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    Metals Market Broadsheet: May 28-31

    In a shortened trading week, gold and silver were rattled by hawkish “Fedspeak” and economic data that again reflected inflation’s vice grip on the U.S. economy, despite a robust job market and improved financial footing across several key sectors. But all told, both metals still delivered an impressive month of May. Meanwhile, federal policymakers said they needed to see more convincing economic data that inflation is being sufficiently tamed before cutting interest rates, which are at a two-decade high. In our asset focus, we’ll examine copper’s remarkable run and why the versatile metal figures to stay in demand.

    GOLD & SILVER

    Gold had a seesaw ride last week, seeing a high of $2,357 an ounce midweek before dipping to a low of $2,325 an ounce by Thursday. Friday’s release by the U.S. Bureau of Economic Analysis showing the country’s inability to tamp down inflation made for another herky-jerky day as Wall Street digested the data. Zooming out of a weekly snapshot, the yellow metal was still on track to notch gains for the fourth month in a row, up $40.07 per ounce month over month and nearly $367 an ounce year over year – a gain of nearly 19%.

    Silver was also affected last week by the same external forces, hitting a low on Friday of $30.23 per ounce after trading at $32.17 an ounce just two days earlier. Like gold, silver’s on a hot streak for the month, with prices holding steady around $32 per ounce through the second half of May. It also continues to outperform gold month over month and year over year, demonstrating its resilience and desirability even in the face of economic headwinds.

    Both metals are still on track to impress this year, thanks to a rebounding economy, geopolitical uncertainty and industrial demand both here and abroad. An improving financial outlook could open the door for interest rate cuts, perhaps spread out through the final two quarters of 2024. Nothing’s a sure bet in the commodities trade, but both metals make a pretty strong case.

    ASSET SPOTLIGHT

    This week, we’re singling out copper, which is having a moment after hitting a record high of $5.20 per pound on May 20. Even though the key staple of the construction, electronics and energy transition industries dipped around $4.60 to close out last week, it’s still enjoying a nearly 30% uptick year over year.

    There are plenty of reasons to believe demand for copper will remain steady. The artificial intelligence industry – which has blasted from the pages of sci-fi novels into our daily lives in a blink – and defense sectors both depend on the critical metal. It’s also essential to the global energy transition, helping to electrify infrastructure and power wind turbines and electric vehicles. Stir in a helping of geopolitics with the wars in Ukraine and the Middle East, and you have a formula for copper’s longevity.

    In fact, Goldman Sachs is downright bullish on its potential, forecasting in a report that a commodities bull market will see copper hit $12,000 per ton by the end of 2024. The AI sector alone, the investment bank predicts, will drive up copper demand at rates of 6% a year between now and 2030.

    THE FED SAID

    In between market-moving economic reports, last week also featured public remarks by several Fed officials. Reading the room, policymakers are nowhere near ready to cut interest rates, especially not ahead of their next monetary policy meeting on June 11-12 in Washington, or anytime soon, for that matter.

    The Fed wants more information on how fast the economy is recovering – it got a trove of data from Friday’s reports on inflation and personal spending to digest – before acting. Even though officials penciled in several rate cuts for 2024, the Fed has repeatedly cautioned that we’re still far from hitting its 2% inflation target.

    On Thursday, Federal Reserve Bank of New York President John Williams said current monetary policy is in the right place to help inflation reach that 2% threshold, but gave no indication whether that translates into rate reductions, Reuters reported.

    “The behavior of the economy over the past year provides ample evidence that monetary policy is restrictive in a way that helps us achieve our goals,” Williams said at a gathering of the Economic Club of New York. He added that policymakers will consider all of the available data “so that we make policy decisions that ensure that we get inflation sustainably back to 2% while maintaining a strong labor market.”

    Two days earlier, Federal Reserve Bank of Minneapolis President Neel Kashkari similarly said he needed to study the available economic data to ensure measures to curb inflation are succeeding before policymakers decide on rate reductions.

    “We just want to slow things down a little bit so we have time to monitor those market signals, but it’s not going to end up changing the destination,” Kashkari said during Tuesday’s Barclays-CEPR International Monetary Policy Forum in London.

    BEAT THE STREET

    After an extremely busy – and revealing – week of economic reports that caused precious metals markets to zigzag from the black to the red and back again, some notable releases this week could give us additional intel on the overall health of the economy and the workforce.

    Data on job openings will be released by the federal government on Tuesday, while a report on private employment payrolls and the trade deficit is expected Wednesday. More insight into the labor markets will come at the tail end of the week, with initial jobless claims released on Thursday and U.S. hourly wages and hourly wages year-over-year to come Friday.

    GOLD RUSH

    A British Royal Navy galleon loaded with a cache of 11 million gold and silver coins and other precious gems when it sank in 1708 could be closer to excavation, MSN reports. Dubbed the “holy grail of shipwrecks”  because its long-lost cargo could be worth upward of $20 billion, getting to the wreck of the San Jose in the Caribbean Sea was once thought impossible because it was buried too deep. The Colombian government plans to employ underwater robots and remote sensors to map the sea bed this year in the first phase of exploration.

    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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