Explore the potential influence of recent banking troubles and the upcoming non-farm payroll report on the prices of precious metals and commodities in this insightful market analysis.
Phillip Streible, Chief Market Strategist
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Good morning. It’s Friday, February 2nd, Groundhog Day. And also non-farm payroll day. Two of my favorite days here on the year and on the month. Looking at the precious metals overnight, you got April gold up $1.20 72 March silver up $0.10, 2333 March, Copper down one at 384, an April platinum up ten at 932. So couple of things here that have been bothering me and a few things that I’ve been looking back at, because a lot of times when the market starts to zig and you’re trying to zag, it’s important to go back, kind of reflect, do a little bit of detective work.
I think commodities is a lot of detective work. So look in here, one hour left after that Fed meeting on Wednesday. Okay, one hour left in a session. Jerome Powell is already gone. He left the stage. What happens? Bonds and notes rip and yields plummet. Okay. Gold and silver were still under pressure at this point in time. But gold started to hang in there and it started to come back.
Now, news had broke that the New York Bank Corp. reported that deteriorating conditions and its commercial real estate portfolio have really impacted that bank. I believe that’s why gold futures held in there and the other commodities, the other equities started to really get under some serious pressure here. Now, you go to Thursday. We start off extremely defensive in precious metals.
You’ve got silver down at 20 to 60, you got gold down to 2046. Then all of a sudden there was another shift in direction and it was a big shift. The unemployment claims came out 224 versus 213. You need that deteriorating employment picture in order to get the Fed to cut. But all of a sudden more news circulates that more banks could be in trouble.
You get the KBE, KBW Regional Bank Index, it slips 1.6%. It sees its single biggest decline since the collapse of Signature Bank in March of 2023. Other banks yesterday come under significant pressure as well. Western Alliance Bank down 4.8%. Valley National Bank down 5%. Comerica is down 2.1%. And the S&P at that point yesterday was down 1.2%. That’s when it looked like we were going to roll over and give up all the gains from that overnight session bounce.
Now, if you look back at Signature Bank and what happened in March of 2023, you go to March night. Gold was at 1818. Signature goes under March 12th. By March 13th, gold was at 1918 90, It rallied $100 in three sessions and news of Bank failures. So is this the beginning of something larger? Are these banks truly in trouble?
And will this be the the firepower and the narrative that Jerome Powell needs to cut rates in March? He wants to cut rates. Everyone wants them to cut rates. All the politicians want them to cut rates. Other Fed officials want him to cut rates. He just can’t do it because it goes against what he’s been saying and he doesn’t want to look like a hypocrite.
But if he’s got a catalog to do it, such as banking failures, then I think he will do it. Now, something to look at is that the news of more banks in trouble? This is back in March 20, 23. By March 17th, gold was at 1993, March 9th it was at 1818 and went up $170 in that last March.
So if we start to get something going on again, you could see gold futures really press higher. And I got to tell you, Silver, that’s the higher beta gold that rallied about five, six bucks back in that last March. So something to keep an eye on. Now, we do have that non-farm payroll number coming out. If you want a position in gold, you want that firmer number, you want to see gold prices sell off.
But I do think that this banking situation, if this gets some steam, if all of a sudden there’s New York Times, Wall Street Journal, Barron’s writes articles over and over the weekend, by Monday comes around, we could have something going, some new catalysts, some things like that. So we got to keep an eye on this. Now, the last Fed or the last non-farm payroll number, they were expecting 168,000.
It blew away expectations, 216,000. Gold had a $40 range here. So don’t be a hero. And here we got going to have some volatility in this market. The expectations for today, 187,000. So we’re going to really want to keep an eye on things. Two other markets I’m watching, Copper went down here, was under some serious pressure in the overnight market kind of snapping back.
Remember, long term fundamentals for copper look great. Some of these short term weaknesses, you’re going to get them. What happened was you had Chinese growth. It was projected at 4.6%. Significant rally lower there, citing that their property sector, all this other stuff. A lot of a lot of pressure there. Another market that I’m keeping an eye on, the crude oil market.
A lot of us stepped into crude oil here, unfortunately, within 10 minutes. Al Jazeera sends out a tweet that says that there is a cease fire in the Middle East, prices plummet and that all of a sudden they delete the tweet. Prices go back to unchanged. And then it’s like, wow, maybe there is something going on here. Prices go back down.
Now OPEC comes out, reaffirms those production cuts throughout the remainder of 2024. So we’ve got a little bit of a floor, in my opinion, on the crude oil market circulating. So we’ve got a lot of stuff here to watch, a lot of action going on in these markets here. So strap in your seatbelt here. Prepare for that 730 number and we’ll see how the day plays out.
You got a question? Give me a call. Probably write an article here or to post those out here and give me some great ideas. So you any questions? Give me a call. 312858733. Remember, futures and options trading involves risk loss may not be suitable to investors. Good luck. Good trade.