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Top Stories This Week: Silver Catches Spark in China, BHP Backs Out of Anglo Deal
May. 31, 2024 01:00PM PST
The latest PCE price index data also arrived this week, feeding expectations that the Fed won't cut rates until the summer is over.
It was a week of ups and downs for gold, which traded between about US$2,325 and US$2,361 per ounce.
Investors were looking toward the latest personal consumption expenditures (PCE) price index data, which was released by the US Bureau of Economic Analysis on Friday (May 31) morning. It shows that PCE was up 0.3 percent month-on-month in April, and 2.7 percent from the previous year. Core PCE, which excludes the more volatile food and energy categories, was up 0.2 percent from March and 2.8 percent compared to last April.
PCE is the US Federal Reserve's preferred measure of inflation, and it's tracked closely by market watchers trying to gauge the central bank's next steps. April's results were largely in line with expectations, but as some analysts have pointed out, the numbers have gotten quite sticky, meaning interest rate cuts may not be in the cards just yet.
"The core index came in at 2.8%. That’s fine, but it’s been trading in a range for five months now, and that’s pretty sticky to me. If I’m (Fed Chair Jerome) Powell, I’d like to see that start moving down, and it’s barely creeping. ... I’m not reaching for the Pepto yet, but I’m not feeling great. This is not what you want to see" — Dan North, Allianz Trade
Currently CME Group's (NASDAQ:CME) FedWatch tool shows that cut expectations are very low in June and July, with about a 50/50 chance of a reduction in September. The Fed's next meeting is scheduled to run from June 11 to 12.
Bullet briefing — China snaps up silver, BHP backs off Anglo
Silver price sees momentum in China
The silver price has stayed strong since breaking through the important US$30 per ounce level, but reports indicate that the white metal is heating up even further in China. Bloomberg said imports of the white metal could surge in the coming weeks as traders take advantage of the country's strong solar demand and a wide spread between international and Chinese prices — the premium on the Shanghai spot price rose above 15 percent last week.
David Morgan of the Morgan Report commented on a different angle for Chinese demand in a recent interview. In his view, it could be significant if retail traders in China wake up to the opportunity in silver.
"If the Chinese retail market has caught on to the silver market, watch out. I mean, you've got 1.4 billion people — not all of those people are going to be silver investors, I realize. But the point is there's a lot of Chinese and they love the markets," he said. Stay tuned for the full interview with Morgan next week.
BHP backs out of Anglo takeover
The "will they or won't they" saga between commodities majors BHP (ASX:BHP,NYSE:BHP,LSE:BHP) and Anglo American (LSE:AAL,OTCQX:AAUKF) has come to an end, with BHP choosing to back out of its takeover plan.
BHP and Anglo first confirmed they were in talks at the end of April, and Anglo rejected the company's initial proposal on April 26. BHP went on to make two other offers, both of which were also rejected by Anglo.
The miners agreed to a one week extension for BHP's deadline to make a binding bid, but by the time it rolled around on Wednesday (May 29), BHP CEO Mike Henry said the company wouldn't be making a "firm offer" for Anglo.
Investors with stakes in the two companies don't appear overly concerned that the deal didn't go through. One expert suggested to Reuters that BHP can now pursue targets like Antofagasta (LSE:ANTO,OTC Pink:ANTGF) or Lundin Mining (TSX:LUN,OTC Pink:LUNMF), while another said the company may focus on its own growth opportunities.
If BHP wants to make another bid for Anglo it will have to wait six months.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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