1. If there was ever a buy signal in the physical gold market, two consecutive years of record gold buying from central banks has to be it. But can central banks possibly exceed last year’s figure of 1,136 tons? One major issue with this idea was that Turkey, one of the top gold buyers, poured its gold reserves into the domestic market to prop up the lira earlier this year. The tonnage was massive, with as many as 160 tons of gold being liquidated from March to June. However, data shows that this was only temporary and that Turkey resumed gold purchases in Q3, bringing their hoard from 439.75 tons in Q2 to 478.97 tons in Q3. That means Turkey, whose net selling was one of the bigger gold stories this year, bought 40 tons of gold in the three months. In Q3, central banks bought a total of 337 tons of gold, seemingly setting them on track to beat that eye-catching figure. What might be overlooked by some is that central banks have raised their quarterly average by an immense margin, which now stands at 328 tons. This has happened during a time when two top buyers in the form of Turkey and Russia have had to halt sales and dispense with a considerable part of their hoard due to economic crises. Going back to 2017, 2018, or 2019, nearly everyone viewed the idea of some kind of gold standard as fringe. These days, it’s viewed as fringe not to expect something along these lines. Between BRICS and the European gold standard we covered last week, something seems to be brewing past just asset allocation.

The Precious Metals Week in Review – December 22nd, 2023.
The Precious Metals Week in Review – December 22nd, 2023.

2. U.S. stocks edged higher to start the last full trading week of the year even as Federal Reserve officials tried to rein in high expectations for interest-rate cuts. The Dow Jones Industrial Average ticked up about 0.1% at the opening bell after closing Friday at a fresh all-time high. Stocks have surged as investors became increasingly convinced the Federal Reserve would make more rate cuts in 2024 than previously forecast. Those hopes got a boost last week, as policymakers recognized its efforts to cool inflation were having an impact. But Fed officials have pushed back against bets on deeper and faster rate cuts. Chicago Fed President Austan Goolsbee said Sunday that it’s too early to declare victory over inflation after his New York counterpart, John Williams, said Friday that talk of rate cuts is “premature.” Investors will closely watch Friday’s reading of the Personal Consumption Expenditures price index, the Fed’s preferred inflation measure, to help set expectations. Economists expect price pressures to have eased in November. UPDATE: The “core” Personal Consumption Expenditures Index — which excludes volatile food and energy prices clocked in at 3.2% for November. That bested economists’ estimate of 3.3% and showed that inflation is expanding more slowly than it did earlier in the year.

3. In a groundbreaking development, researchers at the SLAC National Accelerator Lab, Stanford, and Toyota are turning the tables on traditional hydrogen fuel cell technology. Say goodbye to the pricey platinum catalysts, as silver emerges as a cost-effective game-changer, making fuel cells more accessible and practical for widespread use. The total demand for Hydrogen Fuel Cell cars, trucks, vans, ships, barges, yachts, ferries, boats, and home and commercial HVAC is projected to surpass Silver’s demand in the Solar Panel Sector. The team’s research demonstrates that silver can match the effectiveness of platinum in fuel cells, offering a more economical alternative without compromising performance. This innovation is set to revolutionize the cost dynamics of manufacturing fuel cells. By substituting silver for platinum, the cost is expected to drop significantly, paving the way for more affordable and efficient fuel cell technology. Silver’s role as a catalyst not only slashes costs but also streamlines the manufacturing process. This dual benefit makes fuel cell technology a more viable and sustainable alternative to conventional gasoline and battery-powered electric vehicles. Toyota’s proactive steps to establish the Hydrogen Factory Europe underscore its commitment to advancing hydrogen-based solutions and contributing to the ambitious sustainability goals set for the European continent. The anticipated commercialization of advanced fuel cell technology in 2026 is a significant milestone in this journey, paving the way for more sustainable and efficient mobility solutions.

4. Ten years ago, Amazon founder Jeff Bezos went on 60 Minutes to reveal a secret R&D project he declared would lead to wide-scale autonomous drone delivery capable of dropping off packages in 30 minutes. That vision is set to become reality in 2024. Not through Amazon, but through South San Francisco startup Zipline and shifting regulations. “This kind of automation is now going to make it possible for us to move packages in a way that is near instant and very low cost,” Zipline co-founder and CEO Keller Rinaudo Cliffton said. With a new generation drone and more than 60 million flight hours under its belt, Zipline and partnering businesses are preparing to deploy drone technology across a handful of U.S. cities next year, with plans to expand to 15 cities by 2025. Zipline’s latest generation drone promises near-instant delivery through an aircraft known as Platform 2. The fixed-wing flight never actually touches down during delivery but hovers 300 feet above ground in near silence. A small “droid” inside the aircraft lowers packages using a tether that allows for precise delivery onto porches, driveways, and sidewalks. The drone can travel within a 10-mile radius and carry up to 8 pounds. Zipline’s new system also doesn’t require a warehouse to launch the drones. Each docking station can be built into any business, allowing the process to be customized for each company. The setup is intended to make adoption seamless and rapid, with deliveries estimated to be 10 times as fast as cars and trucks, according to Rinaudo Cliffton. “We can install the technology onto any wall,” he said. “Whether it is a retail store or a hospital or primary care facility or even a restaurant, in 24 hours, we can show up, and install the infrastructure. Then you turn any window or hole in the wall into a magical portal.”

5. After seeing prices at the pump surge from $2.67 in January to $5 per gallon in the summer, the oil industry is on pace to end the year in negative territory. The supply and demand mismatch that shaped the first half of 2023 has inverted, thanks to oversupply and slowing demand, sending oil prices down 4.5% year to date and 22% lower than 2022’s average. And it’s all despite the efforts of OPEC+ to keep prices high. For the past year OPEC+, the consortium of oil producers led by Saudi Arabia, has been using output cuts to keep a price floor on oil, a level many analysts see as $80 per barrel. That $80 floor has been breached since November. However, the deeper production cuts announced in early December by OPEC+ were not enough to stop a downward trend move. In less than a week since the OPEC announcement was made, WTI and Brent were down by $5 per barrel or roughly 6%. While OPEC production cuts and unilateral reductions from Saudi Arabia were taking place throughout this year, non-OPEC producers have been pumping up their output. The U.S. exported a record amount of crude in the first half of the year, diminishing the effects of the OPEC cuts.

6. In the week ending December 16, the advance figure for seasonally adjusted initial claims was 205,000, an increase of 2,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 202,000 to 203,000. The 4-week moving average was 212,000, a decrease of 1,500 from the previous week’s revised average. The previous week’s average was revised up by 250 from 213,250 to 213,500.

7. Oil prices have added 4% since the start of the week and may book the second consecutive five-day trading period for the past two months. The biggest reason for the spike is the situation in the Red Sea as cargo traffic gets diverted away from the Yemeni coast where Houthis target ships with ballistic missiles and drones. Even so, oil seems to be heading for the first annual loss since 2020 as OPEC+ production cuts failed to fulfill their purpose amid record-high U.S. production and higher output in other non-OPEC producers. At the time of writing Brent crude was trading at $78.95 per barrel with WTI at $73.59 per barrel.

8. EUR/USD retreats towards 1.1000 as trading volume thins out. EUR/USD lost its traction and declined after rising to a multi-month high above 1.1040 on soft U.S. PCE inflation data in the early American session. Trading conditions continue to thin out as markets head into the Christmas break.

9. Japanese Yen trims a part of intraday losses against USD as traders brace for U.S. PCE data. The Japanese Yen retreats from a one-week top on softer inflation figures from Japan. Dovish Fed expectations undermine the USD and cap gains for the USD/JPY pair. Traders now look to the U.S Core PCE Price Index for some meaningful impetus.

Wholesale retailer Costco sold more than $100 million worth of gold in the most recent quarter, with gold bars seeing high demand from customers. “You’ve probably read about the fact that we’re selling one-ounce gold bars. We sold over $100 million of gold during the quarter” ended Sept. 30, Richard Galanti, the chief financial officer of Costco, said during an earnings call on Dec. 14. This was the first quarter of fiscal 2024 at Costco. The wholesale retailer started selling gold online beginning September. In a call late that month, Mr. Galanti had alluded to massive demand for the product. “When we load them [gold bars] on the site, they’re typically gone within a few hours.” At present, Costco has listed two, 1-ounce gold bars for sale—one from PAMP Suisse Lady Fortuna Veriscan and the other from Gold Bar Rand Refinery. Both items are listed as 24-karat gold available for members only and limited to two bars per member. Once sold, the gold bars cannot be returned or refunded. Earlier this month, spot gold prices hit an all-time intraday record high of $2,152. Spot gold was trading at roughly $1,200 back in 2019. Analysts expect gold prices to remain elevated next year due to geopolitical uncertainty, potential rate cuts by the Federal Reserve, and a weaker U.S. dollar.

Wall Street has been buzzing with forecasts for the new year — where the S&P 500 will trade, how 10-year Treasury yields will act, and what path the U.S. economy will take to influence markets. And last week, Fed Chair Jerome Powell finally pivoted, signaling the path for rates will be down rather than up in 2024 while reiterating his view that the economy will perform well with unemployment staying reasonably low and inflation cooling off. On Friday, we’ll get the Fed’s favorite inflation gauge, core Personal Consumption Expenditures, which is expected to show inflation ticked down to an annual rate of 3.3% in November. But this annual reading flatters some more recent indicators of the Fed’s progress in returning inflation to target. The three-month, annualized super core services number, which includes healthcare, education, and hospitality — is stuck at 5.2%. Another metric that captures rent of shelter is similarly hovering around 5.7%. Richmond Fed President Tom Barkin said on Tuesday that inflation and employment data need to stabilize, and investors shouldn’t jump the gun anticipating lower rates despite the Fed’s forecasts. “I’ve got a perspective that inflation is a little stubborner than I think the average person is in there, and I hope I’m wrong on that,” he said. And if the inflation dragon remains un-slayed, the primary risk to the 2024 economy is overheating, something very few investors are pricing in.

Jim Bianco, president of Bianco Research, points out that Q4 GDP in the U.S. is currently tracking 2.7%, according to the Atlanta Fed’s GDPNow calculator. “Is the narrative of a soft landing so powerful, and the desire for the [effects of a] soft landing (aka ‘everything rally’) so wanted — that no one wants to buck this and suggest a solid ‘no landing’ is happening that overstimulates the economy and reignites inflation?” Food for thought in the year ahead.

U.S. new-home construction unexpectedly surged in November to a six-month high, benefiting from a scarcity of existing houses on the market and suggesting the crunch in residential real estate is easing. Residential starts increased 14.8% last month to a 1.56 million annualized rate, government data showed Tuesday. The median forecast in a survey of economists called for a 1.36 million pace. Construction of single-family houses jumped 18% to the highest level since April 2022, while start of multifamily projects increased 6.9%. Builders are benefiting from a shortfall in listings of previously owned homes, enticing buyers with incentives such as subsidized mortgage rates and price cuts. That’s helped ease the pain of the worst affordability on record. While mortgage rates are twice as high as at the end of 2021, just before the Federal Reserve started to tighten monetary policy, borrowing costs have slumped in the past six weeks. The average rate on a 30-year fixed mortgage has dropped back below 7% for the first time since August, according to the latest data from Freddie Mac. The annualized pace of new-home starts is on par with pre-pandemic rates, suggesting the toll on gross domestic product from weak residential investment is beginning to ease.

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)

Dec. 15, 2023Dec. 22, 2023Net Change
Gold $2,032.89 $2,055.2522.361.10%
Silver $23.99 $24.290.301.25%
Platinum $949.14 $979.5930.453.21%
Palladium $1,191.01 $1,214.0123.001.93%

Previous Year Comparisons

Dec. 23, 2022Dec. 22, 2023Net Change
Gold $1,797.30 $2,055.25257.9514.35%
Silver $23.76 $24.290.532.23%
Platinum $1,026.14 $979.59-46.55-4.54%
Palladium $1,743.02 $1,214.01-529.01-30.35%

Here are your Short-Term Support and Resistance Levels for the upcoming week.

This is not a solicitation to purchase or sell.
© 2023, Precious Metals International, Ltd.

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