7/2/2024

Gold choppy within recent ranges while silver sets 7-session highs
 
OUTSIDE MARKET DEVELOPMENTS: Markets are reacting to comments coming out of the Central Banking Forum in Sintra, Portugal. Fed Chairman Jerome Powell acknowledged that the Fed has made considerable progress, but wants to be sure inflation is indeed headed toward the 2% goal before starting to cut rates. 

Powell sees risks as being more two-sided now but was disinclined to provide any hints on a timeline. "I am not going to land on any specific date," said Powell.

Chicago Fed President Austan Goolsbee warned that holding rates where they are as inflation comes down is tantamount to tightening. "You should do that by decision, not by default," said Goolsbee. The implication is that rates should be coming down with inflation so policy doesn't become too restrictive and amplify growth risks.

While Powell's comments didn't break any new ground, the markets seemed to like what Goolsbee had to say. Yields and the dollar eased in reaction providing an intraday lift for the metals. That lift was temporary for gold, but silver is holding onto gains.

Eurozone CPI ticked down to 2.5% y/y in June, versus 2.6% in May. ECB Governing Council member Vasle suggested rates could be cut further but wants to see more data to confirm the downward trajectory of inflation.

ECB President Lagarde apparently concurs. "It will take time for us to gather sufficient data to be certain that the risks of above-target inflation have passed," she said.

U.S. JOLTS job openings rose to  8,140k in May, versus a downward revised 7,919k in Apr.

RCM/TIPP Economic Optimism Index rose to 44.2 in Jul, up from 40.5 in Jun.

Domestic auto and light truck sales for Jun come out later today. The market is expecting 2.1M and 10.2M respectively.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$7.50 (-0.32%)
5-Day Change: +$8.91 (+0.38%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34
Weighted Alpha: +22.02

Gold is trading in a choppy manner today, but price action remains confined to yesterday's range thus far. It is in fact the second consecutive inside day. 



Comments out of the Central Banking Forum in Portugal are driving the trade. The central bankers seem to like the trajectory of inflation but are reluctant to declare victory over price risks. More data are needed.

Short-term resistance is clearly defined by the highs from the previous two sessions at $2,337.90/$2,338.03. This level is bolstered by a Fibonacci level at $2,339.36. Penetration of the latter would shift focus to the 21-Jun high at $2,367.22.

Support is marked by the lows for the previous two sessions at $2,319.98/85. Below that, the 26-Jun low at 2,295.86 protects the more important cycle low at $2,287.64 from 07-Jun.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.110 (-0.37%)
5-Day Change: +$0.481 (+1.66%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +31.50

Silver is trading higher for a fourth consecutive session. The white metal has set a 7-session high of $29.748. Generally speaking, I like it when silver leads on rallies.




Despite all the words of caution coming out of Portugal, Fed funds futures continue to price in two rate cuts this year. If the Fed can orchestrate a soft landing, the fundamental picture for silver remains broadly supportive.

More than 50% of the leg-down from $30.824 (21-Jun high) to $28.618 (26-Jun low) has now been retraced. The upper limits of the bearish channel have also been challenged. Additional upside follow-through would bode well for a test of the 61.8% retracement level at $29.981.

Trades with a 30-handle would go a long way toward convincing me the corrective low is now in place. I'd like to see some better performance on the upside out of gold as well. 


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
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