1. The Dow Jones Industrial Average dropped Monday, as Wall Street reacted to Moody’s warning on debt. Moody’s Investors Service cut its U.S. outlook to negative from stable, citing high budget deficits and political polarization. Due to higher interest rates and no effective way to reduce government spending or increase revenues, Moody’s said it expects fiscal deficits to remain large and debt affordability to be significantly weakened. On the economic front this week, October’s consumer price index is out Tuesday. It is expected to show a tame 0.1% overall increase. Yet core prices, excluding food and energy, are seen rising 0.3% on the month and a steady 4.1% from a year ago. Further, the producer price index is Wednesday, along with U.S. retail sales.
2. The yellow metal rallied an incredible 7.3% last month to close at $1,983 an ounce, its strongest October since 1978 when it jumped 11.7%. The price of gold had its best October in nearly half a century, defying tough resistance from surging Treasury yields and a strong U.S. dollar. Gold, a non-interest-bearing asset, has historically floundered when bond yields were heading higher. An exception has been made this year, however, on several significant economic and geopolitical risks, including record-high national debt, rising credit card delinquencies, ongoing recession jitters, and two wars. Let’s take a look at what the official sector has been up to. Central banks bought a collective 337 metric tons of gold in the third quarter, marking the second-largest third quarter on record, according to the latest report by the World Gold Council (WGC). Year-to-date, banks have added a remarkable 800 tons, which is 14% more than they added during the same nine months last year. The list of biggest buyers during the third quarter was dominated by emerging markets as countries continued to diversify away from the U.S. dollar. In the top spot was China, which added a massive 78 metric tons of gold, followed by Poland (over 56 tons) and Turkey (39 tons).
3. The Federal Reserve’s ability to pull off a soft landing, an ideal scenario in which the Federal Reserve curbs inflation without triggering a severe downturn will be “very, very difficult,” private equity veteran Scott Sperling warns. “We should be very careful given all of the complexities,” Sperling, who is the co-CEO of THL, said last Tuesday. “We’re in a relatively difficult period over the next 15 to 18 months, it’s going to be a choppier economy going forward.” A softer labor market, soaring interest rates, and a more cautious consumer have prompted more Wall Street veterans and strategists to warn of a downturn. In its fight to tame inflation, the Fed has raised interest rates to a 22-year high to try and cool the economy. While the restrictive policy has reduced price growth far below 2022’s peak of 9.1%, the highest level in over 40 years, it’s still well above the Fed’s 2% target. The Fed’s preferred inflation measure, the Personal Consumption Expenditures Index, held steady at 3.4% in September for the third month in a row, signaling once again the inflation battle is far from over. In remarks before the International Monetary Fund in Washington on Thursday, Jerome Powell signaled rates will likely be kept higher for longer. He also made it clear more rate hikes are still on the table. Powell said the central bank is “not confident” policy is restrictive enough to get inflation back to its 2% mandate. Sperling urges caution, warning recent data doesn’t appear as strong when you “look below the surface,” and moving too quickly on rates could put the U.S. economy in an “even worse situation.”
4. President Joe Biden’s forceful stance on his green energy agenda is wreaking havoc on major vehicle manufacturers. General Motors announced it will no longer be manufacturing the several hundred thousand electric vehicles (EVs) it originally planned to roll off the line by 2024. This announcement comes following the discovery of multiple issues with their current EV technology. GM execs have admitted the delay in launching the Chevrolet Equinox EV, the Chevrolet Silverado EV RST, and the GMC Sierra EV Denali, along with a major recall of Chevy Bolts. “The American public is not ready for the broad adoption of electric vehicles. There are maybe 10 percent to 12 percent of people who really want an electric vehicle … the remainder still want internal combustion,” previous GM executive Bob Lutz said. Auto workers and union members are furious with the Biden administration for offering huge subsidies to push auto companies toward creating electric vehicles. As a result, many workers are losing their jobs or facing significant cutbacks. Critics say Biden’s ‘green energy agenda’ is ultimately outsourcing their jobs to China.
5. Falling gasoline prices played a big part in Tuesday’s October inflation report, which showed consumer prices were unchanged over the prior month as a drop in the cost of energy brought down this headline figure. Gas prices for consumers were the biggest month-over-month decliner within the energy index, falling 5% from September and 5.3% from the same month last year. The Consumer Price Index showed consumer prices were unchanged between September and October, owing largely to the drop in energy prices. Compared to the prior year, inflation rose 3.2% in October. “Core” inflation, which strips out the volatile costs of food and energy, showed prices rose 4.1% over the prior year in October, the least since September 2021. Tuesday’s report showed the energy index overall fell 2.5% in October. The index for fuel oil fell in October by 0.8% from the prior month, while natural gas prices rose 1.2%; the cost of electricity rose 0.3%. Compared to last year, the energy index fell 4.5% in October with the cost of fuel oil dropping 21.4% during the period. Natural gas prices have been down 15.8% over the past 12 months.
6. More Americans filed for jobless claims last week while the labor market remains broadly healthy. There are growing signs that it may finally be cooling. In the week ending November 11, the advance figure for seasonally adjusted initial claims was 231,000, an increase of 13,000 from the previous week’s revised level. That’s the most in the past three months. The previous week’s level was revised up by 1,000 from 217,000 to 218,000. The 4-week moving average was 220,250, an increase of 7,750 from the previous week’s revised average. The previous week’s average was revised up by 250 from 212,250 to 212,500.
7. U.S. crude prices fell 5% on Thursday as inventories rose while industrial production fell. The West Texas Intermediate December contract fell $3.76, or 4.9%, to settle at $72.90 a barrel, while the Brent January contract tumbled $3.76, or 4.63%, to settle at $77.42 a barrel. U.S. crude and the global benchmark hit their lowest level since early July. U.S. crude inventories rose by 3.6 million barrels last week while production held steady at a record 13.2 million barrels per day, according to data released by the Energy Information Agency Wednesday.
8. EUR/USD is up on Friday, trading near the 1.0900 area. The U.S. Dollar received support during the American session from higher Treasury yields and mixed market sentiment. The pair is on its way to the highest weekly close since August. EUR/USD has rallied over the past month with the cross breaching the 1.08 mark.
9. USD/JPY extends losses due to the soft risk tone in the market. Japanese Yen could face a struggle due to the BoJ’s dovish stance. BoJ Governor Ueda reiterated to maintain ultra-loose monetary policy. The Japanese government could intervene in the FX market to curb excess volatility. The USD/JPY dropped below the 150.00 figure during Friday’s mid-North American session as market sentiment shifted sour due to derivative instruments expiring linked to stocks. U.S. housing data shows signs of recovery, though it failed to underpin the USD/JPY, which trades at 149.76, falls 0.64%
Morgan Stanley’s Mike Wilson sees stocks nearly flat in 2024. Wilson projects earnings growth in the S&P 500 to $229 per share, resulting in a year-end target for the benchmark index of 4,500. That target represents nearly 2% upside to current levels, well below the average yearly return of about 10% for the S&P 500. Wilson’s projection stems, in part, from lackluster commentary from companies about the health of the economy and consumers heading into 2024. “While the medium-term outlook for earnings looks positive, the near-term backdrop remains challenged,” Wilson wrote. “Earnings revisions breadth, which typically leads consensus estimates, has rolled over once again and is at the lowest level since March this year. Underpinning this trend is more cautious corporate commentary overall that’s once again centered on the macro.” Wilson also highlights how the erosion of fiscal stimulus to fuel consumer spending and the impact of the Federal Reserve’s ‘higher for longer’ interest rate strategy is “increasingly weighing on both corporate and consumer sentiment. The combination of these factors suggests that earnings headwinds will likely persist into early next year before a durable recovery takes hold,” Wilson wrote.
While housing costs were once again the biggest contributor behind October’s inflation, they posted a substantial slowdown every year. The shelter component of the Consumer Price Index (CPI) rose 0.4% over the previous month, marking the largest factor in the monthly increase in the core that excludes food and energy. Year over year, the component grew 6.7%- still high, but dropping an impressive 50 basis points from September’s annual gain. Also continuing a six-month downward trend from the peak of 8.2% in March. October’s result highlights that “real-time data is making its way to the CPI index and that a is a positive thing,” Chief economist Gregory Daco said on Tuesday. The high housing costs have been frustrating the Fed’s campaign to bring down inflation. Headline inflation rose 3.2% in the 12 months through October, a deceleration from the 3.7% annual gain in prices, and unchanged from the prior month. While the pace of inflation is still high compared to the Federal Reserve’s long-term target of 2%, it’s on the right path.
More freebies are being handed out to home buyers, thanks to stalling sales and high mortgage rates freezing the housing market. That’s because more sellers have resorted to offering buyers concessions, free offerings intended to make a sale more affordable for buyers, to close deals. Sellers that gave concessions accounted for 35% of home sales in the three months ending in October, according to Redfin data, surging from 27.6% of sales in October 2021. “Sellers have become more open to the idea of giving out concessions like cash for repairs and mortgage-rate buydowns, in part because many of them want to get their homes sold quickly due to major life events like divorces and new jobs,” Redfin Premier agent David Palmer said on Tuesday. When mortgage rates hit 23-year highs in October, that sidelined prospective home buyers, who also backed out of more sales earlier this year. According to Redfin, 16.3% of home sale agreements were canceled in September, the highest rate of cancellations since October of last year.
Volatility should be expected to remain high as investors will be closely watching for hints on upcoming monetary policy direction. Many investors have redoubled their efforts to ensure that their portfolios are sufficiently diversified in the hopes that they will be able to withstand corrections in multiple market sectors. Many of these investors have included physical precious metals as part of their diversification plans, given their long history as a hedge against both inflation and during times of economic turmoil. Remember, the key to profitability through the ownership of physical precious metals is to own the physical product and hold it for the long term. Always remember that you should never overextend your ability to maintain ownership of your precious metals over the long run.
Trading Department – Precious Metals International Ltd.
Friday to Friday Close (New York Closing Prices)
| Nov. 10, 2023 | Nov. 17, 2023 | Net Change | ||
| Gold | $1,936.74 | $1,981.17 | 44.43 | 2.29% |
| Silver | $22.27 | $23.75 | 1.48 | 6.65% |
| Platinum | $846.12 | $898.61 | 52.49 | 6.20% |
| Palladium | $978.64 | $1,053.43 | 74.79 | 7.64% |
| Dow | 34283.50 | 34949.53 | 666.03 | 1.94% |
Previous Years Comparisons
| Nov. 18, 2022 | Nov. 17, 2023 | Net Change | ||
| Gold | 1,751.26 | 1,981.17 | 229.91 | 13.13% |
| Silver | 20.93 | 23.75 | 2.82 | 13.47% |
| Platinum | 979.00 | 898.61 | -80.39 | -8.21% |
| Palladium | 1,947.46 | 1,053.43 | -894.03 | -45.91% |
| Dow | 33739.46 | 34949.53 | 1210.07 | 3.59% |
Here are your Short-Term Support and Resistance Levels for the upcoming week.
| Gold | Silver | |
| Support | 1915/1894/1855 | 21.83/21.45/21.05 |
| Resistance | 2001/2014/2035 | 23.94/24.05/24.30 |
| Platinum | Palladium | |
| Support | 833/826/810 | 939/916/902 |
| Resistance | 903/918/935 | 1063/1080/1105 |