Precious Metals Market News (26 July 2024) | Gold Climbs Again After June PCE Keeps September Rate Cut Likely

 

Precious Metals Market News (26 July 2024) | Gold Recovers as PCE Keeps Bets For September Interest Rate Cut Alive

On Thursday, gold prices dropped as investors cashed-in on profits and hedged their bets ahead of Friday’s economic data from the Bureau of Economic Analysis (BEA). Profit-taking was the main culprit behind yesterday’s dip, which drove gold to a two-week low and saw the metal slip below its shaky new $2,400 support. After market close, investors turned their attention to the Personal Consumption Expenditures (PCE) report, released this morning (26 July) by the BEA. 

Gold prices (+$26.45) recovered this morning, climbing nearly _ since market open as traders priced-in PCE data for the month of June and placing the $2,400 line within reach. The morning’s PCE report is key to gold’s price-action moving forward, as the PCE remains the key report used by the Federal Reserve to measure U.S. inflation. Rate cut bets have played a major role in gold’s record-breaking performance this year, and the Fed suggested earlier this month that interest rate cuts become likely once data demonstrates that the U.S. is sustainably approaching the FOMC’s 2% inflation target. 

The report found that the expenditures index increased only .1% for the month of June, showing another month of slowing inflation compared to May. Core inflation metrics fell in-line with projections and also suggest that the U.S. inflation rate continues to decline. June’s PCE came back with few surprises and seems to support the Fed’s recent position that the economy is moving in the right direction. 

This new economic data boosted Wall Street bets that easing interest rates will come at the Federal Reserve’s September meeting, which is slated for 17-18 September. CME Group’s “FedWatch” tool projects a 100% chance that the FOMC will move to cut interest rates at that September meeting. CME Group also finds it highly likely that another rate cut will happen in either November or December 2024. 

Silver Notches Months-Long Low Below $28/oz

Silver (+$.13) moved sideways this morning but failed to recover from Thursday’s drop. Yesterday (26 July), the metal fell below the $28 support for the first time since 8 May of this year. The dip marks three consecutive days of losses in the silver market, although the metal remains in the green since the beginning of 2024. 

Demand for silver is at an all-time high, primarily due to industrial and investor demand in Asia. China’s solar energy sector has been a major boon for silver bulls in 2024 as the country logged another year as a world leader in the transition toward renewable energy. The Silver Institute reports a record-breaking supply deficit for silver, which helped propel the metal from $23.82/oz on 1 January to a local high of $32.06/oz on 28 May. 

Despite its excellent supply-demand fundamentals, silver has struggled to establish a consistent support above $30/oz over the past three months. A crash yesterday drove the metal below two key supports, with silver settling near the $28 line.

After another severe 2 day selloff in gold and silver the prices have stabilized as of Friday morning.

And in today’s show, Vince Lanci looks at who’s actually been buying, and who’s been selling.https://t.co/O9Yy0P1eQS via @Sorenthek

— Chris Marcus (@ArcadiaEconomic) July 26, 2024

Gold-Silver Ratio Continues to Climb, Nears Key 90:1 Level

The gold-silver ratio, often used by traders to determine whether gold or silver is overvalued, is nearing a local high at 85.33:1. 90:1 has proven a key level for the GSR this year. Each time the gold to silver ratio has crested above 90:1, it has quickly crashed. Investors can expect a likely sell-off of gold in favor of silver if the ratio continues to climb past that 90:1 resistance line. 

The gold to silver ratio has moved up each day since 11 July, climbing from 76.83:1 to today’s monthly high of 85.33:1. This upward GSR trendline has more to do with a bullish gold market than bearish movements in the silver market. Unless silver can mount a recovery and reclaim that $29/oz support, investors should anticipate a sustained increase in the gold to silver ratio until we hit that key reversal trigger at 90:1.