1. Gold and silver prices are up a bit in early U.S. trading Monday. Amid a lack of fresh, markets-moving news to start the trading week, the precious metals market traders are looking at the key “outside markets” that are leaning friendly for metals prices. The U.S. dollar index is weaker and U.S. Treasury yields have down ticked. August gold was last up $3.80 at $2,349.60. July silver was last up $0.105 at $30.545. Sturdy central bank gold buying since 2009 and a rising gold price has grown the precious metal’s share of global international reserves to the detriment of fiat currencies. By the end of 2023 gold surpassed the euro and the next fiat currency to be challenged is the U.S. dollar.

The Precious Metals Week in Review – June 7th, 2024.
The Precious Metals Week in Review – June 7th, 2024.

2. Equities kicked off the busy week for economic data with gains. Big tech led the advance after last week’s rout. A drop in Treasury yields also removed pressure from the industry. NYSE Equities is investigating a reported technical issue. U.S. factory activity shrank in May at a faster pace as output came close to stagnating and the measure of orders fell by the most in nearly two years. The Institute for Supply Management’s manufacturing gauge fell 0.5 point to 48.7, the weakest in three months, data out Monday showed. Readings less than 50 indicate contraction. The S&P 500 hovered near 5,300. The tech-heavy Nasdaq 100 outperformed as Nvidia Corp. and Advanced Micro Devices Inc.’s chiefs showcased new generations of the chips powering the global boom in AI (Artificial Intelligence) development, deepening a rivalry that may decide the direction of artificial intelligence design and adoption. Treasury 10-year yields declined nine basis points to 4.41%. Brent oil dropped below $80 for the first time since February as OPEC+ set out a timetable for gradually unwinding some of its production cuts. Aside from manufacturing, traders will also be focused on a slew of labor-market readings this week, including Friday’s jobs report.

3. The U.S. labor market added more jobs than expected in May, defying previous signs of a slowdown in the economy. Data from the Bureau of Labor Statistics released Friday showed the labor market added 272,000 nonfarm payroll jobs in May, significantly more additions than the 180,000 expected by economists. Meanwhile, the unemployment rate rose to 4% from 3.9% the month prior. May’s job additions came in significantly higher than the 165,000 jobs added in April. The print highlights the difficulty the Federal Reserve faces in determining when to lower interest rates and how quickly. Overall, the economy and labor market have held up, and inflation has remained sticky, building the case for holding rates higher for longer. Yet some cracks have emerged, such as signs of inflation pressuring lower-income consumers and rising household debt. “They’re really walking a tightrope here,” Robert Sockin, Citi senior global economist stated. He noted the longer the Fed holds rates steady, the more cracks could develop in the economy.

4. The de-dollarization trend that has dominated global financial markets for nearly two years and supported gold prices at record highs is potentially less dramatic than initially portrayed, according to a research report from the Federal Reserve Bank of New York. In a report published last week, analysts at the regional central bank argued that while global U.S. dollar assets held by central banks have fallen 7% between 2015 and 2021. While some countries have been actively moving away from the U.S. dollar, the New York Fed said that this trend is dominated by two countries: India and China. They noted that these two nations account for roughly 2.9 percentage points of the 7% decline. However, the timeframe the regional central bank is using is a little dated. According to the latest Treasury data, China has sold $53.3 billion worth of U.S. Treasuries and agency bonds within the first three months of 2024. The analysts noted that the Swiss National Bank also reduced its U.S. dollar holdings between 2015 and 2021, which accounted for 1.8% within the broader trend. For the last two years, the gold market has seen unprecedented central bank demand. Official gold holdings increased by more than 1,000 tons in 2022 and 2023. In April, the World Gold Council said central bank net demand totaled 290 tons in the first quarter of 2024, the strongest start to any year on record. “Gold’s seeming safety from sanctions has been widely viewed as a particularly salient factor behind official gold purchases since Russia’s invasion of Ukraine in 2022 and the G7 countries’ subsequent decision to freeze the foreign exchange reserves of Russia’s central bank and forbid their banks from doing most business with Russian counterparts,” the central bank analysts said. “Central banks themselves have noted sanctions concerns as a driver of gold purchases and of increased vaulting of gold domestically in recent reserve manager surveys.”

5. When former President Barack Obama first imposed tariffs on solar cells and panels imported from China in 2012, he vowed to “level the playing field” for American workers and businesses to counter unfair trade practices. Twelve years later, successive tariffs have done little to dent China’s dominance in the solar supply chain. The country nearly doubled its solar photovoltaic manufacturing capabilities in 2023 alone, and commissioned as much capacity as the entire world did in 2022. As the U.S. prepares to lift a two-year exemption on tariffs for solar imports from Southeast Asian countries on Thursday, America is importing more than ever. In 2023, the U.S. purchased a record 54 gigawatts of solar panel capacity, an 82% surge from the previous year. The United States is now playing catch-up on a technology that has really matured in China, and it’s going to be very difficult to recreate those supply chains in a short period of time at a low cost. It’s entirely feasible, but it’s going to be a long-time horizon, and it’s going to be far more costly.

6. The number of Americans filing new claims for unemployment benefits increased last week, but underlying strength in the labor market should continue to support the economy. Initial claims for state unemployment benefits rose 8,000 to a seasonally adjusted 229,000 for the week ended June 1, the Labor Department said on Thursday. Economists polled by Reuters had forecast 220,000 claims in the latest week.

7. Crude oil futures were on pace Friday for a third straight weekly loss on worries that demand may be softening even as OPEC+ plans to increase production. U.S. crude oil and global benchmark Brent sold off earlier in the week after OPEC+ members announced that they would start phasing out 2.2 million barrels per day in production cuts starting in October. Poor U.S. manufacturing data and weak private payrolls also weighed on the market. West Texas Intermediate July contract: $75.51 a barrel, down 4 cents. Year to date, U.S. oil is up 5.3%. Brent August contract: $79.69 a barrel, down 16 cents. Year to date, the global benchmark is ahead by 3.4%.

8. The EUR/USD pair is finishing a third consecutive week little changed at around 1.0820, and after meeting sellers near 1.0900 for a fourth straight week. Different first-tier events fell short of triggering directional strength around the pair, as investors are still uncertain about what the future may bring. The European Central Bank (ECB) announced its decision on monetary policy on Thursday. As widely anticipated, the central bank trimmed interest rates by 25 basis points (bps) each, with the interest rates on the main refinancing operations, the marginal lending facility, and the deposit facility coming down to 4.25%, 4.5%, and 3.75%, respectively.

9. USD/JPY shoots over half a percent higher following higher-than-expected U.S. payrolls data for May. The data also showed a greater-than-experienced increase in wages although unemployment unexpectedly rose. The data contrasts with Japanese real wages which fell for the 25th straight month in April.

While gross gold purchases were similar to those seen in March, sovereign selling dried up in April, resulting in a large net gain by central banks, according to Krishan Gopaul, Senior Analyst at the World Gold Council. “The rapid rise in the gold price during March raised several questions,” Gopaul noted in their latest report. “One of these was whether central banks – whose demand has been posited as a key reason for the recent rally – would change their gold buying behavior in response.” Gopaul said that March’s more complete data combined with initial numbers for April, show that the sovereign appetite for bullion is as strong as ever. “Latest figures, reported via the IMF and publicly available sources show that global gold reserves rose by a net 33t in April, similar to levels seen in February (27t). Although gross purchases dipped to 36t, from 39t in March, gross sales saw a more pronounced m/m drop from 36t to just 3t in April.” The latest numbers show that eight central banks increased their gold reserves by one ton or more during the month. The Central Bank of Turkey was the largest buyer, increasing its official reserves by 8t. With 11 consecutive months of buying, the bank’s year-to-date net purchases now total 38t and lift its total official gold holdings to 578t. The other major buyers during the period were the National Bank of Kazakhstan (6t), the Reserve Bank of India (6t), the National Bank of Poland (5t), the Monetary Authority of Singapore (4t), the Central Bank of Russia (3t), and the Czech National Bank (2t).

The European Central Bank (ECB) has cut interest rates by a quarter-point, for the first time in five years at its governing council meeting in Frankfurt. It also raised its forecasts for inflation this year and in 2025. As widely expected, borrowing costs across the eurozone have been lowered from record highs of 4% to 3.75%, with the ECB joining the central banks of Canada, Sweden and Switzerland in cutting rates, moving well ahead of the influential U.S. Federal Reserve. It also lowered the interest rate on the main refinancing operations, which is the rate banks pay when they borrow money from the ECB for one week, from 4.5% to 4.25%. Its third key interest rate, the marginal lending facility, has been lowered from 4.75% to 4.5%.

The biggest antitrust regulators in the U.S. are stepping up their scrutiny of the nation’s most powerful developers of artificial intelligence. The Justice Department and the Federal Trade Commission have launched and divided up investigations of Nvidia, Microsoft and OpenAI, according to reports. The new scrutiny is part of a wide-ranging effort by the Biden administration to rein in what it views as anticompetitive behavior across a number of industries, from healthcare to groceries to tech. The administration has already alleged anticompetitive conduct against tech giants Apple and Amazon and claimed that Microsoft’s acquisition of gaming giant Activision Blizzard would create a gaming market monopoly. It also took to trial a case filed by the Trump administration over Alphabet’s dominance in search. A judge is currently weighing the evidence in that case, with a decision expected this year. The efforts have not always been successful. The FTC failed in its challenge against Microsoft’s acquisition of Activision Blizzard and fell short in a separate battle to prevent Meta from being able to purchase VR company Within.

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. 31, 2024June.7, 2024Net Change

Previous Year Comparisons

Jun. 9, 2023June.7, 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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