1. April 26 brought the latest of several signs that inflation is reasserting itself. Personal Consumption Expenditures, an inflationary measure the Federal Reserve watches closely, showed annualized inflation of 2.8% in March, slightly higher than expected. The Consumer Price Index, another key indicator, rose during the last two months and now shows inflation at 3.5%. Inflation peaked at 9% in June 2022, then fell sharply for a year, reaching a cycle low of 3.1% in June 2023. But it didn’t disappear. Inflation has banged around in the low 3% range for the last nine months, well above the Federal Reserve’s target of 2%. Stubborn inflation has important implications for the rest of 2024. The Fed has made clear it’s not going to cut interest rates until inflation is gone. And it’s not gone yet. So, rates are likely to stay where they are for several more months and potentially through Election Day in November.
2. Central bank digital currencies (CBDCs) are a trending topic globally as data provided by the Atlantic Council shows that 134 countries and currency unions, representing 98% of global GDP, are in some stage of exploring or creating a CBDC. While the topic generates intense emotions from proponents and detractors, the way things are evolving currently suggests that many countries will eventually adopt digital fiat alongside traditional paper money and bank deposits as the digital age slowly encroaches on all aspects of society. Though a future of CBDCs looks likely, naysayers still have several years to prepare for such a development, at least in the European Union, as Dr. Joachim Nagel, president of Germany’s central bank, told attendees at a conference in 2024. He stated that “It may take another four or five years before a digital euro is actually implemented. Today, banknotes and coins are still the preferred means of payment at the point of sale. But the share of cash payments in retail turnover has roughly halved,” Nagel said. “In return, cashless payment methods have become increasingly important – a trend that is likely to continue. By offering innovative and convenient means of payment, they have challenged incumbent payment solution providers, even though they lack the same level of trust. Trust is an important keyword when it comes to payments. Trust is the soul of money. And in times of change, as we are currently experiencing, trust is particularly important.” Nagel noted that while digital payments are rising, “cash is being used less and less,” and since it cannot be used in digital payments, “it is also being used less at stores.” While many banks are concerned that the digital euro might become an attractive substitute for bank deposits, the Eurosystem is aware of the potential risks and will take the necessary precautions to make sure that they do not materialize.
3. Stocks are facing a familiar problem. Even as earnings for the first quarter come in better than expected, the market has struggled to climb higher consistently as rising Treasury yields weigh on sentiment for equities, reminding investors of the period in 2023 when higher yields sent stocks crashing. “Higher rates are now a systemic problem for equities,” Piper Sandler chief investment strategist Michael Kantrowitz wrote in a weekly note to clients on Friday. Kantrowitz pointed to the market action over the last month, which could be simplified to a basic formula: When Treasury yields have risen, stocks have fallen. And recently, yields have soared. The 10-year Treasury yield is up more than 40 basis points to 4.63% since the start of April, its highest level since November 2023. In that time, the S&P 500 has fallen about 3%. At this point, it’s hard to see equities going up without rates going down. The rise in yields has come as investors have heavily scaled back their bets on Federal Reserve interest rate cuts this year. Market expectations have shifted from nearly seven cuts to around just one in 2024. And Morgan Stanley’s chief investment officer Mike Wilson wrote in a research note on Sunday this upside pressure in yields is likely to remain unless Fed Chair Jerome Powell “surprises on the dovish side” during his press conference on Wednesday. Given recent hot inflation readings, economists don’t expect that to be the case when Powell speaks.
4. Federal Reserve officials agreed on Wednesday to hold interest rates steady for the sixth consecutive meeting, signaling that they are willing to keep rates at the highest level in more than two decades for longer than previously expected and noting that progress on bringing down inflation has stalled. The central bank left its benchmark federal funds rate unchanged in a range between 5.25 percent and 5.5 percent, as it awaits more evidence that inflation is sustainably falling to its two percent target. The Fed’s preferred inflation gauge, the personal consumption expenditures price index, rose at an annualized rate of 3.4 percent in the first quarter, nearly double the 1.8 percent pace recorded in the fourth quarter of last year. Core PCE inflation, which excludes the more volatile costs of food and energy, climbed 3.7 percent in the first three months of the year, a big step up from the fourth quarter’s 2 percent.
5. Gold is at an inflection point post-Fed with prices pulling back on improved market sentiment and lower safe-haven demand, according to Joaquin Monfort, European Editor at FXStreet. “Gold price surged over $30 an ounce after the Federal Reserve adopted an overall easing bias at its May policy meeting on Wednesday,” Monfort wrote. “Gold bulls bid up the price after the Fed decided to leave interest rates unchanged and to slow the pace of reduction of its Treasury holdings, a mildly dovish move as it unwinds quantitative tightening.” He noted, however, that the FOMC also added a hawkish phrase to their latest statement, saying “in recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective.” In his prepared remarks, Powell dropped any reference to reducing interest rates this year, and sidestepped questions about whether the Fed would still be cutting rates in 2024. Yet, although the overall takeaway was that rates were not coming down any time soon, additional rate hikes were not on the table either. Turning to the technical picture, Monfort said that spot gold “has fulfilled the minimum requirement for completing its bearish Measured Move price pattern after hitting the Fibonacci 0.681 price objective for the final C wave at $2,286.” He said this indicates that prices could be ready to move higher.
6. In the week ending April 27, the advance figure for seasonally adjusted initial claims was 208,000, unchanged from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 207,000 to 208,000. The 4-week moving average was 210,000, a decrease of 3,500 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 swung in a narrow range as a buildup in U.S. stockpiles and a potential cease-fire in the Middle East suppressed a budding rebound from sharp losses. West Texas Intermediate sank below $79 and reached the lowest point in more than a month. Oil has lost more than 5% this week on signs of easing tensions in the Middle East, including the prospect of a historic pact between Washington and Riyadh. Falling equity markets have also provided headwinds for crude in recent days as traders shy away from risk assets. The decline is a turnabout from last month when oil soared to the highest since October following Iran’s attack on Israel. On the supply side, the United Arab Emirates’ main oil company said it has bolstered its production capacity, a month before the country meets with fellow OPEC+ nations to decide output levels for the second half of the year.
8. EUR/USD soars to 1.0800 as the U.S. Dollar weakens in Friday’s early American session. The Dollar faces an intense sell-off as the United States Bureau of Labor Statistics (BLS) has reported that labor demand remains weak and wage growth slowed in April. The U.S. Dollar Index, which tracks the Greenback’s value against six major currencies, has printed a fresh three-week low near 104.50.
9. The Japanese Yen is set to lock in a staggering performance for this week against the U.S. Dollar. The Yen has appreciated over 3% following Japan’s intervention to propel the currency and the Fed’s less-hawkish rhetoric. The Dollar Index slips below 105.00 with softer Non-Farm Payroll print.
Stocks are on track to post their worst month of 2024, as a brutal mid-April stretch means the major indexes are set to end the month with losses. But investors are looking to continue making headway on a rebound that has pervaded over the last week. Investors are bracing for policymakers to hold interest rates at historically elevated levels at the Fed’s two-day meeting, set to start on Tuesday. The prospect of rate cuts has retreated dramatically since the start of the year, helping drive up Treasury yields — a familiar systemic problem for stocks. In addition, Consumer confidence declined to its lowest level in more than a year and a half during April. The latest survey from the Conference Board showed consumer confidence retreated to a reading of 97 in April, below economists’ expectations for a reading of 104, and lower than Marches of 103.1.
U.S. worker productivity growth slowed sharply in the first quarter, resulting in a surge in labor costs, but the trend in productivity remained solid. Nonfarm productivity, which measures hourly output per worker, increased at a 0.3% annualized rate last quarter after rising at a 3.5% pace in the October-December period, the Labor Department’s Bureau of Labor Statistics said on Thursday. The government on Friday corrected productivity data from 2019 through 2023 due to a computation error. Economists polled had forecast productivity would increase at a 0.8% rate. Productivity advanced at a 2.9% pace from a year ago. Economists are keeping an eye on productivity to gauge how quickly labor costs can rise without re-igniting inflation. Labor costs and inflation surged in the first quarter.
A cooling of the labor market should provide welcome relief for the Federal Reserve as it looks to ease the economy into a soft landing, Mohamed El-Erian said after the release of April U.S. jobs data. “A Goldilocks report that will please the Fed and please the markets,” El-Erian, the president of Queens’ College, Cambridge told the media on Friday. The market’s reaction to the Friday report should also offer a reprieve for global economies grappling with a stronger dollar as the Fed holds benchmark rates higher for longer. The yen in particular has suffered from rising U.S. yields this year, and Japanese officials possibly stepped in on two occasions this week to support the currency in what would be the first foreign-exchange intervention since 2022. The yen advanced some 0.8% against the greenback after the release of the jobs data Friday. U.S. yields and the dollar tumbled on Wednesday after Fed Chair Jerome Powell in the news conference following the central bank’s latest policy meeting said a resumption of interest-rate increases was unlikely, even as the outlook for rate cuts remains uncertain.
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)
| Apr. 26, 2024 | May. 3, 2024 | Net Change | ||
| Gold | $2,338.72 | $2,302.28 | -36.44 | -1.56% |
| Silver | $27.28 | $26.48 | -0.80 | -2.93% |
| Platinum | $916.25 | $958.40 | 42.15 | 4.60% |
| Palladium | $958.30 | $948.45 | -9.85 | -1.03% |
| Dow | 38235.78 | 38675.88 | 440.10 | 1.15% |
Month End to Month End Close
| Mar. 29, 2024 | Apr. 30, 2024 | Net Change | ||
| Gold | $2,221.41 | $2,296.32 | 74.91 | 3.37% |
| Silver | $24.87 | $26.41 | 1.54 | 6.19% |
| Platinum | $911.70 | $940.60 | 28.90 | 3.17% |
| Palladium | $1,019.78 | $958.29 | -61.49 | -6.03% |
| Dow | 39807.37 | 37815.92 | -1991.45 | -5.00% |
Previous Year Comparisons
| May. 5, 2023 | May. 3, 2024 | Net Change | ||
| Gold | $2,015.63 | $2,302.28 | 286.65 | 14.22% |
| Silver | $25.61 | $26.48 | 0.87 | 3.40% |
| Platinum | $1,060.62 | $958.40 | -102.22 | -9.64% |
| Palladium | $1,502.12 | $948.45 | -553.67 | -36.86% |
| Dow | 33674.31 | 38675.88 | 5001.57 | 14.85% |
Here are your Short-Term Support and Resistance Levels for the upcoming week.
| Gold | Silver | |
| Support | 2289/2241/2192 | 26.30/25.44/24.22 |
| Resistance | 2315/2387/2436 | 28.38/29.60/30.46 |
| Platinum | Palladium | |
| Support | 907/900/889 | 940/926/899 |
| Resistance | 975/1005/1030 | 981/1008/1021 |