Posted on August 05, 2024 by IBV GOLD Editorial Team
Bullion investors found plenty of reasons last week to believe that gold and silver have room – maybe quite a bit of it – to run in the short term. Federal Reserve Chairman Jerome Powell, whose dovish scenario of a potential interest rate cut being “on the table” in September if market conditions held, set the tone after last Wednesday’s Federal Open Market Committee meeting. Friday’s dismal jobs report pointing to serious cracks in the labor market raised the stakes even higher, as the rise of the unemployment rate to 4.3% triggered the Sahm Rule, which is designed to signal the beginning of a recession. Those fears reverberated across the market, causing Wall Street stocks to plunge and sending Treasury yields and the dollar into a tailspin. Anxiety among traders that the Fed waited too long to cut rates caused the market to project a 70% chance that policymakers will now make a 50-basis-point cut in September. Rising tensions in the Middle East after Hamas leader Ismail Haniyeh was assassinated in Iran also bolstered the precious metals’ safe-haven appeal. Besides Friday’s surprise labor market data, earlier reports in the week revealing weaker manufacturing and employment also supported prices.
GOLD & SILVER:
Gold flashed signs of challenging its all-time high on Friday – crossing the $2,470 per ounce level in early trading – but profit-taking ahead of the weekend chomped into gains. The yellow metal was still on track to post a 1.8% weekly gain as prices hovered around the $2,435 mark by late Friday afternoon. Despite the whipsaw trading to end the week, several market factors remain in place to support a bullish sentiment for gold. A string of disappointing economic reports, recession fears, and escalating tensions in the Middle East all figure to boost gold’s appeal as a safe investment in uncertain financial and geopolitical times.
Like its yellow cousin, silver also had a strong start out of the gate Friday, boosted by nonfarm payrolls data that jolted markets amid fears that the U.S. was beginning to fall into a recession. The white metal held out around $29 per ounce at one point before sliding back down. And while it made up some losses throughout the hectic trading day, it was still battling to remain above $28.50 per ounce late Friday afternoon. With economic uncertainty at home and fears of an expanding Middle East conflict, silver also received support for its bid as a safe haven.
ASSET SPOTLIGHT: Gold Forecast, Courtesy of Chat-GPT
With so much economic uncertainty and geopolitical tension lately, it’s difficult to predict which way gold might be headed. Finbold, a financial news site, decided to run an experiment using OpenAI’s newest product, ChatGPT-4, to predict gold’s potential price range for the rest of 2024. According to the artificial intelligence-powered chatbot, price momentum for the yellow metal is expected to continue, settling between $2,450 and $2,550 per ounce. The chatbot spits out several reasons to support its prediction, including a continued robust demand by global central banks and a supportive economic environment as the Fed is expected to make modest trims to interest rates this year, thereby reducing chances of price volatility. The publication also ran bullish and bearish scenarios, with the bears settling at highs between $2,550 and $2,700 per ounce and the bulls retreating to lows between $2,350 and $2,450 per ounce.
THE FED SAID:
Heading into last week’s Federal Open Market Committee meeting, the market hung on hopes that policymakers would telegraph when to expect interest rate cuts to begin, and Fed chief Jerome Powell didn’t disappoint. Noting progress in recent months to bring inflation down closer to the Fed’s 2% target, Powell said if employment and economic data remain encouraging, a September rate reduction could be in the cards.
“If we were to see inflation moving down … more or less in line with expectations, growth remains reasonably strong, and the labor market remains consistent with current conditions, then I think a rate cut could be on the table at the September meeting,” Powell said at a post-meeting news conference last Wednesday.
The next FOMC meeting is slated for Sept. 17-18, when stakes will be even higher after Friday’s downbeat nonfarm payrolls report touched off recession fears.
BEAT THE STREET:
With the FOMC meeting in the books – and possible interest rate relief more than a month out – the market hopes this week’s batch of economic reports will begin building the case for the Fed to pull the trigger on cuts in September. The trading week kicks off with Monday’s release of the S&P U.S. services PMI and ISM services indexes for July. A readout on the U.S. trade deficit for June comes Tuesday, followed by a look at consumer credit on Wednesday. On Thursday, data on weekly initial jobless claims and wholesale inventories are expected. Richmond Fed President Tom Barkin is also slated to speak Thursday afternoon.
GOLD RUSH:
In the spirit of the ongoing Paris Olympics, we’re taking a closer look at how valuable those gold, silver, and bronze medals are to the elite athletes who went the distance. Oxford Economics examined what each medal class is worth based on their metal makeup. Containing 523 grams of silver and coated in 6 grams of gold, gold medals this year are valued at $1,027. Worth $535, silver medals weigh 525 grams and are made of pure silver. Rounding out the trio, bronze medals weigh 455 grams and are made of copper, tin, and zinc for a value of around $4.60. With higher precious metals market prices, the medals only figure to increase in financial value for recipients. Then there’s the added touch of flair – each medal contains a piece of iron from the iconic Eiffel Tower – which enhances the collector’s value.
Disclaimer: All Market Updates are provided as a third party analysis and do not necessarily reflect the explicit views of IBV GOLD. and should not be construed as financial advice.