10/18/2024

Gold pushes to record highs above $2,700 while silver surges to new 12-year highs

OUTSIDE MARKET DEVELOPMENTS: Hamas leader Yahya Sinwar, the architect of the October 7th atrocities, was killed by an Israeli drone on Thursday. "This is a good day for Israel, for the United States, and for the world,” said President Joe Biden.

Biden believes that Sinwar's death may have opened a "path to peace — a better future in Gaza without Hamas.” He urged that stalled cease-fire talks be reinvigorated and a hostage release deal be reached.

However, Sinwar's deputy Khalil al-Hayya said Hamas’s conditions for a cease-fire and hostage deal remain unchanged. “Today, evil has suffered a heavy blow, but the task before us is not yet complete,” said Israeli Prime Minister Netanyahu.

It is Netanyahu's position that the war "is not over yet.” Arguably the elimination of Hamas leadership creates uncertainty. It is possible that the next leader of Hamas could be more extreme than Sinwar.

China's GDP slowed to 4.6% in Q3, above expectations of 4.5%, versus 4.7% in Q2. It's the weakest quarterly print in more than a year. Persistent housing market woes, weak consumer demand, and slower exports are all weighing on growth.

The PBoC immediately announced a C¥800 bln ($112.38 bln) stock buyback and equity swap scheme to bolster markets. China's benchmark CSI300 index rebounded from early losses to end the session 3.6% higher.

The central banks also pledged to "strengthen inter-department coordination, create synergies and make full use of the policies to reinvigorate market confidence, improve people's expectations and promote sustained economic recovery."

While Beijing appears committed to attaining its 5% growth target, jawboning and dribbling out stimulus measures has disappointed the trade in recent weeks. We'll see if there's upside follow-through in Chinese shares next week, or if markets continue to press Beijing to fire a policy howitzer to bolster the bazooka-sized measures announced in September.

U.S. housing starts slowed by 0.5% to 1.354M pace in September, above expectations of 1.349M, versus an upward revised 1.361M in August. Single-family starts rose 2.7% to 1.027M, the strongest in five months, but multi-family starts fell 9.4% to a four-month low of 0.361M. The recent rebound in mortgage rates suggests a persistent headwind for housing into year-end.

We'll get the September Treasury Budget later today. The market is expecting to see a $16 bln surplus.

FedSpeak is due from Bostic, Kashkari, and Waller.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$19.77 (+0.73%)
5-Day Change: +$57.87 (+2.18%)
YTD Range: $1,986.16 - $2,719.06
52-Week Range: $1,812.39 - $2,719.06
Weighted Alpha: +39.91

Gold jumped to new record highs above $2,700 buoyed by persistent geopolitical tensions and expectations of further central bank easing. The yellow metal is poised for a second consecutive higher weekly close.  



With less than three weeks until the U.S. elections most presidential polls remain within the margin of error. Similarly, which parties will secure House and Senate majorities appear to be toss-ups. The resulting uncertainty, and perhaps some fears of unrest, are contributing to safe-haven demand for gold.

Analysts at UBS believe the rally could continue for another six to twelve months, driven by central bank easing and ongoing "strong" official sector buying of gold. UBS sees potential for the yellow metal to reach $2,900 by September 2025.

I continue to believe gold could reach $3,000 in Q1'25. My measuring objective at $2,718.42 has been satisfied and exceeded, shifting focus to a Fibonacci projection at $2,732.55. The next Fibonacci level beyond that comes in at $2,810.38.

We could see some profit-taking ahead of today's close, but corrective setbacks should continue to attract buying interest. Initial support is noted at $2,702.75/$2,700.00, which protects the more important $2,692.49/$2,684.45 zone and $2,673.68 level.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +0.464 (+1.46%)
5-Day Change: +$1.239 (+3.93%)
YTD Range: $21.945 - $32.910
52-Week Range: $20.704 - $32.910
Weighted Alpha: +43.76

Silver is on the bid after pushing to new 12-year highs above $32.700 helped by gold market strength and the latest PBoC accommodations. Stops were likely triggered above $32.700 contributing to more than 20¢ of follow-through buying.



Today's upside breakout lends considerable credence to the bullish scenario that calls for a challenge of the $35.217 Fibonacci level (61.8% retracement of the decline from $49.752 to $11.703). An eventual breach of this level would bode well for a return to the record high around $50.

Former resistance at $32.700 now marks initial support. Secondary support is $32.0904/$32.000.


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