1. Gold and silver prices are higher, with silver sharply up, in early U.S. trading Tuesday. Bullish daily outside-market forces are working in favor of the bulls to start the trading week. The U.S. dollar index is lower and crude oil prices are higher. June gold was last up $14.30 at $2,348.80. July silver was last up $1.296 at $31.795. Silver’s strong gains today come amid reports of stronger Chinese demand for silver. To underscore the increased global demand for metals, broker SP Angel today reported in a dispatch that a University of Michigan study said the amount of copper needed for electric vehicles is “impossible for mining companies to produce.” An EV requires three to five times more copper than traditional gas or diesel cars. The study analyzed 120 years of global copper production data and modeled future production against projected copper needs for renewable energy and EVs. The study concluded that renewable energy’s copper needs exceed current production capacity.

The Precious Metals Week in Review – May 31st, 2024.
The Precious Metals Week in Review – May 31st, 2024.

2. As much as Western investors want to ignore the gold market, there is no denying that we are seeing a generational shift in the marketplace. Investment demand is being replaced by central bank purchases as one of the most significant factors driving prices. At the same time, market influence is rushing from the West to the East as Asian buyers, specifically Chinese retail investors, have an insatiable appetite for gold. This shifting dynamic in gold was revealed in AG’s annual comprehensive “In Gold We Trust” report. In one of its findings, the report highlights the end of the Great Moderation—a period characterized by low inflation—and the onset of persistent inflation volatility. This new economic environment strengthens the case for gold as a hedge against inflation and economic instability. Central banks and Emerging Markets are embracing new strategies that include gold as an important monetary asset; however, Western investors continue to read from the old playbook as they focus on monetary policy and opportunity costs of holding gold. Steve Forbes, Chairman, and Editor-in-Chief of Forbes Media, suggested in a recent commentary that the world is inching toward a new gold standard. Forbes notes that despite widespread skepticism, the historical gold standard provided economic stability and growth. Gold’s growing allure makes sense when you look at the size of government debt worldwide. Forbes noted that total global debt is more than $300 trillion, three times the global GDP. Sovereign gold demand should continue to rise as nations become more insular.

3. The tide is turning on once-trendy electric vehicles, with many Americans admitting that the cars are actually more hassle than they’re worth. Almost all major electric vehicle makers, including Tesla and Chinese rival BYD, saw declines in sales in the first quarter of 2024 – as people have questioned if the costs, convenience, and reliability are actually worth it. Demand for these cars have dropped precipitously throughout 2023 after a boom in interest during 2022, but now a new poll has found that a total of 61 percent of Americans don’t like EVs. As the technology for electric vehicles are a lot newer than the systems that have been inside gas cars for decades, drivers report having a lot more issues with EVs. Among the most frequently reported troubles were battery and charging system issues as well as flaws in how the vehicles’ body panels and interior parts fit together. A recent survey found that electric vehicles cost 63.6 percent more for every 1,000 miles driven per year compared to gasoline cars. This is because electric cars end up being driven less than gas cars. Consequently, the majority of people surveyed in the poll cited their belief that electric vehicles don’t perform as well as gas cars as a major reason for their negative views of EVs.

4. Home-price growth in 20 major U.S. cities picked up pace in March, pressuring buyers as the key selling season kicks into gear. Prices in a measure of 20 cities increased 7.4% from a year earlier, larger than the 7.3% annual gain in February. Homebuyers are facing a severe affordability crisis made worse by mortgage rates hovering around 7% and price growth that’s only accelerating. At the heart of the problem is the lack of previously owned homes for sale: Few owners are willing to move if it means letting go of a loan locked in when rates were cheap. While listings have increased in recent months, inventory remains historically tight. San Diego posted the biggest annual gain among the 20 cities, followed by New York and Cleveland. The Northeast is the “top performer,” according to Brian Luke, head of commodities and digital assets at S&P Dow Jones Indices. “COVID was a boon for Sunbelt markets, but the bigger gains the last couple of years have been the northern metro cities,” Luke said in a statement.

5. The U.S. economy grew more slowly than initially thought during the first quarter. The Bureau of Economic Analysis’s second estimate of first quarter U.S. gross domestic product (GDP) showed the economy grew at an annualized pace of 1.3% during the period, down from a first reading in April of 1.6% growth and in line with economist estimates. The update to the first quarter growth metric “primarily reflected a downward revision to consumer spending,” per the BEA. Personal consumption in the first quarter grew at 2%, down from a prior reading of 2.5%. The reading came in significantly lower than fourth quarter GDP, which was revised up to 3.4%.

6. In the week ending May 25, the advance figure for seasonally adjusted initial claims was 219,000, an increase of 3,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 215,000 to 216,000. The 4-week moving average was 222,500, an increase of 2,500 from the previous week’s revised average. The previous week’s average was revised up by 250 from 219,750 to 220,000.

7. U.S. crude oil was on pace Friday for its worst month of the year, ahead of an OPEC+ meeting this weekend during which the cartel will review its production levels. U.S. oil is down 5.7% in May, while global benchmark Brent has fallen 7%. OPEC+ members on Sunday are expected to review voluntary output cuts of 2.2 million barrels per day. Three OPEC+ delegates told CNBC those cuts will likely be prolonged. “We see no appetite at this juncture to add more barrels to the market and trigger another price move to the downside,” Helima Croft, head of commodity strategy at RBC Capital Markets, told clients in a note on Wednesday. Gasoline demand in the U.S. has been relatively weak, with the daily demand average for fuel 1.4% lower in the runup to Memorial Day compared with the year-ago period.

8. EUR/USD clings to gains above 1.0850 after U.S. inflation data. EUR/USD trades in positive territory above 1.0850 in the American session on Friday. The Dollar struggles to preserve its strength following the April PCE inflation data and helps the pair hold its ground heading into the weekend.

9. The U.S. Dollar continues to bounce around against the Japanese yen, as there is a lot of noise around the PCE numbers coming out a little lower than expected. USD/JPY is likely to remain underpinned as the Bank of Japan has few options for sustainably strengthening the Yen. Direct intervention is only a quick fix and needs support from higher interest rates to work sustainably. The pair is likely to be a Dollar-affair with any declines resulting more from USD weakness rather than JPY strength.

For much of the past half century, U.S. Treasuries have handily outpaced gold as a buy-and-hold investment. Now, bonds’ status as the ultimate haven is facing one of its biggest challenges yet. This relationship has been shifting lately, with recent trends moving in gold’s favor. The benchmark Treasury Total Return Index is on track for its third annual decline in four years, extending its loss from a peak in 2020 to 11%. In comparison, gold set a fresh record this week to clock in a 15% return so far this year alone. To Kristina Hooper, chief global market strategist at Invesco, the divergence of the two traditional havens signals investors’ heightened angst about skyrocketing government debt and their preference for physical assets. “The safe haven asset class of choice has become gold rather than Treasuries,” said Hooper. “The bigger theme is just the concern about a lot of debt and concern that the fiscal situation in the United States is unsustainable.” The diverging performance means gold has jumped ahead of U.S. government debt as a long-term investment. A dollar invested in gold 51 years ago is now worth $2,314, $172 more than the return pegged to the Treasury index, which had its debut in 1973. In many ways, bonds’ recent struggles are easy to understand. They stem largely from the Federal Reserve’s aggressive monetary tightening campaign since 2022, which drove up yields from a record low and hammered bond prices.

U.S. stocks endured more losses on Thursday as lingering concerns about higher-for-longer interest rates and a Salesforce sell-off put a damper on investors’ spirits. The Dow Jones Industrial Average sank 0.8%, or more than 300 points, after shedding over 400 to lead Wednesday’s stock market slide. The S&P 500 fell 0.4%, while the tech-heavy Nasdaq Composite dropped about 0.7%. That rates angst drove U.S. bond yields this week to their highest levels since early May, lifting the 10-year Treasury back above 4.5%. Though the benchmark yield retreated on Thursday, falling about 7 basis points to 4.55%.
Three of Japan’s biggest car makers have shunned electric vehicles and vowed to achieve carbon neutrality by developing cleaner internal combustion engines (ICE). Toyota, Mazda and Subaru announced in Tokyo this week they will commit to bringing to market smaller engines as well as utilize hybrid technology and adopt green biofuels to lower vehicle emissions. Toyota, the world’s biggest car seller, described its new compact ICE as ‘an engine reborn’. All three manufacturers have been reluctant to join the battery car arms race currently in motion in China and Europe. The three said their efforts will help decarbonize internal combustion engines by making them compatible with alternative fuel sources, such as e-fuels and biofuels.

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)

May. 24, 2024May. 31, 2024Net Change

Month End to Month End Close

Apr. 30, 2024May. 31, 2024Net Change

Previous Year Comparisons

Jun. 2, 2023May. 31, 2024Net Change

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

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© 2024, Precious Metals International, Ltd.

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