Precious metals news

A bond-market indicator signaling a recession has been flashing since 2022, the longest on record, but it doesn't always predict immediate stock market trouble. Verdad Advisers analysts suggest this time might be different. Typically, equity investors react negatively when an inverted yield curve steepens, as it often signals a Fed response to economic downturns. However, the Fed's planned rate cuts aim to achieve a soft landing amidst ongoing economic growth, potentially leading to a prolonged inverted yield curve without immediate adverse effects.

The Consumer Price Index (CPI) showed a slight and unexpected dip in May, suggesting potential price relief for consumers and raising questions about the timing of Federal Reserve interest rate cuts. Annual inflation eased to 3.3% from 3.4% in April, below expectations. Monthly inflation was flat, the lowest since July 2022, and core CPI, excluding food and energy, increased by 0.2%, the lowest since October. These figures indicate a possible normalization of inflation, which could influence the Fed's future rate decisions, though rates are expected to remain unchanged for now.

The dollar fell on Wednesday after data showed May's consumer prices rose less than expected, fueling speculation that the Federal Reserve might cut interest rates as soon as September. Headline inflation was flat, and core prices increased by 0.2%, both below forecasts. This has boosted the probability of a September rate cut to 73%, up from 53% the previous day, and increased expectations of a second rate cut by year-end.

China has called quits on its 18-month gold buying spree, causing precious metal prices to stumble this week as the world’s largest buyer unexpectedly closes its tab.
In 2023, the People’s Bank of China purchased more gold than any of the world’s other central banks, swelling its reserves of the precious metal to more than 2,000 tons to break free from the U.S. dollar standard. Chinese consumers have been following suit, amassing gold coins, bars, and jewelry as Chinese stocks, currency, and real estate have succumbed to economic volatility and plunging value.

U.S. crude oil prices rose above $79 per barrel on Wednesday, extending gains as the Department of Energy (DOE) and OPEC projected a supply deficit due to increased demand. The DOE raised its global oil consumption growth forecast to 1.1 million barrels per day (bpd) for this year, up from 900,000 bpd, while OPEC maintained its forecast of 2.2 million bpd. These optimistic projections contrast with the International Energy Agency's bearish outlook on demand. Current energy prices show significant gains in oil and gasoline, while natural gas has also seen a substantial year-to-date increase.

Gold prices remained stable within a narrow range on Wednesday as investors awaited U.S. consumer inflation data and the Federal Reserve's interest rate policy announcement. Spot gold slightly dipped to $2,314.56 per ounce, while U.S. gold futures rose to $2,331.10. The market is focused on the Fed's stance on rate cuts, influenced by persistent inflation and strong job market data. Additionally, recent strong U.S. job reports and China pausing gold purchases led to gold's biggest daily drop since November 2020. Despite high prices, Asian demand for gold continues to rise.

Despite near-record prices, gold demand in Asia is soaring as buyers seek a hedge against geopolitical and economic uncertainties. Spot gold is trading above $2,300 per ounce, up 12% year-to-date and close to its all-time high. Reduced confidence in real estate and equities is driving this demand. Analysts suggest that once economic conditions stabilize, interest in these other investments may return. In Japan and China, investors are particularly bullish on gold, with Chinese gold coin and bar purchases rising 27% in the first quarter.

Japan's wholesale inflation surged in May at the fastest annual rate in nine months, driven by a weak yen that increased import costs. This rise complicates the Bank of Japan's decision on raising interest rates, as higher prices from cost pressures could reduce consumption and hinder demand-driven inflation. Analysts note that with energy prices expected to rise and government utility subsidies ending in June, the BOJ may need to wait for wage growth to boost consumption before considering rate hikes.

Gold prices remained steady around $2,300 an ounce in Asian trade on Wednesday, as traders awaited key signals from a Federal Reserve meeting and upcoming inflation data. Despite recent declines due to rising Treasury yields and a stronger dollar, gold found support at this level. The Fed is expected to keep rates unchanged but future rate decisions and the potential for rate cuts in September remain under scrutiny, especially with persistent inflation and a robust labor market.

Earlier this year, four states took steps toward strengthening sound money by lifting or reducing taxes faced by holders of physical gold and silver. Only a few months later, three other states have actually implemented new sound money policies, and by doing so, they have improved their citizens’ economic standing.

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The Federal Reserve's decision to maintain high interest rates for an extended period has forced American businesses and consumers to delay major purchases and investments. Companies are rethinking their spending on equipment, inventory, and hiring, leading to a slowdown in economic activity. This shift is evident in the decreased projection for manufacturing capital investments and a significant increase in business bankruptcy filings. The Fed is expected to keep rates steady, continuing to impact business plans and economic growth.

The World Bank has upgraded its global economic growth forecast for 2024 to 2.6%, driven by sustained strong growth in the U.S., which is expected to grow by 2.5%. This revision marks an increase from the previous 2.4% estimate. Despite the positive outlook, the World Bank warns that global growth remains sluggish compared to past standards, with poorer countries struggling under high debts and interest rates, and trade barriers posing risks to prosperity. Additionally, conflicts in Ukraine and Gaza are adding pressure to regional economies. The U.S. economy's resilience in the face of high interest rates has been a significant factor in this improved forecast.

U.S. Treasury yields are expected to remain stable over the next three months and decline slightly by year-end due to diminishing expectations of Federal Reserve interest rate cuts. After a significant drop from October's peak of 5.02%, yields have rebounded to 4.44% amid strong economic data and persistent inflation. Financial markets now anticipate only two 25-basis-point rate cuts this year, starting in September, with some economists predicting even fewer cuts. According to a Reuters poll, the 10-year Treasury yield is forecast to be around 4.35% at the end of August, then gradually decrease to 4.23% and 4.13% over the next six and twelve months.

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Oil prices remained stable as OPEC upheld its strong demand forecasts for 2024 and 2025, anticipating steady global economic growth. Despite a recent sell-off due to OPEC+'s decision to increase production later this year, crude oil rebounded, with U.S. crude recording its best day since February 8. Current energy prices show minor changes, with West Texas Intermediate at $77.63 and Brent at $81.54. OPEC projects oil demand to grow by 2.2 million barrels per day in 2024 and 1.8 million bpd in 2025, driven by stable economic growth and increased travel and tourism.

In May, gold posted its third consecutive monthly gain, rising by 2% to $2,348/oz and reaching a record high of $2,427/oz before pulling back due to profit-taking. Despite moderate gains, market activity remained supportive with high net long positions on COMEX and significant inflows into gold ETFs. While no single variable dominated, factors like momentum and a weaker US dollar contributed marginally, with strong over-the-counter buying, including central bank purchases, playing a significant role. Looking ahead, a potential peak in the US dollar could further benefit gold.

The gold market is showing strong support around the $2,300 level as we approach the FOMC meeting and subsequent press conference. Despite a slight pullback, if gold captures the 50-day EMA, it could rally, overcoming last Friday's sell-off. A drop below $2,280 might trigger a correction to $2,200 or $2,150, but the long-term uptrend remains intact. Buyers seem determined to sustain gold's price, driven by potential interest rate cuts and geopolitical concerns, making it risky to short the market now.

This week's U.S. inflation data could influence the Federal Reserve's timeline for potential interest rate cuts. As the Fed meets, the release of new inflation figures on Wednesday will play a crucial role in shaping their policy statement. If the data shows significant progress in reducing inflation towards the 2% target, the Fed might signal an eventual rate cut, which would lower borrowing costs for consumers and businesses.

UBS analysts suggest buying gold during price dips, following a recent 3% decline after positive U.S. employment data. They note potential under-reporting of China's gold reserves and recommend purchasing gold around $2,250-$2,300 per ounce. UBS anticipates near-term pressure on gold prices due to possible CPI surprises but expects the Federal Reserve to cut rates twice in 2024. With ongoing geopolitical tensions and the US elections approaching, they recommend a 5% gold allocation in USD-balanced portfolios.