1. U.S. stocks were little changed on Monday as investors braced for a busy week packed with Big Tech earnings updates, a Federal Reserve rate decision, and the crucial jobs report. With five of the “Magnificent Seven” tech companies set to report earnings, it looks like a crunch week for stocks. Big techs have driven the S&P 500’s recent record-setting gains, and the focus will be on whether their AI efforts and layoffs are paying off. At the same time, investors are preparing for the Fed’s policy decision on Wednesday after data last week showed inflation cooling and the economy robust. While policymakers are expected to hold interest rates steady at 5.25%, the market will listen closely to Chair Jerome Powell’s comments for clues as to when cuts could begin amid a scaling-back on March bets. Also coming is Friday’s U.S. jobs report for December, which will factor into calculations of whether the Fed has managed a “soft landing.”
2. One of the hottest debates in the markets right now is if and when the Federal Reserve will pivot from its very hawkish stance and start cutting interest rates. It’s been on hold since last summer. And in its December summary of projections, the central bank signaled that it could cut rates three times in 2024. The present question for Fed watchers has been about when that first-rate cut will happen. For a while, futures traders were betting that the first-rate cut would come with the monetary policy meeting this coming March. But more recently, those bets have been pared back with traders now assigning a 47% chance of a March rate cut, down from 83% a month ago. First of all, we’re talking about a potential 25-basis-point cut from a range of 5.25% to 5.5%. Sure, that’s not insignificant. But that’s nowhere near as big a deal as it was when we were talking about 25-, 50-, and 75-basis-point rate hikes from near 0%. Second, all those big rate hikes early in the hike cycle were happening amid an intensifying inflation crisis. The economy was a complicated mess in 2022. Today, that crisis is largely behind us with inflation rates hovering near the Fed’s target levels. On Friday, we learned that the core PCE price index, the Fed’s preferred inflation gauge, fell to its lowest level in nearly three years. To reiterate, the Fed’s projection that it would cut rates in 2024 was accompanied by assumptions that economic growth would slow significantly, and inflation rates would take another leg lower during the year. That’s to say if the Fed were to change its outlook for rate cuts, it may also be the case that its outlook for the economy and inflation have changed as well.
3. A rising disinflationary environment provides the Federal Reserve room to ease its monetary policy within the first quarter of this year; however, solid economic activity does not give the central bank any incentive to act. This uncertainty has a firm grip on the gold market as prices consolidate within a narrow range, holding critical support above $2,000 an ounce. The anticipation of potential central bank rate cuts later this year, alongside recent U.S. dollar weakening, is fueling optimism that gold markets will advance further and sustain gains much higher than its current price just above U.S. $2,000 per troy ounce. If Federal Reserve Chair Jerome Powell indicates that rate cuts could occur sooner rather than later this year, gold markets could break higher on this signal. The bigger picture, geopolitical volatility, and recent economic uncertainty are creating elevated demand for precious metals as more investors move into ‘safe-haven’ assets. Gold and other precious metals are increasingly becoming a mainstream choice for investors looking to diversify their portfolios and hedge against inflation. With the Federal Reserve keeping its cards close to its chest, gold investors will have to pay more attention to the data. “It will be more important to watch Friday’s employment numbers than listen to what the Fed has to say,” said Philip Streible, chief market strategist at Blue Line Futures. “We know the Fed is paying attention to the labor market; any weakness will force their hand to cut rates. Investors also need to look past government-created jobs and look at the condition of the real job market.” Meanwhile, the Bank of England will also hold its first monetary policy meeting of the year. The BoE is even in a more difficult position as the British economy slows and inflation remains stubbornly high.
4. After years of turbulence, Chinese property giant Evergrande was hit with a winding-up order by a judge in Hong Kong on Monday, setting up a multibillion-dollar battle between Western creditors and Chinese authorities. In a dramatic escalation of Evergrande’s plight, the world’s most indebted property company failed to convince Judge Linda Chan that it had a viable restructuring plan – three years after the company first defaulted on its debt. “Enough is enough,” said Judge Chan, as she ordered Evergrande to liquidate. Given the scale of its borrowings, it is unclear what happens next. This means Western investors who lent it billions of dollars must now proceed through the Chinese courts, pitting them against Beijing policymakers, retail investors, and small suppliers. In theory, the latter two will rank lower than overseas investors when it comes to sharing payouts. Before China’s property crisis, when the so-called Golden Era was in full swing, Evergrande raised money by issuing IOUs in dollars rather than renminbi to lure international investors. Western fund managers like Ashmore, Amundi, and Legal & General, as well as banks such as HSBC and UBS, lapped up so-called “Kung-Fu Bonds”, with Evergrande holding around $19bn worth of IOUs at its peak. However, as the company unraveled and ultimately defaulted, these bonds fell from being worth 95 cents in the dollar to just 20. They are now trading at around just 1.5 cents to the dollar, attracting the attention of vulture funds who buy cheap debt to squeeze a few more pennies from insolvency.
5. America’s economy is growing at a faster pace than any other G7 country in part thanks to a post-pandemic productivity boom, experts say. The IMF World Economic Outlook report estimates the U.S. economy grew by 2.5 percent in 2023 – and is set for a similar 2.1 percent growth in 2024. Japan saw the second-largest growth after its economy swelled 1.9 percent while Canada came in third after experiencing a 1.1 percent increase in GDP. But despite beating out the world’s ‘advanced economies,’ America’s growth was outstripped by so-called ’emerging markets’ China and India, which are not part of the G7. They saw their GDP increase by 5.2 percent and 6.7 percent, respectively. Figures released today show worker productivity grew at a faster rate than expected in the fourth quarter of last year. Nonfarm productivity – which measures hourly output per worker – increased 3.2 percent compared to the same period last year, according to the Labor Department’s Bureau of Labor Statistics. By comparison, many other G7 countries struggled with greater economic pressures than the U.S.
6. In the week ending January 27, the advance figure for seasonally adjusted initial claims was 224,000, an increase of 9,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 214,000 to 215,000. The 4-week moving average was 207,750, an increase of 5,250 from the previous week’s revised average. The previous week’s average was revised up by 250 from 202,250 to 202,500. The advanced seasonally adjusted insured unemployment rate was 1.3 percent for the week ending January 20, an increase of 0.1 percentage point from the previous week’s unrevised rate.
7. Oil futures headed lower on Friday, setting prices up for their first weekly loss in three weeks after posting a gain for January. News reports citing Qatari officials that indicated an Israel-Hamas ceasefire and hostage deal were imminent, sparking a selloff in oil Thursday, but Qatar later made clear a deal had not yet been reached. West Texas Intermediate crude for March delivery fell $1.62, or 2.2%, to $72.20 a barrel on the New York Mercantile Exchange, with the contract trading more than 7% lower for the week. April Brent crude, the global benchmark, was $1.45 lower, down 1.8%, at $77.25 a barrel on ICE Futures Europe, trading roughly 6.8% lower for the week.
8. EUR/USD came under heavy bearish pressure and declined to the 1.0800 area on Friday. The data from the U.S. showed that Nonfarm Payrolls surged 353,000 in January, surpassing the market expectation of 180,00 and fueling a rally in the USD.
9. The USD/JPY bounces from around the 146.00 handle and prints a new three-day high at 148.05 after a strong U.S. Nonfarm Payrolls report pushed aside the Federal Reserve’s rate cut speculations amongst the investment community. At the time of writing, the major exchanges hands at 147.77, gains more than 0.90%.
The Federal Reserve voted to keep interest rates steady for the fourth consecutive meeting today after borrowing costs spiraled to a 22-year high. Fed Chair Jerome Powell also ruled out the chance of an anticipated rate cut in March as he cautioned: ‘Inflation is still too high and the path to bringing it down is not assured.’ It means the Fed’s benchmark funds rate – which has a knock-on effect on mortgages and credit card loans – will remain at its current level of between 5.25 and 5.5 percent where it has been since last July. He told reporters: ‘Based on the meeting today, I would tell you that I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that. But that’s to be seen.’ Stocks plummeted following Powell’s somber statement, with the Dow losing 317 points. The S&P 500 was down 1.5 percent as of Wednesday afternoon. The Fed has staved off interest cuts because consumer spending has remained surprisingly resilient in the face of higher borrowing costs. The U.S. economy grew 3.1 percent last year, faster than the average over the five years before the pandemic and up from less than 1 percent in 2022. This resilience has been fueled by a red-hot labor market which has kept unemployment low. US private payrolls added 107,000 jobs last month, according to figures from the ADP National Employment Report released today. A core concern is that the Fed will cut rates too quickly causing inflation to spiral again.
Bots and fake accounts spread misinformation about First Republic Bank, triggering the withdrawal of $100 billion in deposits and driving its share price down until it became the second-biggest bank failure in U.S. history, according to a new report. Valent Technologies used AI technology to examine online activity during last year’s banking crisis that began with the collapse of Silicon Valley Bank in March. That was followed by an unusual cascade of tweets and Reddit posts from bots that targeted the First Republic, which analysts believed was on a firmer financial footing, coinciding with a collapse in confidence that led depositors to withdraw their cash. Researchers concluded that short sellers likely used the strategy to bet against the bank’s share price and pocket huge profits as it plunged in value. Analysts say it is not an isolated case. Just as bots are being used to spread political misinformation, they can be used for financial gain. Amil Khan, chief executive of Valent Projects, said: “First Republic Bank crashed despite there being no significant change to its fundamentals. The only thing that changed was the way it was perceived, and how those perceptions were manipulated to cause depositors to pull $100 billion in just a few weeks.” Valent Projects found that the hysteria was not organic. Its AI-driven algorithm found that on March 11 there was an uptick in activity on social media which coincided with an increase in ‘short positions’ against the bank as traders gambled that its share price would fall. ‘This is highly abnormal when compared to organic social media trends and raises red flags about the authenticity of the activity,’ the report says. ‘This pattern is unlikely to occur naturally.‘ The surge was driven by bots.
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)
| Jan. 26, 2024 | Feb. 2, 2024 | Net Change | ||
| Gold | $2,016.75 | $2,035.10 | 18.35 | 0.91% |
| Silver | $22.75 | $22.66 | -0.09 | -0.40% |
| Platinum | $916.05 | $897.43 | -18.62 | -2.03% |
| Palladium | $961.44 | $948.97 | -12.47 | -1.30% |
| Dow | 38109.50 | 38656.06 | 546.56 | 1.43% |
Month End to Month End Close
| Dec. 29, 2023 | Jan. 31, 2024 | Net Change | ||
| Gold | $2,067.00 | $2,049.64 | -17.36 | -0.84% |
| Silver | $23.96 | $23.08 | -0.88 | -3.67% |
| Platinum | $999.50 | $927.78 | -71.72 | -7.18% |
| Palladium | $1,110.20 | $994.84 | -115.36 | -10.39% |
| Dow | 37689.40 | 38150.30 | 460.90 | 1.22% |
Previous Year Comparisons
| Feb. 3, 2023 | Feb. 2, 2024 | Net Change | ||
| Gold | $1,863.14 | $2,035.10 | 171.96 | 9.23% |
| Silver | $22.30 | $22.66 | 0.36 | 1.61% |
| Platinum | $976.45 | $897.43 | -79.02 | -8.09% |
| Palladium | $1,633.01 | $948.97 | -684.04 | -41.89% |
| Dow | 33924.60 | 38656.06 | 4731.46 | 13.95% |
Here are your Short-Term Support and Resistance Levels for the upcoming week.
| Gold | Silver | |
| Support | 2000/1972/1943 | 22.21/21.85/21.28 |
| Resistance | 2058/2087/2115 | 23.14/23.71/24.07 |
| Platinum | Palladium | |
| Support | 890/880/865 | 930/914/900 |
| Resistance | 929/938/954 | 974/990/1005 |