Market Update & Outlook: Gold, Silver, Platinum, Palladium & US Economic Data – December 16th, 2023
Key Concepts:
- Gold Renaissance: The long-term upward shift in investment demand for gold, beginning around 2000, driven by economic and political instability.
- Comex: The Commodity Exchange, a futures and options market for metals, including silver.
- PGM: Platinum Group Metals – Platinum, Palladium, and Rhodium.
- Investment Demand Curve: A graphical representation of the relationship between price and the quantity of gold and silver demanded by investors.
- Registered & Eligible Inventories (Comex): Categorizations of silver held in Comex-approved depositories, indicating availability for delivery against futures contracts.
I. Gold Market Analysis & Long-Term Trends
Jeffrey Christian of CPM Group presented a market update on December 16th, 2023, focusing on precious metals and US economic data. Gold prices were around $2,035 at the time of the presentation. A key focus was a long-term chart of gold prices dating back to 1968, when the gold price was allowed to float. The chart illustrated initial spikes in the 1970s, followed by a period of relative stability until the early 2000s.
Christian identified a significant upward trend beginning around 2000, which CPM Group terms the “gold renaissance.” This upward shift in the investment demand curve is attributed to “longterm hostile economic and political conditions.” The price surged from 2001 to 2011, corrected for several years until 2016, moved sideways, and then resumed its ascent in 2019. The current price of $2,035 is significantly higher than historical levels. CPM Group anticipates this upward trend will continue for several years due to a lack of expected improvement in the economic and political climate, driving continued investment in gold and silver for wealth preservation and capital appreciation.
II. Silver Market Analysis & Historical Misinformation
Silver prices were trading around $24.20, with a high of $24.20 earlier in the day. Christian highlighted a long-term silver chart showing a spike in 1979-1980, followed by a sharp decline to $15 within three months and a prolonged period of low prices.
He expressed concern over “misinformation and bad historical reviews” circulating in the gold market, citing examples from YouTube videos and client reports. Specifically, he corrected inaccuracies regarding the German Bundesbank’s gold repatriation and misinterpretations of historical bull markets, clarifying that the major bull market occurred in the 1970s, not the 1980s. The average silver price through November was $22.26, making the current price relatively high. CPM Group expects continued investor interest, but cautions that promotional figures for silver demand are often inflated.
III. Comex Silver Deliveries & Inventory Analysis
December Comex futures contract deliveries totaled 58 million ounces through yesterday, consistent with past active contract months. Christian refuted claims of a billion ounces being removed from the market. Comex depository inventories of eligible and registered silver totaled 545.6 million ounces yesterday, down 2.1 million ounces from the end of November. This indicates regular turnover of deliveries with most silver remaining within Comex depositories. He stated that the Comex silver futures market is operating as usual, dismissing suggestions of its imminent collapse.
IV. Platinum & Palladium Market Dynamics
Platinum prices reached $982, with a current price of $974-$975. The record price was in 2007-2008, driven by a power outage in South Africa disrupting platinum group metals (PGM) production and subsequent buying by the auto industry. However, the onset of the Great Recession led to a price reversal as auto sales plummeted. Christian cautioned that the current price increase is partially based on concerns about South African and Russian supply disruptions and stronger auto industry demand, both of which may not materialize. He emphasized the risk of a rapid reversal in investment demand if the global economic environment worsens.
Palladium prices reached $1,061, currently trading around $1,052. Similar dynamics to platinum are at play, with CPM Group expressing caution about the sustainability of recent price increases.
V. US Economic Data & Outlook
US unemployment data for November showed continued weakening. Non-farm payroll employment growth slowed, with approximately 64,000 jobs created, a decline starting around April/May of this year. The unemployment rate edged up to 3.7% in November, steadily rising since the beginning of the year. These indicators suggest a weakening US economic environment.
Upcoming economic data releases this week include US retail sales (Wednesday), the Consumer Price Index, initial jobless claims, and manufacturing output (Thursday). These reports could influence the Federal Reserve’s monetary policy decisions.
VI. CPM Group Reports & Client Services
CPM Group recently completed a live webinar with Silver Corp. and released a six-page report titled “The Gold and Silver Renaissance 25 Years On: What Happens Next?” The report is available for download on the CPM Group website (cpmgroup.com) and can be requested via email ([email protected]).
An open question and answer session for paying clients, including retail investor program participants, will be held on Tuesday, December 23rd at 11:00 AM Eastern Time. Clients can submit questions in advance.
CPM Group plans to release its yearbooks on the following tentative dates: Gold Yearbook (March 24th), Silver Yearbook (May 26th), and Platinum Group Metals Yearbook (June 30th or early July).
Notable Quote:
“We’ve seen an upward shift in the investment demand curve for gold and silver since 2000. Our expectation is it’s going to continue.” – Jeffrey Christian
Technical Terms:
- Futures Contract: An agreement to buy or sell an asset at a predetermined price on a specified future date.
- Comex Deliveries: The process of transferring physical metal to fulfill a futures contract.
- Registered Inventories: Silver held in Comex-approved depositories that is immediately available for delivery against futures contracts.
- Eligible Inventories: Silver held in Comex-approved depositories that may require a transfer to registered status before delivery.
Conclusion:
CPM Group maintains a bullish outlook on gold and silver, anticipating continued price increases driven by persistent economic and political instability. While acknowledging strong investment demand, they caution against inflated promotional figures and highlight the potential for rapid reversals in market sentiment. The analysis emphasizes the importance of accurate historical data and a nuanced understanding of market dynamics, particularly in the silver market. Monitoring upcoming US economic data releases will be crucial for assessing the future trajectory of interest rates and precious metal prices.
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