inflation rate that increasingly seems harder and harder for the U.S. to shake.
The appetizer will be Tuesday’s data from the National Federation of Independent Business (NFIB) gauging the optimism of small businesses, which make up about half of the U.S. private workforce. The main course will come Wednesday out of the Federal Open Market Committee meeting when a formal decision on interest rates is scheduled. That’ll be followed by public remarks from Fed Chairman Jerome Powell. A batch of data on the Consumer Price Index is also expected the same day. On Thursday, we’ll get information on jobless claims and the Producer Price Index. And we’ll close out the week with Friday’s preliminary report on consumer sentiment.
GOLD RUSH
The high price of gold has prompted Rolex to hike the prices of some of its watches in the United Kingdom, according to a new report. The luxury brand is adding up to $2,000 to the cost of some of its most popular timepieces, such as the Daytona Chronograph. The watch, made of white rose gold, will now set well-heeled buyers across the pond back $49,482 – compared to its previous $47,553 price tag. Rolex typically raises prices once a year, but global demand for the precious metal and currency fluctuations in recent years have led the company to increase prices more frequently.
