Zaner Daily Precious Metals Commentary

2/17/2024

Gold and silver remain under pressure within their ranges

OUTSIDE MARKET DEVELOPMENTS: Ukraine's security service is taking credit for placing a remotely detonated bomb in Moscow that killed Lt. General Igor Kirillov, the head of Russia’s Nuclear, Biological, and Chemical Defence Forces. Ukraine had charged Kirillov with using banned chemical weapons, a charge that the U.S. State Department has corroborated.

A targeted killing of a key Russian official in Moscow appears to be a new level of escalation in the nearly three-year-old conflict. Russia has vowed retribution.

German Chancellor Olaf Scholz lost a vote of confidence on Monday, paving the way for snap elections in February. The collapse of the German government is just one in a string of spectacular, political crises, ruling party ousters and outright government collapses this year.

Along with Germany, the UK, France, Japan, and South Korea make the list. Arguably, the Trump win and GOP political gains should also be part of the discussion.

Now there are mounting concerns that the Canadian government of Justin Trudeau is on shaky ground following the resignations of key cabinet members. Trudeau's favorability rating is below 30% and he is unlikely to survive next year's election, resulting in rising pressure to resign.

Today's U.S. economic data were a mixed bag. Better-than-expected retail sales bolster the notion of U.S. economic resilience, although industrial production missed expectations.

The two-day FOMC meeting began today and the Fed is widely anticipated to announce a 25 bps rate cut tomorrow. Market focus has shifted to expectations for a "hawkish cut" with forward guidance indicating a slower pace of easing in 2025.

This is helping to underpin the dollar near three-week highs. Further tests in the dollar index above 107 would bode well for an eventual retest of the two-year high from 22-Nov at 108.07.

Retail Sales rose 0.7% in November, above expectations of +0.5%, versus a positive revised +0.5% in October (was +0.4%). Ex-auto +0.2%, below expectations of +0.4%, versus an upward revised +0.2% in October.

Industrial Production fell 0.1% in November, below expectations of +0.3%, versus a revised -0.4% in October (was -0.3%). Capacity Utilization fell to 76.8%, below expectations of 77.3%, versus a revised 77.0% in October.

Business Inventories rose 0.1% in October, below expectations of +0.2, versus a revised unch in September.

NAHB Housing Market Index was steady at 46 in December. The future sales index rose to 66, its highest level since Apr'22.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$10.75 (-0.41%)
5-Day Change: -$51.54 (-1.91%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +26.77

Gold slipped to a new low for the week, leaving support marked by the lows from the past three weeks at $2,628.79/$2,617.65/$2,609.76 vulnerable to tests. However, the yellow metal remains broadly consolidative near the midpoint of the $2,789.68/$2,541.42 range.



I believe the consolidative tone will prevail as the market shifts to holiday mode at the end of this week. Nonetheless, gold is likely to notch its best annual gain since 2010.

The rise in political uncertainty has tempered risk appetite, but gold isn't garnering much benefit. Bitcoin may be stealing the risk aversion thunder amid hopes that the Trump administration will deem the cryptocurrency a reserve asset. Bitcoin set another record high today at $108,226.65.

Gold may see revived haven interest as political and geopolitical risks extend into the new year. Central bank interest should continue to provide a tailwind as well.

A rebound above this week's highs at $2,658.40/$2,663.89 would clear the way for renewed tests above $2700. Penetration of the more formidable $2,719.75/$2.723.70 level would return focus to the $2736.55 Fibonacci level and the all-time high at $2,789.68.

A breach of support at $2,609.76 would favor tests below $2,600 with potential back to the $2,541.42 range low. 

Silver is under pressure for a fourth straight session, reaching a two-week low of $30.198. The white metal is having additional weight applied from trade tensions and persistent uncertainty stemming from a lack of specifics from Beijing regarding planned stimulus.



The breach of Friday's low at $30.347 favors tests below $30, although the $29.736/703 lows should prove difficult to penetrate as the market shifts to holiday trading. The rising 200-day moving average is at $29.575 today but will correspond with the cycle low by the Christmas week.

A rebound above $32 is needed to set a more favorable tone within the range. The recent highs at $32.255/306 reinforced the range midpoint at $32.278.


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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