Precious Metals and Comments
Gold bullion continued its rally this week, reaching a high of $2,294 on Wednesday. The precious metal is on track for a third straight weekly gain after setting a series of records over the past couple of weeks. The yellow metal has gained over 10% year to date, following the ~13% rally in 2023. Silver has also climbed this week, up ~7%, to $26.77 an ounce, at time of writing. The precious metal hit $27.09 yesterday, the highest level since June 2021.
Gold’s recent rally to historic highs has been supported by the perfect storm of sticky inflation, reduced expectations in US interest rate cuts, a pick-up in demand from Turkey and China, heightened geopolitical risks, as well as central bank buying.
Data from the World Gold Council revealed that central banks continued to add to their gold holdings in February, albeit at a slower pace than before. They bought a net 19 tons, marking the ninth straight month of growth. Overall consumption also grew by about 3% last year, to nearly 4,900 tons, with many expecting 2024 to exceed that.
However, despite gold's rally, it has not yet captivated investors who prefer investing in the metal via physically backed exchange-traded funds (ETFs). Globally, the assets in these ETFs have diminished by over 100 tons since the beginning of the year, reaching their lowest point since September 2019.
Meanwhile, in what is being termed ‘Fedstock’, a total of thirteen Fed members have or will be on the wires yesterday and today. We heard from five speakers on Thursday, who, as expected, continued to toe the party line. All echoed Powell’s rhetoric that inflation progress will be bumpy, and the stronger prints seen recently don’t mean a new upward trend is being established. All spoke of the need for patience.
One interesting comment came from the Fed’s most hawkish governor, Kashkari, a non-voter this year, who questioned the need for any cuts at all this year if growth remains strong and inflation continues to stall.
This afternoon we also have the US’s March employment numbers. After February’s +275k print, the market is going for a more conservative +214k (the whisper is slightly higher), with the unemployment rate falling marginally to 3.8%, hourly earnings rising 0.3%mom, and a participation rate of 62.6%.
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