1. The Federal Reserve is stuck in a mode of forecasting and public communication that looks increasingly limited, especially as the economy keeps delivering surprises. The issue is not the forecasts themselves, though they’ve frequently been wrong. Rather, it’s that the focus on a central projection — such as three interest-rate cuts in 2024, in an economy still undergoing post-pandemic tremors fails to communicate much about the plausible range of outcomes. The outlook for rates presented just last month now appears outdated amid a fresh wave of inflation. Higher-than-expected inflation data quickly rendered that call obsolete, at least in financial markets: Investors have dialed back the number of cuts expected this year, while options markets say the probability of one cut or less is about a coin toss. Without a sense of how officials might revise their path for rates in a “hot economy” scenario, “any shift in these outlooks creates more volatility,” said Ira Jersey, chief U.S. interest-rate strategist. “Understanding how the Fed is handicapping such potential outcomes could provide valuable information,” he said.

The Precious Metals Week in Review – April 26th, 2024.
The Precious Metals Week in Review – April 26th, 2024.

2. Stubbornly high inflation has pushed rates in the U.S. up relative to rates in other countries, lending support to the greenback. That has investors thinking about currency impacts again. A stronger dollar makes U.S. exporters less competitive. It makes profits generated overseas less valuable when converted back into dollars. It makes dollar-denominated debt more burdensome for foreign borrowers. And so on. There are a host of effects from the strong dollar that investors should consider. Perhaps the most straightforward, however, is the impact that the rising dollar has on international stock ETFs. When the dollar rises, stocks held by those exchange-traded funds are worth less—all else equal. This year, the Japanese yen has moved lower by nearly 10% compared to the U.S. dollar. That’s subtracted nearly 1000 basis points from the returns of iShares MSCI Japan ETF, which is up less than 5% this year. Of course, few investors can accurately determine currency moves, especially over the short term. But that doesn’t change the fact that, whether consciously or not, investors in international stock ETFs are making a bet on where the dollar is headed.

3. Techs led a retreat in U.S. stocks on Thursday as Meta’s revenue forecast rattled investors eyeing the next high stakes mega cap earnings. Meanwhile, a sharply lower-than-expected reading on GDP for the first quarter ratcheted up questions about the health of the economy in the face of persistently high interest rates. The Nasdaq Composite fell more than 2% on the heels of a go-nowhere day for the major Wall Street gauges. The S&P 500 lost 1.3%, while those on the Dow Jones Industrial Average slipped 1.65%, or 635 points. That miss put a dent in hopes that results from the “Magnificent Seven” might juice a comeback in stocks, whose rally has lost momentum recently. Meanwhile, U.S. GDP growth came in at a 1.6% annualized pace in the first quarter, falling well short of expectations of 2.5%. The reading comes amid ongoing debate about the path of the Federal Reserve’s interest rate campaign.

4. Gold fell as geopolitical tensions eased in the Middle East, paring safe-haven demand, and traders looked ahead to U.S. data that will shed light on the outlook for monetary policy. Bullion dropped more than 2% to trade near $2,345 an ounce after a five-week rally, the longest such streak in more than a year. Gold remains almost 15% higher so far this year after the recent surge to a record, with gains supported by central bank buying and demand from Asia, especially China. The commodity has risen despite advances in the dollar and 10-year Treasury yields, factors that would usually be a headwind. Against that backdrop, banks including Goldman Sachs Group Inc. have been raising their price targets for the metal.

5. The Biden administration has waged war on American energy. Costs have skyrocketed. Both consumers and producers are being crushed by burdensome regulations. Offshore energy development in the Gulf of Mexico is essential to our nation’s all-of-the-above energy strategy, offering immense economic, national security and environmental advantages. Yet, President Biden has implemented a draconian federal offshore oil and gas leasing program that inhibits this progress. According to the Bureau of Ocean Energy Management, the U.S. Department of the Interior only plans to hold three lease sales over the over the next five years in the Gulf of Mexico. This represents the lowest number of auctions in the history of the program, as there have been at least 11 lease sales in every five-year plan since 1992. The U.S. Department of Energy’s decision to ban new liquified natural gas (LNG) export permits puts the United States at a competitive disadvantage in terms of energy production, mitigating greenhouse gas emissions and national security. This decision is especially baffling as natural gas plants release much lower levels of nitrogen oxides, sulfur dioxide and particulate matter than coal plants. Deterring LNG production only places additional need for the world to rely on foreign adversaries, particularly Russia and China, for fuel. China continues to build coal plants, without a second thought about the emissions they are producing, and Russian supplies of natural gas remain unreliable with the ongoing war in Ukraine. For decades, America’s energy producers have worked diligently to successfully improve efficiency, productivity and safety while lowering emissions. In fact, U.S. carbon intensity is 46% lower than the global average.

6. Unlike Sam Bankman-Fried who founded fraudulent crypto exchange FTX and has become a household name, Do Kwon has gone more under the radar, even though his crypto scheme, Terra, wiped out tens of billions more dollars in comparison. South Korea-born Kwon broke away and created Terraform Labs in 2018, supposedly applying his tech and coding genius to the wacky world of crypto. But now, both the U.S. and South Korea are fighting over who will extradite the alleged crypto fraudster – who faces a slew of billion-dollar civil and criminal accusations after the fugitive was finally apprehended in Montenegro in 2023. Kwon created the cryptocurrency Luna, earning him the unofficial title ‘King of Lunatics.’ He also created TerraUSD, a so-called stablecoin that was pegged to the dollar, meaning it was always supposed to be worth $1. At its peak in April 2022, Terra-related coins had a total market cap of around $60 billion. A month later, it practically went to zero. And in early May, the worst-case scenario unfolded when skeptical investors triggered the collapse of TerraUSD and Luna by selling the stablecoin en masse. By May 9, the TerraUSD was worth $0.35, not a dollar like it was supposed to be. And on May 12, Luna’s price dropped 96 percent in a single day, leaving it at a measly $0.10. Instead of facing the music right away, Kwon spent months tweeting and evading capture from U.S. and South Korean authorities. Kwon also faces a litany of criminal charges from his home country South Korea and the Southern District of New York – the same office that prosecuted Bankman-Fried and got him locked him up for 25 years. Now both countries are in a bitter battle to extradite the Stanford graduate.

7. In the week ending April 20, the advance figure for seasonally adjusted initial claims was 207,000, a decrease of 5,000 from the previous week’s unrevised level of 212,000. The 4-week moving average was 213,250, a decrease of 1,250 from the previous week’s unrevised average of 214,500.

8. Oil is headed for a weekly gain amid signs of a tightening physical market while traders continue to assess lingering Middle East risks. West Texas Intermediate edged lower to trade near $83 a barrel, on track to post a weekly advance of about 2%. A report earlier this week showed U.S. crude stockpiles dropping to the lowest since January, while gauges such as the WTI cash roll and key time spreads are signaling supply constraints. At the time of writing, Brent crude was trading for $89.44 per barrel.

9. The EUR/USD pair edges lower during the Asian session on Friday and moves away from a two-week high, around the 1.0740 area touched the previous day. Spot prices currently trade around the 1.0725-1.0720 region and remain at the mercy of the U.S. Dollar (USD) price dynamics ahead of the crucial US data.

10. The Japanese Yen weakens across the board after BoJ announced its policy decision. A short-lived spike in the Yen may be testament to an attempt by the Japanese authorities to intervene. The U.S. PCE Price Index shows higher-than-expected inflation but does little to impact USD/JPY which almost touches 157.00.

New data released Tuesday flashed a sign that the U.S. economy could be losing steam. S&P Global’s flash composite PMI, which captures activity in both the services and manufacturing sectors, came in at 50.9 in April, its lowest reading in four months. April’s print was down from the 52.1 reading seen in March and below economists’ expectations for 52. The decline from previous months shows a “little bit of a wobble” for economic activity to start the second quarter. It’s going to be interesting to watch this and see how that persists. But certainly, the second quarter so far is not looking as strong as the first quarter, which is pretty much in line with what most people were anticipating. It was a good start to the year, and now it’s losing some momentum. After hitting a 20-month high in January, overall business confidence took a hit, reaching its lowest level since November. April’s report also showed a decline in new orders for the first time in six months while companies scaled back on employment for the first time in nearly four years.

Car rental operator Hertz reported it lost another $200 million due to its EV gamble. In its first quarter earnings report, Hertz said it “upsized” its prior EV fleet drawdown plans by an additional 10,000 EVs, which led to the company incurring a $195 million charge to vehicle depreciation for writing down the value of EVs held for sale. The company previously said it would sell off 20,000 EVs from its fleet, meaning it will now dispose of 30,000 EVs in its fleet through the end of 2024. Add today’s charge to the $245 million write-down taken in Q4, and the company has now lost $440 million on its EV gambit. Hertz’s EV fleet — which once stood at 60,000 EVs, will be cut down to half that at 30,000 EVs. A third of Hertz’s EV fleet was from Tesla, with the rest coming from Polestar, Volvo, and Chevrolet.

The end of oil is not in sight, OPEC’s top official said, as the pace of energy demand growth means that alternatives cannot replace it at the needed scale, and the focus should be on cutting emissions, not oil use. The Organization of the Petroleum Exporting Countries believes oil use will keep rising in coming decades, in contrast to bodies such as the International Energy Agency, which predicts it will peak by 2030. The oil industry is investing in technologies like carbon capture utilization and storage, clean hydrogen and direct air capture, and so showing that it is possible to reduce emissions while producing the oil the world needs. The world has invested over $9.5 trillion in transition costs over the past two decades, yet wind and solar still only supply just under 4% of the world’s energy, while electric vehicles have a total global penetration rate of between 2% and 3%. The reality is that many alternatives cannot replace oil at the necessary scale or are unaffordable in many regions.

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.

Friday to Friday Close (New York Closing Prices)

Apr. 19, 2024Apr. 26, 2024Net Change
Gold $2,393.82 $2,338.72-55.10-2.30%
Silver $28.69 $27.28-1.41-4.91%
Platinum $934.10 $916.25-17.85-1.91%
Palladium $1,021.24 $958.30-62.94-6.16%

Previous Year Comparisons

Apr. 28, 2023Apr. 26, 2024Net Change
Gold $1,990.76 $2,338.72347.9617.48%
Silver $25.01 $
Platinum $1,080.04 $916.25-163.79-15.17%
Palladium $1,511.25 $958.30-552.95-36.59%

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

This is not a solicitation to purchase or sell.
© 2024, Precious Metals International, Ltd.

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