December 2023

The S&P 500 Index reached a new all-time high on Friday, capping off a global stock rally that also lifted European and US futures. The Stoxx 600 index in Europe rose 0.8% on Monday morning, driven by gains in banking, real estate and tech sectors. Tech stocks also boosted US futures, as investors anticipated lower interest rates from the Federal Reserve and a surge in artificial intelligence. However, Chinese stocks lagged behind, as the country’s economic recovery showed signs of weakness.

The S&P 500 has rebounded strongly from its low point in October 2022, increasing by about 35% and breaking its previous record of 4,796.56 on Friday. It was the last of the three main US stock indexes to achieve this feat.

Jun Bei Liu, a fund manager at Tribeca Investment Partners in Sydney, said: “We are entering a situation where the economic slowdown is more mild, and we are also expecting rate cuts. This combination is very favorable for the stock market.”

The online gambling industry in Europe will become more concentrated after La Francaise des Jeux SA proposed to acquire the Swedish firm Kindred Group Plc for 27.95 billion kronor ($2.7 billion), sending its shares up 19% on Monday. The dollar and US Treasuries were stable. Benchmark notes rose on Friday as a survey from the University of Michigan indicated high consumer confidence and low inflation expectations, which is favorable for the Federal Reserve.

Later this week, investors will focus on the Bank of Japan, which is expected to keep its policy unchanged on Tuesday when it reveals the outcome of its meeting. On Thursday, the US will release its preliminary estimate of fourth-quarter GDP and the European Central Bank will make its rates decision.

On Monday, Asian stocks gave up their earlier gains as the Hang Seng Index plunged 3% and the main indexes in China also declined. China’s commercial banks maintained their benchmark lending rates on Monday, following the central bank’s choice last week to avoid lowering interest rates.

Vasu Menon, investment strategy managing director at Oversea-Chinese Banking Corp. in Singapore, said that the current cheap prices of Chinese stocks are not enough to attract investors back to the markets. He said that he thinks that Chinese policymakers will offer more stimulus, but he wonders if it will be big enough to satisfy the markets.

Oil prices dropped as Libya, an OPEC member, resumed production at its biggest field, increasing global supplies and temporarily easing worries about the Red Sea tensions that are likely to keep affecting shipping.

According to our projections, the global tin market will be in equilibrium in 2024. Our model estimates that the average LME cash price will be about $27,040 per tonne, which is a 4% increase from 2023. We expect tin to bounce back in 2024 after a difficult 2023, which witnessed a 17% drop in prices compared to 2022 based on yearly averages.On the supply and demand side, we observe a shrinking of the refined market, fueled by higher semiconductor sales and the effect of the mining prohibition in Myanmar.

We expect the global market balances for the other four base metals to be in excess supply in 2024. However, the anticipated surplus in aluminium is negligible at 0.4% of total demand, which should boost the prices this year. Our current prediction is that the LME cash price will average at $2,212 per tonne in 2024, 1.6% less than the previous year’s average.Aluminium demand growth is likely to increase to 2.8% from 0.9% in 2023, while primary production is projected to grow at a similar rate, speeding up from last year’s 1.3%. We foresee Chinese production to reach 42.2 million tonnes in 2024, up 2.2%, with maximum operational capacity reaching around 45 million tonnes per year – the highest level of the government’s capacity limit. Production for the rest of the world will rise by 3.8%, reversing the drops of the past two years.

We anticipate the global refined lead market to shift from a slight supply excess in 2023 to a larger surplus this year equivalent to 0.9% of yearly demand. This is likely to result from increased Chinese production and thus the possibility of higher export volumes to markets outside China. This is a key context that should put lead prices under strain around the crucial $2,000-per-tonne level, before rebounding in 2025, when the market is expected to move back into a supply shortage.

We predict an annual average lead price of $2,022 per tonne, which is 5.4% lower than the 2023 average, but still around the center of a wide sideways trading range that has lasted for over a decade.

Zinc, the related metal of lead, is in a poorer fundamental condition with a refined market excess supply equivalent to 2.6% of demand this year, although we have recently lowered this estimate due to production reductions, mining company outlook downgrades and project postponements. The threat to this scenario is that the market becomes tighter because of more supply changes, which would boost prices.

We will modify our predictions for prices, premiums and treatment charges accordingly in the next few months if those events surpass our current disruption allowances. As of now, the LME zinc price is expected to average $2,471 per tonne, about 6.5% lower than the 2023 average. Any positive potential in the short term is likely to be restricted to bear market recoveries, with robustness forecast for the latter half of the year dependent on Chinese authorities effectively handling the property market crisis and controlling contagion risks, which remain our main case view.

Gold ended lower last week, and continues to be in the negative for January and thus the year as well. The metal had increased in the previous three months of 2023, driven by speculation that the Fed is going to reduce interest rates earlier than it had forecasted in its prior dot plots.

This year, we have witnessed some hawkish adjustment of the Fed’s rate reductions, and accordingly gold has declined as yields have risen. A few weeks ago, a rate reduction for March was almost certain by the market. Now, it is a toss-up, according to Investing.com’s Fed Monitor tool.

The hawkish adjustment of the Fed rate reductions has been backed by stronger data and hawkish remarks from Fed officials. Yet, this has not prevented equity markets from hitting new record highs, thanks to the soaring technology stocks.

In fact, the US dollar’s rebound has been mild and gold has only lost a little. So, there is still a good possibility we may see the continuation of the bullish trend for gold once the hawkish adjustment of the Fed cuts is done.

However, I will not be anticipating and instead wait for the right bullish sign from the charts before looking for long setups, considering the increasing number of central bank officials resisting rate cuts. What are Gold Traders Paying Attention to This Week?

Gold’s short-term direction is exposed to high volatility this week as we have two central bank meetings, namely the Bank of Japan and European Central Bank, and some high-level data from the US.

Gold ended lower last week, and continues to be in the negative for January and thus the year as well. The metal had increased in the previous three months of 2023, driven by speculation that the Fed is going to reduce interest rates earlier than it had forecasted in its prior dot plots.

This year, we have witnessed some hawkish adjustment of the Fed’s rate reductions, and accordingly gold has declined as yields have risen. A few weeks ago, a rate reduction for March was almost certain by the market. Now, it is a toss-up, according to Investing.com’s Fed Monitor tool.

The hawkish adjustment of the Fed rate reductions has been backed by stronger data and hawkish remarks from Fed officials. Yet, this has not prevented equity markets from hitting new record highs, thanks to the soaring technology stocks.

In fact, the US dollar’s rebound has been mild and gold has only lost a little. So, there is still a good possibility we may see the continuation of the bullish trend for gold once the hawkish adjustment of the Fed cuts is done.

However, I will not be anticipating and instead wait for the right bullish sign from the charts before looking for long setups, considering the increasing number of central bank officials resisting rate cuts. What are Gold Traders Paying Attention to This Week?

Gold’s short-term direction is exposed to high volatility this week as we have two central bank meetings, namely the Bank of Japan and European Central Bank, and some high-level data from the US.

The BoJ is unlikely to change its policy at this meeting, but may do so sometime in the first half of the year. Recent data from Japan will offer them little reason to adjust current settings, as inflation and wages data are both weak.

If the BoJ is more dovish than anticipated, this could boost gold, while any clear signs that it will stop negative interest rates could hurt gold as Japanese government bond yields increase. The global PMIs on Wednesday will give us clues about the state of the global economy at the beginning of the year, which traders could use as a gauge for demand for various commodities.

Worries about the state of the Chinese and European economies have restrained commodities and commodity-heavy indices such as the FTSE 100 and China A50 among others.

However, tech-heavy indices such as US Tech 100 and Germany 40 have performed better on expectations that the global slowdown will lead to a steep cut in interest rates. We have also seen base metals like copper suffer, dragging down silver and to a lesser extent gold.

Let’s see what the purchasing managers in the manufacturing and services sectors have said at the start of the year.

The PMIs are key economic indicators and investors will pay more attention to them. If we see a positive reaction in risk assets, then foreign currencies should gain against the dollar, supporting gold.

The upcoming ECB policy decision could affect gold.

If the ECB is more cautious than anticipated, then European bond yields would likely fall and that would support assets with low and zero yields like gold and silver. But the market expects a hawkish ECB after some officials last week resisted early rate cuts, following the Fed.

While in the US, the resistance is mainly due to a relatively stronger economy, in other places – especially in the UK and Eurozone – it is all about worries about inflation staying high, with wage pressures persisting.

ECB President Christine Lagarde indicated that borrowing costs could drop in the summer instead of spring, while some other ECB officials have also voiced concerns about wage inflation. Let’s see if the ECB will give any more clues at this meeting.

old, a buck-denominated asset, will probably get more influenced by the upcoming US data than anything else, following stronger-than-expected CPI, jobs, and retail sales reports in the last couple of weeks, the dollar has been pushing higher, keeping the price of gold under pressure.

There has been renewed concerns over the Fed’s inclination to maintain higher interest rates longer, after Fed governor Christopher Waller suggested a measured approach, cautioning against any haste in considering near-term rate cuts.

If GDP reveals further strength in the US economy, expectations of an imminent reduction in interest rates will be pushed further out. Gold bulls will therefore be looking for weakness in US data, including GDP on Thursday and Core PCE the following day.

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