1. Thin holiday trading with North American markets closed for holidays is creating some volatility in the precious metals market, with gold prices benefiting and silver prices suffering. U.S. markets are closed in recognition of President’s Day, and major Canadian exchanges in Ontario are closed for Family Day. In the low liquidity environment, gold continues to recover from last week’s selloff after testing support at $2,000 an ounce. Along with gold’s safe-haven appeal, analysts warn investors to watch Asia’s insatiable appetite for the precious metal. Fred Hickey, creator of The Strategist newsletter, pointed out that gold’s rally started Sunday evening after Asian markets opened. Chinese markets were closed all last week for Lunar New Year celebrations. At the same time, silver is seeing some significant selling pressure as prices were unable to hold critical psychological support above $23.50 an ounce. Some traders note that silver could see some profit-taking after last week’s strong recovery. After testing support at $22 an ounce, silver managed to end last week with a 7% rally off its lows. Although gold is starting the shortened trading week with a modest gain, some analysts have pointed out that it remains in a well-defined trend with support at $2,000 and resistance around $2,050 an ounce. While gold remains rangebound, some analysts have said that silver is the key metal to watch in the precious metals space. “If inflation gets ugly, silver has a lot of room to the upside,” said Michele Schneider, director of trading at MarketGauge. Last week, both consumer and producer prices rose more than expected, demonstrating that the ongoing inflation threat is far from over, some traders have said.
2. The growing economic consensus has hit a bump in the road. Over the past several months a string of stronger-than-expected data had many investors embracing a possible soft landing, in which inflation would fall to the Federal Reserve’s 2% goal without a severe economic downturn. Recent data over the past week has challenged that narrative. January inflation reports from the Consumer Price Index (CPI) and Producer Price Index (PPI) showed prices increased more than economists projected in the last month. The recent string of January data is notable because it’s largely the first chunk of data to challenge the soft-landing narrative since Federal Reserve Chair Jerome Powell hinted the U.S. economy may be headed to the ideal outcome during the December Fed meeting. “The data is stacking up against investors in a way that’s making people more nervous,” SoFi head of investment strategy Liz Young stated. After this week though, economists are cutting their projections for the first quarter gross domestic product (GDP), a popular economic growth measure. Goldman Sachs has shifted its forecast from 2.9% annualized growth in the first quarter entering the week down to 2.3%. The Atlanta Fed’s tracker moved down to 2.9% from a 3.4% projection on Feb. 8. Not auspicious for the economic growth component of a soft landing.
3. Reminiscent of 2019, the debate between gold and Bitcoin rages anew as the two assets see a stark contrast in investment demand. In January, the Securities and Exchange Commission approved the launch of 11 Bitcoin-backed exchange-traded products. In a recent interview George Milling-Stanley, chief gold strategist at State Street Global Advisors, said he doesn’t see much correlation between Bitcoin and gold. “All of the demand for the Bitcoin ETFs seems to me to be people selling other Bitcoin products and buying the 11 ETFs rather than new investors coming into the market,” he said. At the same time, gold has managed to hold solid gains above $2,000 an ounce and many analysts expect the market to hit record highs this year. Milling-Stanley said that if Bitcoin were a real threat to gold, the precious metal would see its price well below $2,000 an ounce by now. Milling-Stanley explained that one reason why gold and Bitcoin aren’t competing with each other anymore is because of important shifts in the marketplace and in investment demand. He explained that investors are more likely to hold a hard asset due to rising geopolitical uncertainty. He also pointed out that despite its recent rally, Bitcoin remains an extremely volatile asset. “I certainly don’t trust the safe-haven aspect of Bitcoin. All I see is a volatile asset and I have enough volatility with the Magnificent 7 and other tech stocks,” he said. “Gold will remain an important asset as it provides a portfolio with the dual promise of protection and performance.”
4. Oil held near the highest level in three weeks as persistent geopolitical tensions countered concerns over the demand outlook. Brent crude was trading near $83 a barrel in London after rallying almost 8% in the previous two weeks. Crude futures in New York were above $79. Activity was subdued as a result of a holiday in the U.S. Attacks on shipping in the Red Sea and the Israel-Hamas war have added a geopolitical premium to crude. For the first time, the crew of one ship was forced to abandon the vessel after it was hit by a missile. Still, in the medium term, there are lingering concerns about a market surplus, flagged last week by the International Energy Agency, which also argued that global consumption is slowing. Travel in China, the world’s top importer, surpassed pre-Covid levels over the Lunar New Year holiday period, offering a potential bright spot in a patchy consumption outlook. The push and pull of bearish and bullish factors have led to a decline in volatility. “We expect Brent to trade around the current level in the coming weeks,” Arne Lohmann Rasmussen, head of research at A/S Global Risk Management, said in a note. “Geopolitical risks are upside risks, together with OPEC+ cuts.” Bullish wagers for global benchmark Brent are at the highest since 2021 after the ratcheting up of geopolitical risks in the Middle East, which accounts for around a third of the world’s crude production. Fuel markets, meanwhile, are in focus amid one of the most active trading periods for refined products in several years, as year-to-date price gains outstrip those for crude.
5. Mortgage rates climbed further above 7% this week, complicating the housing market with mixed signals on where home affordability will head next. The average rate for a 30-year fixed loan reached 7.16% on Thursday and remained over the 7% threshold every day over the last seven days. The latest average is the highest in two months, matching the highest level since late November. A separate index tracking the weekly average on a 30-year loan showed a similar story — the weekly average increased 12 basis points to 6.90% from 6.77% a week prior, according to Freddie Mac’s latest release. So far in 2024, housing market activity remains slow but is expected to accelerate when rates drop. However, resilient economic data, strong labor market, and consumer spending are likely to delay the rate cut that many were expecting earlier in the year. That would have a dampening effect on the normally busy spring homebuying season.
6. In the week ending February 17, the advance figure for seasonally adjusted initial claims was 201,000, a decrease of 12,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 212,000 to 213,000. The 4-week moving average was 215,250, a decrease of 3,500 from the previous week’s revised average. The previous week’s average was revised up by 250 from 218,500 to 218,750.
7. Crude oil futures rose Thursday amid signs of a tightening global market and as the geopolitical outlook in the Middle East remains uncertain. The West Texas Intermediate contract for April gained 70 cents, or 0.9%, to settle at $78.61 a barrel. The Brent contract for April added 64 cents, or 0.77%, to settle at $83.67 a barrel. The price premium of the first-month futures contracts over the following months has increased in recent weeks, according to UBS strategist Giovanni Staunovo.
8. The Euro prints gains against the U.S. Dollar during Friday’s North American session but still circa the 200-day moving average at 1.0826, amid an absent economic calendar in the United States. Data from the Euro area (EU) witnessed its largest economy shrinking while business sentiment improved. The EUR/USD continues to trade in a tight channel above 1.0800 in the second half of the day on Friday, as the improving risk mood makes it difficult for the USD to gather strength. The pair remains on track to snap a five-week losing streak.
9. The USD/JPY faces an intense sell-off from 150.80 in Friday’s early New York session. The asset has come under pressure as the US Dollar retraces vertically, even though Federal Reserve (Fed) policymakers argue in favor of keeping interest rates at their current level. The U.S. Dollar Index corrects to 103.80 as the appeal for safe-haven assets wanes. 10-year US Treasury yields have dropped to 4.30%.
Interest payments on the U.S. national debt will eclipse defense spending in 2024, grim new projections show. Federal debt is at a historic high, having hit a staggering $34 trillion earlier this year. Interest payments on this debt are now the fastest-growing part of the federal budget. It means by the end of 2024; interest payments will be the second largest government expenditure. Only Social Security will be a bigger cost. Net interest has been exploding over the past few years, with payments nearly doubling from $352 billion in 2021 to $659 billion in 2023. In 2024, the federal agency predicts interest will total $870 billion – and surge past $1 trillion annually by 2026. As a share of the economy, total interest on the national debt is forecast to hit 3.1 percent of GDP this year. While the Fed has indicated that it may lower interest rates this year, analysts now expect this will not happen before May at the earliest. It comes after legendary hedge fund manager Paul Tudor Jones warned that ‘unsustainable’ government borrowing has led to a ‘debt bomb’ which is on the verge of exploding in the U.S. The investor said that the economy appears strong – but under the surface, it is actually on ‘steroids’ that are masking major problems. The founder and chief investment officer of Tudor Investment Corporation said the danger of this excessive fiscal spending is being masked by a strong economy and particularly a boom in artificial intelligence. This, he argued, is improving productivity, and masking the unsustainability of government spending and borrowing. He said: “The only question is does that manifest itself in the markets, or when does that manifest itself in the markets. It could be this year; it could be next year. Productivity may mask and it might be three or four years from now but clearly, clearly, we’re on an unsustainable path.”
SoFi Head of Investment Strategy Liz Young discussed investor sentiments coming off of January inflation data and what the Fed could be forecasting for “later rather than sooner” rate cuts in 2024. “If we get bad data again for February, if things have heated up quite a bit, then I think investors really start to take heed that… maybe we shouldn’t even cut rates starting in May or June, and that’s where we start to get nervous,” Young explains. “You have to think about what drove the rally towards the end of the year last year. It was the expectation that the Fed was going to pivot, that inflation had been solved, and that rates were going to come down sooner than maybe we had originally expected. So, the volatility, particularly the volatility that we’re seeing in yields, is telling that story, that we’re not quite out of the woods yet, not necessarily that inflation is heating back up and on a new trend. It’s again, it’s just one month. But that risk that things could get hotter and not be going down in the linear fashion that we had expected is still around.” She further went on to say, “I don’t think the Fed is taking a victory lap. I think that they’ve been pretty consistent with their messaging that we’re not confident yet that we’ve solved the problem, which is why they consistently pushed back on that March rate cut. It moved to May, then it moved to June. And I think that that strategy so far has worked for them because expectations of an earlier cutting cycle have completely dissolved.”
Sales of previously occupied U.S. homes ticked up in January but remained historically low after 2023 saw the fewest sales in nearly 30 years. Existing home sales increased 3.1% last month from December to a seasonally adjusted annual rate of 4 million, the National Association of Realtors said Thursday. That marked the strongest sales activity since August when 4.04 million sales were recorded. Year-over-year sales of previously owned homes declined by 1.7% but came in above the 3.97 million predicted by economists polled. The median home price increased more than 5% year over year, marking the seventh straight month of annual gains. The median price of $379,100 was the highest for January on record. The measure outpaced wage growth for the first time in 14 months, the NAR said. The data underscores how many first-time homebuyers continue to be in dire straits as they try to break into the market. The challenges that crumbled demand last year, tight inventory, climbing prices, and elevated mortgage rates continue to be a pressure point for would-be buyers.
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)
| Feb. 16, 2024 | Feb. 23, 2024 | Net Change | ||
| Gold | $2,013.35 | $2,037.90 | 24.55 | 1.22% |
| Silver | $23.43 | $22.98 | -0.45 | -1.92% |
| Platinum | $910.03 | $905.35 | -4.68 | -0.51% |
| Palladium | $955.36 | $989.51 | 34.15 | 3.57% |
| Dow | 38621.26 | 39131.86 | 510.60 | 1.32% |
Previous Year Comparisons
| Feb. 24, 2023 | Feb. 23, 2024 | Net Change | ||
| Gold | $1,810.07 | $2,037.90 | 227.83 | 12.59% |
| Silver | $20.79 | $22.98 | 2.19 | 10.53% |
| Platinum | $911.19 | $905.35 | -5.84 | -0.64% |
| Palladium | $1,394.67 | $989.51 | -405.16 | -29.05% |
| Dow | 32817.05 | 39131.86 | 6314.81 | 19.24% |
Here are your Short-Term Support and Resistance Levels for the upcoming week.
| Gold | Silver | |
| Support | 1988/1963/1942 | 22.38/21.36/20.79 |
| Resistance | 2045/2079/2100 | 23.96/24.53/25.55 |
| Platinum | Palladium | |
| Support | 892/879/869 | 934/918/900 |
| Resistance | 915/924/937 | 967/984/1000 |