Breaking News
Get 40% Off 0
Is NVDA a 🟢 buy or 🔴 sell? Unlock Now

Silver Should Be Scared of a Slowdown

By Sunshine Profits (Alex Demolitor)CommoditiesOct 20, 2023 03:05PM ET
www.investing.com/analysis/silver-should-be-scared-of-a-slowdown-200642925
Silver Should Be Scared of a Slowdown
By Sunshine Profits (Alex Demolitor)   |  Oct 20, 2023 03:05PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
XAG/USD
+0.90%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
XAGg/USD
+0.91%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
US500
+0.03%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
BAC
+0.89%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DX
+0.03%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
Silver
+0.84%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

Recession winds are blowing, and the next major gust could push silver over the edge.

While silver has benefited from the Middle East conflict, history shows the white metal can’t escape the ominous fundamentals of higher real yields, a stronger USD Index, and panic selling that occurs during recessions. 

Furthermore, with economic pain hiding in plain sight, the crowds’ belief that higher long-term rates don’t matter should end in tears. For example, the National Association of Homebuilders (NAHB) released its Housing Market Index (HMI) on Oct. 17. The report stated:

“Stubbornly high mortgage rates that have climbed to a 23-year high and have remained above 7% for the past two months continue to take a heavy toll on builder confidence, as sentiment levels have dropped to the lowest point since January 2023.”

Please see below:

Housing Index Vs Mortgage Rates
Housing Index Vs Mortgage Rates

To explain, the black line above tracks the HMI, while the blue line above tracks the inverted (down means up) US 30-year mortgage rate. If you analyze the right side of the chart, you can see the latter implies more downside for the former. 

Likewise, the U.S. 30-year Treasury yield closed at a new cycle high on Oct. 19, which means the mortgage rate is even higher now. Consequently, the pain confronting the U.S. housing market should spread to other areas of the economy, and gold could sell off when the crowd realizes the ramifications. 

Labor Concerns

While U.S. unemployment claims sunk below 200,000 on Oct. 19, the labor market is weaker than it appears. LinkedIn has cut nearly 1,400 positions in 2023, and another round of layoffs was announced on Oct. 17.

Please see below:

Linked-in Snippet
Linked-in Snippet

Similarly, Indeed noted on Oct. 2 that the Christmas rush is nothing like 2021 and 2022, as “there are fewer [seasonal] jobs available this year than in years past, and less urgency to fill those that are available.” The report added:

“For the first time in the post-pandemic era, the number of seasonal/holiday job postings on Indeed has fallen below pre-pandemic levels. As of late September, seasonal job postings were down 3% from the same time in 2019, and 6% below levels from the same period a year ago.”

Please see below:

US Holidays
US Holidays

To explain, the pink and brown lines above are higher than the blue line, which means that seasonal job postings outperformed in 2021 and 2022 relative to 2019. As a result, the data highlights why we faded the recession narratives back then, as employee demand was bullish for wage inflation and consumption.

In contrast, the green line above is below the blue line, which means that 2023’s postings are weaker than 2019, and this is bearish for wage inflation and consumption. Similarly, the rapid rate rise should lead to further weakness in the months ahead, and the USD Index should benefit from the volatility.

As another warning sign, Bank of America found that unemployment claims may look much worse in the months ahead. 

Please see below:

Small Business Loans Vs Jobless Claims
Small Business Loans Vs Jobless Claims

To explain, the dark blue line above tracks the availability of loans to small businesses, while the light blue line above tracks the inverted (down means up) initial jobless claims. If you analyze the relationship, you can see that unemployment claims often rise when banks stop lending to smaller firms. And with the two lines diverging on the right side of the chart, it’s likely only a matter of time before jobless claims, and economically-sensitive assets like crude oil, bear the brunt of higher interest rates.

Finally, The Bank of Canada (BOC) revealed on Oct. 16 that Canadian business sentiment suffered its seventh consecutive quarterly decline and is gunning for its 2020 lows. And with Canada sending the bulk of its exports to the U.S., a slowdown is bad news for America.

Canada Business Sentiment
Canada Business Sentiment

Overall, the crowds’ 2023 belief that long-term rates can rise indefinitely without any carnage is like their 2021 belief that inflation is transitory. In reality, plenty of pain is present, and the current fundamental backdrop is nothing like 2021 or 2022, in our opinion. As a result, the S&P 500 should come under heavy pressure in the months ahead, and the PMs are unlikely to sidestep the volatility. 

Silver Should Be Scared of a Slowdown
 

Related Articles

Anna Radomska
Natural Gas – Double Bottom or… By Anna Radomska - Feb 23, 2024 2

Although natural gas bounced off the previous lows, the risk of another downswing has not decreased. Why?Will the pattern return?The last few weeks have not been good for the...

Silver Should Be Scared of a Slowdown

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Tom Scheuermann
Tom Scheuermann Oct 25, 2023 3:05PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
this is PRs writing. funny these guys happen to be part of the same website and they write exactly the same. hmmm
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email