6/24/2024

Gold and silver pare last week's losses with a focus on incoming data and the Fed

OUTSIDE MARKET DEVELOPMENTS: Focus this week will be on May personal income and PCE data out on Friday. Median expectations favor a 0.4% increase in income and a 0.3% rise in spending. Most importantly, consensus on the price index is unch.

Fed funds futures continue to show that the market believes there is about a 60% chance that the Fed will cut rates at the September FOMC meeting. This defies the dot plot from the June meeting and recent FedSpeak that has tended toward "higher-for-longer."

We'll hear more FedSpeak this week from Waller, Daly Bowman, Cook, and Barkin.

Last week's PMI beats reflect the resiliency of the U.S. economy, which is underpinning the dollar. While there have been some negligible signs of cracks in the labor market, above-target inflation remains the Fed's primary concern.

The first of two presidential debates between Joe Biden and Donald Trump will happen on Thursday. Polling continues to show that the race is very tight, so the performances of the candidates could have a material impact on the outcome.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$4.41 (+0.19%)
5-Day Change: +$6.92 (+0.30%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34

Gold ended last week with a loss of 0.5% after gains acquired earlier in the week evaporated on Friday. The yellow metal was weighed by diminished expectations of two rate cuts this year on the heels of better-than-expected PMI data.



Friday's price action prevented a second consecutive higher weekly close, raising some concerns within the bull camp. However, important support marked by the 07-Jun low at $2,287.64 remains well protected. Intervening barriers are noted at $2,317.85 (Friday's low), $2,307.45 (18-Jun low), and $2,296.92 (13-Jun low).

Indian gold demand subsided following the Akshaya Tritiya festival in May according to the World Gold Council. While buying bested expectations during the festival, it quickly waned due largely to near-record prices.

Overall, the Indian gold market appears robust with the WGC acknowledging strong RBI interest, rising ETF inflows, and a steady uptrend in gold imports. The RBI has added 30.6 tonnes of gold to reserves YTD, bringing total holdings to a record high of 834.2 tonnes.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.052 (+0.18%)
5-Day Change: +$0.151 (+0.51%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379

Silver is trading modestly higher on the day, retracing some of the sharp losses seen on Friday. Like gold, the white metal succumbed at the end of last week to selling pressures stemming from the PMI beats. Silver ended last week down a scant 0.1%.



However, the signal that the U.S. manufacturing sector remains strong is arguably a positive for silver. Industrial demand was 55% of overall demand in 2023, according to The Silver Institute.

Total silver demand rose 7% last year to 1,154 Moz. Total industrial demand was 654.4 Moz, led by the electrical and electronics sector. Total supply was 1,011 Moz resulting in a structural deficit of 184 Moz.

The Silver Institute projects a 2% rise in demand this year, with a 1% dip in supply. That would result in a fourth consecutive deficit.

The supply/demand fundamentals remain broadly supportive for silver, favoring the 4-year uptrend that began with the $11.703 low in March 2020. Gains since that low have been as much as 176.7%. I think this market is still good, although further short-term corrective/consolidative price action can not be ruled out.

The overseas low at $29.356 defines initial support, which protects $29.022 (18-Jun low) and the important $28.719 low from 13-Jun.

Friday's high at $30.824 is now the level to watch on the upside. A climb back above $30 would be an encouraging technical signal. 


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
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