10/9/2024

Gold and silver consolidate yesterday's losses amid hopes for more Chinese stimulus

OUTSIDE MARKET DEVELOPMENTS: Chinese stocks are retracing recent stimulus-driven gains on revived growth concerns. The Shanghai Composite Index closed down 6.62% and the CSI300 lost 7.05% today. These were the biggest daily losses since the COVID crisis.

Hong Kong's Hang Seng index lost another 1.7% today, following a plunge of 9.5% on Tuesday. That was the biggest drop since the global financial crisis in 2008. Commodities remain defensive.

The market is demanding more stimulus, which will likely be met. Beijing has announced that a fiscal policy briefing will be held on Saturday, where Finance Minister Lan Fo’an is expected to introduce additional measures to boost growth.

The ECB is widely expected to cut rates by another 25 bps next week. "A cut is very probable, and furthermore it won't be the last," said Banque de France Governor Francois Villeroy de Galhau. With inflation continuing to moderate, ECB policy remains tilted toward easing amid persistent growth risks.

While the Chinese and European (especially German) economies continue to display weakness, last week's strong U.S. jobs report reflects a resilient U.S. economy. Today's update to the Atlanta Fed's GDPNow model estimates Q3 GDP to be 3.2%, up from 2.5% on October 1. The Blue Chip consensus remains below 2% but is rising gradually. 

With the prospects for a U.S. recession considerably diminished, the market has priced out the possibility of another oversized Fed rate cut. However, solid growth has the potential to revive inflationary pressures.

U.S. CPI and PPI data are out on Thursday and Friday respectively. While the market expects both to show benign 0.1% monthly increases, there are whispers of upside risk.

Dallas Fed President Lorie Logan (moderate hawk) warned today of "still meaningful" upside risks to inflation. "I continue to see a meaningful risk that inflation could get stuck above our 2% goal," she said. Logan sees "a more gradual path back to a normal policy stance" as appropriate.

The dollar has rebounded in recent weeks as the market pivoted to less-dovish policy expectations. The dollar index reached a new eight-week high today.

U.S. MBA mortgage applications fell 5.1% in the week ended 04-Oct, weighed by a five-week high in 30-year mortgage rates of 6.36%. Refinances fell 9.3%.

U.S. wholesale sales fell 0.1% in August, below expectations of +0.4%, versus +1.1% in July. Wholesale inventories rose 0.1%.

The minutes from the September 17-18 FOMC meeting will be released this afternoon.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -0.51 (-0.02%)
5-Day Change: -$41.33 (-1.55%)
YTD Range: $1,986.16 - $2,684.45
52-Week Range: $1,812.39 - $2,684.45
Weighted Alpha: +36.01

Gold is consolidating yesterday's losses with price action confined to the lower end of Tuesday's range. While the yellow metal is trading lower for a sixth session, the magnitude of the correction thus far from the $2,684.45 record high (26-Sep) has been less than 3%.



High geopolitical tensions and political uncertainty are seen as supportive factors that should limit the downside. The shift in Fed rate cut expectations toward a more conservative 25 bps and the corresponding rise in the dollar pose headwinds for gold.

UBS believes gold's rally still has legs. They see ongoing central bank buying and steady consumer demand in China and India as important driving forces. UBS now forecasts $2,800 by year-end and $3000 in 2025.

HSBC has a year-end target of $2,725 and expects a broad range of $2,350 to $2,950 through 2025. HSBC cites central bank demand, expectations for further Fed easing, and rising concerns over fiscal deficits in major economies at tailwinds for gold.

I'd like to see gold climb back above the 20-day moving average at $2,623.57 to boost confidence in the longer-term bullish outlook.

On the downside, initial support at $2,607.26/09 protects the more important $2,600.00/$2,597.42 level. Penetration of the latter would shift focus to $2,579.26 (50% retrace of the rally from $2,474.08 to $2,684.45).

Silver has stabilized somewhat in the wake of yesterday's 3.2% plunge. While the white metal is trading lower for a third session, additional downside progress has not been seen today.



Revived hopes for additional Chinese stimulus are providing some support, but markets seem inclined to wait until after Saturday's policy briefing to see exactly what Beijing is considering. A much-anticipated press conference on Tuesday disappointed, leading to the recent sell-off.  

While the double top formation on the daily chart remains troubling, I believe China is inclined to make whatever accommodations are necessary to ensure the attainment of its 5% growth target.

News this week that Russia is considering holding silver as a reserve asset has rather bullish implications as well. Russian reserve buying has the potential to boost demand considerably in a market that is expected to notch its fourth consecutive structural supply deficit in 2024.

A close back above the 20-day moving average at $31.186 would ease short-term pressure on the downside and favor renewed tests above $32.  The eventual negation of the double top at $32.657/$32.700 would put silver back on track for attainment of previously established objectives at $33.00 and $33.972.

On the other hand, if solid support at $30.00/$29.85 gives way, a more protracted corrective/consolidative phase becomes likely. The 100- and 50-day moving averages are rising to bolster this area and come in at $29.743 and $29.577 today. Today's intraday low at $30.281 and yesterday's low at $30.229 mark the initial downside barriers.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

10/8/2024

Gold and silver correct on tepid post-holiday stimulus messaging from China

OUTSIDE MARKET DEVELOPMENTS: Risk-off sentiment has surfaced on renewed worries about the Chinese economy. The Golden Week holiday has ended and a much-anticipated press conference by the chairman of the National Development and Reform Commission was a disappointment. No new stimulus measures were announced.

Chinese stocks saw record volume after the weeklong holiday closure. Initial strong gains were pared into the close. Meanwhile, Hong Kong’s Hang Seng index plunged 9.5%, its worst day since 2008. Commodities are in retreat.

Hurricane Milton continues to strengthen, prompting evacuation orders as the storm approaches the west coast of Florida. Milton is expected to make landfall near Tampa Bay tomorrow and could be the worst storm to hit the U.S. in more than a century.

Tensions remain extremely high in the Middle East amid expectations that Israel is preparing to strike Iran in retaliation for last week's missile barrage. Iranian nuclear facilities are considered by many to be likely targets.

A rare earthquake in Iran over the weekend has some speculating that a nuclear weapon test may have been conducted. CIA Director William Burns said on Monday that he sees no evidence that Iran is rushing the development of such a weapon.

A Wall Street Journal article worries that Iran may now realize that its ballistic missiles and Hezbollah proxies in Lebanon are "less powerful than previously thought." This may prompt Iran to accelerate its nuclear program to achieve a more substantial deterrent against Israel.

The Israeli and U.S. position has always been that Iran can not be allowed to get a nuclear weapon. The deterrent Iran seeks is the exact thing that could prompt a joint strike on the country.

The Japanese yen has come under renewed pressure as prospects for another big Fed rate cut have dimmed. This elicited warnings from key Japanese policymakers that hinted at the potential for direct intervention to support the yen.

The U.S. NFIB Small Business Optimism Index edged up to 91.5 in September from 91.2 in August. It is the 33rd consecutive month below the 50-year average of 98. The Uncertainty Index jumped 11 points to a record high of 103 with the U.S. election less than a month away.

RCM/TIPP Economic Optimism Index rose 0.8 points to a 16-month high of 46.9 in October, versus 46.1 in September. While an improvement, it was the 38th straight month below 50. A sub-50 reading indicates economic pessimism.

The U.S. trade deficit narrowed to -$70.4 bln in August, inside expectations of -$70.6 bln, versus a revised -$78.9 bln in July. The deficit narrowed 10.5% from a 25-month high in July to a 5-month low that some attribute to proactive moves by importers and exporters in advance of what at the time was a threatened strike by longshoremen.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$3.58 (+0.14%)
5-Day Change: -$17.86 (-0.67%)
YTD Range: $1,986.16 - $2,684.45
52-Week Range: $1,812.39 - $2,684.45
Weighted Alpha: +38.04

Gold slid to a three-week low in early U.S. trading on dampened risk sentiment after China failed to announce any new stimulus as the Golden Week holiday came to an end. The yellow metal is trading lower for a fifth straight day.



The breach of chart support at $2,633.48/$2,627.20 cracked the range that had held for five sessions, prompting a challenge of the important 20-day moving average at $2,614.80. While gold has tested below the SMA, the next tier of chart support at $2,600.00/$2,597.42 remains intact thus far.

High geopolitical tensions and persistent political uncertainty ahead of the U.S. elections continue to provide some underpinning to the market. Meanwhile, the erosion of Fed rate cut expectations and the firm dollar weigh.

September saw a fifth consecutive month of inflows into gold-backed ETFs. Inflows totaled 18.4 tonnes ($1.4 bln). North American investors continue to lead the charge.

North Americans have been net buyers for three straight months. Asian investors extended their buying streak to 20 consecutive months. 

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -0.376 (-1.19%)
5-Day Change: -$0.220 (-0.70%)
YTD Range: $21.945 - $32.700
52-Week Range: $20.704 - $32.700
Weighted Alpha: +37.57

Silver came under selling pressure along with the rest of the commodities sector on revived concerns about the health of the Chinese economy. The white metal plunged more than 4% intraday to approach the $30 zone.



The violation of support at $30.963 confirms the $32.657/$32.700 double top. A more serious challenge of the $30.00/$29.85 zone seems likely, especially on a close below the 20-day moving average at $31.090. The 100- and 50-day moving averages come in at $29.745 and $29.545.

Given the short-term market fallout stemming from China's tepid stimulus messaging today, I suspect at a minimum they'll start jawboning in favor of further accommodations as soon as Wednesday. Ultimately, more stimulus is likely forthcoming based on Beijing's commitment to its growth targets.

A rebound above the 20-day would ease short-term pressure on the downside and favor renewed tests above $32.00. A minor intraday chart point at $30.595 marks an intervening barrier.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

10/7/2024

Gold and silver consolidate near historic highs as focus shifts to U.S. inflation data

OUTSIDE MARKET DEVELOPMENTS: Hamas reportedly fired rockets from the Gaza Strip at Tel Aviv on the first anniversary of the horrific October 7th terrorist attack. Israel has issued evacuation warnings for northern Gaza in advance of what may be a major new offensive.

Meanwhile, rockets fired by Hezbollah in the north struck the Israeli city of Haifa. Israel continues to attack Hezbollah positions within Lebanon and the IDF is said to be preparing a “serious and significant” retaliatory strike on Iran.

Hurricane Milton is tracking toward Tampa Bay, an area still reeling from the effects of Hurricane Helene. Milton is projected to make landfall on Wednesday.

Market focus this week will be on U.S. inflation data. September CPI will be released on Thursday and PPI comes out on Friday. Median expectations are +0.1% m/m for both, although Friday's better-than-expected jobs data suggests some upside risk to inflation.

The market is suddenly worried that the Fed's 50 bps rate cut in September was too aggressive. Consequently, expectations for another large rate cut in November have fallen to zero. A more cautious 25 bps cut is now favored, but the probability of a hold has increased to 16.5%.

Today's economic calendar is light with just August Consumer Credit. The market is expecting an increase of $12.0 bln.

We'll hear Fedspeak from Bowman, Kashkari, Bostic, and Musalem later today. 


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$2.69 (+0.10%)
5-Day Change: +$11.61 (+0.44%)
YTD Range: $1,986.16 - $2,684.45
52-Week Range: $1,812.39 - $2,684.45
Weighted Alpha: +38.09

Gold remains narrowly confined within striking distance of record highs, as ongoing haven interest is offset to some degree by less dovish Fed expectations and a strong dollar. While the yellow metal notched a second consecutive lower weekly close, I continue to be impressed by this market's resilience in the face of recent seven-week highs in the dollar index.



For five sessions, the yellow metal has been confined to the 01-Oct range ($2,670.67 - $2,633.48). Such price action does not indicate a top is forming but is more likely a continuation pattern. An eventual upside breakout is favored.

A breach of $2,670.67 would clear the way for a retest of the record high at $2,684.45. Above the latter, the $2,700.00/$2,709.14 objective remains valid.

The $2,633.48/$2,627.20 area marks initial support. The rising 20-day moving average will correspond with this support later in the week and is presently at $2,613.66.

The COT report for last week showed that net speculative long positions fell 15.5k to 299.9k contracts from 315.4k in the previous week. I imagine the spec longs that left the market will be quick to jump back on board with new record highs.

Indian gold imports hit a more than three-year high of 125 tonnes in August, driven by strong consumer demand and industry restocking ahead of the festival and wedding season according to the latest edition of Heaeus's weekly market report. Consumption in India continues to be supported by this summer's steep cut in import duties.

Central bank demand remains an important driving force behind the rally in the gold market. Poland has been a leading buyer, adding 39 tonnes to its holdings over the past five months. The WGC reported The National Bank of Poland held 398 tonnes of gold as of the end of August.

"We now hold 420 tonnes," Adam Glapiński, president of the National Bank of Poland, told reporters last week.  Glapiński went on to note that Poland now has more gold reserves than the UK, viewing that as an important benchmark that ushers Poland into the "exclusive club of the world's largest gold reserve holders."

You may recall that Chancellor of the Exchequer Gordon Brown famously sold about half of Britain's gold between 1999 and 2000, at an average price of $275. It became known as Brown's Bottom.

Silver saw its fourth consecutive higher weekly close last week, and a fresh 12-year high at $32.70. While gains above $32 have proven unsustainable thus far, the trend remains positive.



Recently announced Chinese monetary and fiscal stimulus remains a primary supporting factor. We may see this influence re-exert itself this week as the Golden Week holiday winds down.

Russia has been a consistent buyer of gold as a means to sidestep international sanctions stemming from its invasion of Ukraine. Russia's Draft Federal Budget specifically mentions silver for the first time as part of its plan to continue increasing its holdings of precious metals.

While no real specifics were provided, a nation-state buyer in the silver market would have rather bullish implications. The silver market is substantially smaller than the gold market. The estimated market capitalization of the silver market is about a tenth that of the gold market.

First support at $31.451 (03-Oct low) protects the more substantial $31.041/$30.963 zone. The 20-day moving average has risen to $30.989 today, further bolstering this support level.

While the upside remains favored, be aware of the potential double-top formation at  $32.657/$32.700 that would be confirmed on a breach of $30.963. Such a move would suggest downside potential to the $30 zone initially.

At this point, buying strategies remain favored. An eventual breach of $32.700 would bode well for tests of previously established objectives at $33.00 and $33.972.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

10/4/2024

Gold remains consolidative despite dollar strength while silver hits a new 12-year high

OUTSIDE MARKET DEVELOPMENTS: U.S. nonfarm payrolls surged 254k in September, well above expectations of +150k, versus a positive revised +159k in August (was +142k). The unemployment rate ticked down to 4.1% from 4.2% in August.

Hourly earnings rose 0.4% on expectations of +0.3%, versus a positive revised +0.5% in August (was +0.4%). The average workweek edged down to 34.2 hours.

Stronger-than-expected jobs and earnings growth suggest growth risks may not be as worrying as the market thought. Arguably, there are also heightened price risks into year-end. This has prompted the market to completely unwind bets for another oversized rate cut. Fed funds futures now favor a 25 bps cut in November with a slight chance for steady policy.

Chicago Fed President Austan Goolsbee called the jobs report "superb" on BloombergTV. Goolsbee believes it is still appropriate for the Fed to bring the policy rate down "a lot" over the next 12 to 18 months.

"With the benefit of hindsight, the 50 basis point cut in September was a mistake...," wrote former Treasury Secretary Larry Summers on X. Summers believes "Caution in rate cutting" is required.

The Fed is still widely expected to ease in November and December. At the moment the bias is for more conservative 25 bps cuts. The Fed continues to remind us that the policy path is data-dependent and there are 34 days until the next FOMC meeting; plenty of time for more surprises. 

Given the recent more-dovish talk out of the ECB and BoE, shifting expectations for interest rate differentials has led to new seven-week highs in the dollar index. The low-to-high move in the DXY thus far has been 2.5%.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$2.23 (+0.08%)
5-Day Change: +$2.21 (+0.08%)
YTD Range: $1,986.16 - $2,684.45
52-Week Range: $1,812.39 - $2,684.45
Weighted Alpha: +44.88

Gold initially retreated in reaction to this morning's significant NFP beat, weighed by less-dovish Fed policy expectations and the corresponding rise in the dollar. Nonetheless, price action remains confined to Tuesday's range for a third session. An inside week is evident as well.

 

I wrote yesterday about gold's impressive resilience in the face of the dollar's recent rebound. That is even more evident today although dollar strength is seen as limiting the upside. High geopolitical tensions and rising political uncertainty a month out from U.S. elections provide the counterbalance.

A close above $2,658.20 is needed for the yellow metal to notch a fourth consecutive higher weekly close. That would bode well for a retest of the record high set last week at $2,684.45. Above that, the $2,700.00/$2,709.14 objective remains valid.

On the downside, the $2,633.48/$2,627.20 area marks first support. This level was reinforced by today's earlier intraday low at $2,637.43. The 20-day moving average is now at $2,606.50.

Setbacks into the range are likely to be viewed as buying opportunities even as the trade looks ahead to next week's important inflation data. Both CPI and PPI are expected to come in at a benign +0.1%.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +0.026 (+0.08%)
5-Day Change: +$0.952 (+3.01%)
YTD Range: $21.945 - $32.700
52-Week Range: $20.704 - $32.700
Weighted Alpha: +52.02

Silver continues to probe above the $32 level, heartened by today's better-than-expected jobs data and demand optimism stoked by Chinese stimulus. The white metal shrugged off seven-week highs in the dollar to slightly exceed last week's high at $32.657, eking out a new 12-year high of $32.70.



Silver is up nearly 2% this week and appears poised for a fourth consecutive higher weekly close. The last time that happened was in March.

A more convincing breach of the previous high would clear the way for short-term tests above $33 and lend credence to the previously established Fibonacci objective at $33.972.

Further out, $35.217 is an important level to watch as it marks 61.8% retracement of the entire decline from $49.752 (Apr'11 high) to $11.703 (Mar'20 low). An eventual breach of this would bode well for the bullish scenario that calls for a return to the $50 zone.

Initial support at $32.00 stands in front of the intraday low at $31.697. Several additional tiers of support now protect the key $31.041/$30.963 zone. 


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

10/3/2024

Gold and silver display resilience in the face of dollar gains 

OUTSIDE MARKET DEVELOPMENTS: The IAF struck Hezbollah's intelligence headquarters in Beirut as Israel continues to degrade the terrorist organization's ability to wage war. IDF forces continue to conduct ground operations in southern Lebanon.

BoE Governor Bailey warned that the situation in the Middle East could lead to a 1970s-style oil shock. So far, oil gains have been limited and Bailey senses there is "a strong commitment to keep the market stable" from counterparts in the region.

If inflation continues to moderate, Bailey said the central bank could be “a bit more activist” in its policy decisions. Solid UK PMI readings with "improving order books accompanied by cooling inflationary pressures" suggest the BoE may indeed have room for more aggressive rate cuts. 

The prospect for accelerated BoE easing sparked a rally in Gilts and Sterling came under pressure. Cable tumbled to a three-week low, providing an additional tailwind for the dollar. The dollar index extended to a six-week high of 102.08.

Ongoing weakness in the Eurozone economy revealed by the latest PMI readings, has the market leaning toward another ECB rate cut in October. While inflation remains above target, the ECB's Mario Centeno worries that keeping policy restrictive for too long could result in inflation undershooting the 2% target.

ECBSpeak in general has tilted more dovish this week, raising the likelihood of another 25 bps cut this month. The euro is under pressure, reaching a three-week low against the dollar.

The U.S. Challenger report saw announced layoffs fall 3.1k to 72.8k in September, versus 75.9k in August. 
Announced hirings surged 397.8k to 403.9k led by the retail and transportation sectors that are looking ahead to seasonal holiday hiring needs.

U.S. initial jobless claims rose 6k to 225k in the week ended 28-Sep, above expectations of 223k, versus a revised 219k in the previous week. Continuing claims fell 1k to 1,826k in the week ended 21-Sep.

U.S. services PMI for September was revised down to 55.2, versus 55.4 flash and 55.7 in August. However, further solid expansions in output and new orders were noted. Price pressures increased to 54.6 from 52.9. Business confidence "dropped markedly due to concerns of a slowdown in the economy."

U.S. services ISM rose 3.4 points to 54.9 in September, above expectations of 51.7, versus 51.5 in August. That's the highest reading since February 2023. The sector has expanded in 49 of the last 52 months. Prices jumped to 59.4 from 57.3 in August.

U.S. factory orders fell 0.2% in August to $590.4 bln, below expectations of +0.2%. This modest setback comes on the heels of the 4.9% rise in July, the largest one-month percentage gain in more than four years.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$12.11 (-0.46%)
5-Day Change: -$27.67 (-1.04%)
YTD Range: $1,986.16 - $2,684.45
52-Week Range: $1,812.39 - $2,684.45
Weighted Alpha: +43.71

Gold continues to consolidate within the confines of Tuesday's range. The upside is being hindered by heightened expectations of more aggressively dovish policy paths for both the BoE and ECB, which has pushed the dollar index to six-week highs.



Scope for another aggressive 50 bps Fed cut in October has waned over the past week. Fed funds futures put the current probability at 33.3%, down from 35.2% yesterday and 49.3% a week ago. This too is providing a tailwind for the dollar.

However, the yellow metal is proving to be quite resilient in the face of this dollar strength. The last time the dollar index was this high was on 19-Aug and gold closed at $2,586.83 that day.

Global central banks reported just 8 tonnes of net gold purchases in August according to the World Gold Council. While it was the fifteenth consecutive monthly net gain, it was the smallest since March. Poland was the largest buyer in August at 6 tonnes, followed by Turkey and India at 3 tonnes each.

The WGC's Marissa Salim notes that "sales have not increased which may signal a likely wait and see approach rather than a change in trend." They believe that all of the drivers of central bank gold demand remain in place, although demand this year will be weaker than in 2023.

First support at $2,642.77 protects the more substantial $2,633.48/$2,627.20 area. The important 20-day moving average is at $2,598.89 today.

On the upside, sights remain set on the $2,700.00/$2,709.14 objective. Beyond that, psychological barriers at $2,800 and $2900 stand in front of the longer-term target at $3,000.

Silver continues to probe above the $32 level but remains confined to yesterday's range thus far. The white metal is also displaying impressive resilience in the face of today's dollar strength.

 

A breach of yesterday's high at $32.259 would clear the way for a retest of last week's 12-year high at $32.657. Beyond that, I have targets at $33.00 and $33.972.

An intraday level at $31.887/80 now protects the low for the day at $31.451. The importance of the $31 zone has been reinforced by buying interest that emerged in this area.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

10/2/2024

Gold consolidates within yesterday's range as silver tests back above $32 

OUTSIDE MARKET DEVELOPMENTS: Israeli Prime Minister Netanyahu has vowed retaliation for Iran's 'retaliatory' missile attack on Israel. Iran "made a big mistake tonight and it will pay for it,” warned Netanyahu. The cycle of retaliation seems likely to continue and the regional risks grow with each exchange.

Israel is thought to be considering taking out Iranian oil infrastructure and nuclear sites. It is believed that any response will be coordinated with the U.S.

Iran fired at least 180 missiles at Israel on Tuesday, but Israeli air defenses including the Iron Dome intercepted most. There are reports that U.S. forces participated in the defense effort. Despite the magnitude of the attack, damage and loss of life in Israel has been limited.

Hezbollah fighters in southern Lebanon say that they are engaged with IDF forces. Israel reports that eight soldiers have been killed in the fighting.

MBA mortgage applications fell -1.3% in the week ended 27-Sep, following some big weekly gains in the wake of the Fed's oversized rate cut on 18-Sep. Thirty-year mortgage rates ticked up for the first time in nine weeks to 6.14% from a 23-month low of 6.13%.

The ADP Employment Survey showed that private employers added 143k jobs in August, above expectations of +125k, versus a revised +103k in July (was +99k). Strength in the ADP report suggests some upside risk for Friday's NFP report, where the median payrolls estimate is +150k.

Richmon Fed President Thomas Barkin (moderate hawk) said there is still "significant uncertainty" about inflation and employment. Along with Fed Chairman Powell, he worries that core inflation won't come down much more until next year.

Incoming data and less dovish FedSpeak have seen the prospects for another 50 bps rate cut in October diminish to 34.7%. That's down from 36.8% yesterday and 57.4% a week ago.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$14.34 (-0.54%)
5-Day Change: -$6.03 (-0.23%)
YTD Range: $1,986.16 - $2,684.45
52-Week Range: $1,812.39 - $2,684.45
Weighted Alpha: +44.18

Gold is consolidating within yesterday's range but remains generally well-supported by elevated Middle East tensions.  Given that yesterday's Iranian attack on Israel was largely ineffectual, some of the haven bid has come out of the market.



Geopolitical risks are still elevated, and gold is the preferred hedge against such risks. An article by The World Gold Council outlines the advantages of a gold allocation in times of geopolitical crisis.

According to the WGC: "In almost every week during which the GPR [Geopolitical Risk] index soared by over 100%, gold saw positive returns. Gold averaged a weekly return of 1.6% during these spikes while global equities declined, on average, by 0.8%." 

Gold, a consistent outperformer during geopolitical crises

The dollar remains on the bid as the market pares expectations for another jumbo rate cut in October. This is providing a bit of a headwind for gold.

Nonetheless, the trend remains decisively bullish with fresh record highs anticipated. Initial resistances are noted at $2,670.67/$2,673.67 (01-Oct and 27-Sep highs), and $2,684.45 (26-Sep high).

Sights remain set on the $2,700.00/$2,709.14 objective. Beyond that, psychological barriers at $2,800 and $2900 stand in front of the longer-term target at $3,000.

First support at $2,644.46 protects the more substantial $2,633.48/$2,627.20 area. The important 20-day moving average is at $2,591.53 today.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +0.022 (+0.07%)
5-Day Change: +$0.544 (+1.77%)
YTD Range: $21.945 - $32.657
52-Week Range: $20.704 - $32.657
Weighted Alpha: +43.32

Silver tested back above $32 today as a little more risk-on sentiment allows some level of focus to return to China's massive monetary and fiscal stimulus efforts. This is providing support to the broader commodity complex, but silver is likely garnering some additional lift from being a less costly alternative to gold.

 

While the white metal has slipped back into the range, leaving last week's high at $32.657 intact, focus remains on buying strategies. The three daily lows so far this week reinforce the importance of the $31 zone as short-term support.

An eventual move to new 12-year highs above  $32.657 would bode well for the bullish scenario that targets $33.972 based on a Fibonacci projection. The $33 area can be considered an intervening barrier.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

10/01/2024

Gold rebounds from recent corrective losses on rising Middle East tensions

OUTSIDE MARKET DEVELOPMENTS: Israel has launched its anticipated ground incursion into Lebanon, to push Hezbollah forces further back from the border. Israel also revealed that its special forces had already conducted more than 70 small raids within Lebanon since the war began to destroy Hezbollah positions, tunnels, and weapons.

Besides strikes in Lebanon and Gaza, Israel has also attacked military targets in Yemen and Syria this week.

The AP is reporting that Iran is preparing to “imminently” launch a ballistic missile attack on Israel, citing senior administration officials. That same official warned that such an attack would have “severe consequences” for Iran.

The Pentagon announced on Monday that additional U.S. fighter jet squadrons were being sent to the Middle East. “The United States is committed to Israel’s defense,” said U.S. Secretary of State Anthony Blinken. As tensions rise, uncertainty about President Biden's mental acuity is particularly concerning.

NATO's new Secretary General Mark Rutte has pledged ongoing support for Ukraine. "We have to make sure that Ukraine prevails as a sovereign, independent, democratic nation," he said.

Rutte indicated he supported Ukraine's use of weapons supplied by alliance members to "strike legitimate targets on the aggressor's territory." 

Rutte also accused China of being a "decisive enabler" of Russia's war effort. "(China) cannot continue to fuel the largest conflict in Europe since the Second World War without this impact in its interests and reputation," he said.

In Nashville on Monday, Fed Chairman Jerome Powell said that policy is "not on any preset course," reiterating the Fed's data dependency. He noted that the labor market “clearly cooled over the last year.” The market is expecting a NFP print of +150k on Friday.

The JOLTS job openings increased 329k to 8,040k in August, versus a revised 7,711k in July. That's the highest print since May.

U.S. manufacturing PMI was revised to 47.3 in September, versus a preliminary print of 47.0. However, the final reading was down 0.6 points from 47.9 in August. "The US manufacturing sector moved deeper into contraction territory at the end of the third quarter of the year," said S&P. 

New orders saw the sharpest drop since June 2023. The employment component fell to 48.3, the lowest reading since June 2020, as "job shedding intensified."

U.S. manufacturing ISM was unchanged at 47.2 in September, below expectations of 47.5, and holding just above July's low at 46.8. Prices slid to a nine-month low of 48.3 from 54.0 in August.

U.S. construction spending fell 0.1% in August, below expectations of +0.2%, versus a negative revised -0.5% in July (was -0.3%). June was revised sharply lower to -1.1% from unchanged previously. 

Auto and light truck sales for September come out later today. The market is expecting 2.0M and 9.9M respectively.

Today marks the beginning of the Golden Week holiday in China. Many Chinese take advantage of factory and business closures to travel, although the recent tough economic times are expected to dull spending this year. Chinese markets are closed for the remainder of the week.  

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$15.10 (+0.57%)
5-Day Change: +$5.26 (+0.20%)
YTD Range: $1,986.16 - $2,684.45
52-Week Range: $1,812.39 - $2,684.45
Weighted Alpha: +45.04

Gold has rebounded from recent corrective action on heightened haven demand stemming from the most recent developments in the Middle East. The yellow metal has moved back within $20 of last week's record high at $2,684.45 on reports that Iran has indeed fired missiles at Israel.



Friday's high at $2,673.67 is the next intervening resistance level to watch. If the U.S. becomes directly involved in the fight, gold could quickly go much higher.

Near-term potential remains to the $2,700.00/$2,709.14 objective. Psychological barriers at $2,800 and $2900 stand in front of the longer-term target at $3,000.

Goldman Sachs has raised their gold price forecast for early 2025 to $2,900 from $2,700. If things heat up in the Middle East we could see those levels before year end.

"We reiterate our long gold recommendation due to the gradual boost from lower global interest rates, structurally higher central bank demand and gold's hedging benefits against geopolitical, financial, and recessionary risks," the bank said in a note.

Silver has recovered somewhat from recent corrective action, buoyed by gains in gold. While the white metal remains confined to yesterday's range thus far, further short-term probes above $32 are considered likely.



Silver gains are being muted by today's soft U.S. manufacturing data and safe-haven buying in the dollar. While I do expect some spillover haven buying in silver, the vast majority of silver demand comes from industry.

First resistance is marked by yesterday's high at $31.829, the penetration of which would favor a retest of last week's 12-year high at $32.657. Friday's high at $32.227 provides an additional intervening barrier.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/30/2024

Gold and silver remain corrective ahead of month-end and quarter-end

OUTSIDE MARKET DEVELOPMENTS: China's CSI 300 stock index surged 8.5% on Monday, its biggest gain since 2008, as markets continued to digest last week's bazooka stimulus. Hong Kong's Hang Seng Index posted a 2.4% gain and is now up 24% YTD.

The easing of home-buying restrictions in three major Chinese cities provided additional lift to shares and its troubled real estate sector. Steel and iron ore prices surged. Copper reached a 4-month high of $4.7382 before retreating somewhat.

Bejing is pulling out all the stops to get growth back to its 5% target. There's a growing sense that if additional stimulus is needed to achieve that goal, it will be forthcoming. That provides a considerable market tailwind.

Iran has vowed retaliation for recent Israeli attacks that have effectively decapitated Hezbollah. The Wall Street Journal is reporting that Israeli special forces have been conducting targeted raids within southern Lebanon, possibly paving the way for a broader IDF ground incursion. 

ECB President Christine Lagarde is worried that the EU "recovery is facing headwinds."  That acknowledgment may boost the prospects for an October ECB rate cut, but European bonds and shares were under pressure today.

German HICP inflation fell to 1.8% y/y in September, versus 2.0% in August. Italian HICP inflation fell to 0.8% y/y in September from 1.2% in August. These readings below the ECB target of 2.0% may provide clearance for more easing, but Lagarde sees scope for a Q4 inflation rebound driven by energy prices.

Chicago PMI rose to 46.6 in September, above expectations of 45.9, versus 46.1 in August. While comfortably above the May low of 35.5, the barometer has been in contractionary territory for 24 of the past 25 months. Troubles at Boeing continue to pose a headwind.

The Dallas Fed Index improved to -9.0 in September, inside expectations of -10.7, versus -9.7 in August. "Moderate upward pressure on prices and wages continued in September," according to the Dallas Fed. The comments section highlights how political uncertainty ahead of the November election has weighed on sentiment. 

Fed President Powell will speak at the NABE conference later today.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$6.68 (-0.25%)
5-Day Change: +$5.07 (+0.19%)
YTD Range: $1,986.16 - $2,684.45
52-Week Range: $1,812.39 - $2,684.45
Weighted Alpha: +42.86

Gold is maintaining a corrective tone to start the new week as traders ring up profits for month-end and quarter-end. The yellow metal is lower for a second session after setting a record high of $2,684.45 on Thursday.



Despite the recent setback, gold is poised to notch an eighth consecutive monthly rise and a fourth straight quarterly gain. The quarterly gain should be the best since Q1'16.

The trend remains decisively bullish. Consequently, pullbacks are likely to be viewed as buying opportunities. The  $2,700.00/$2,709.14 objective remains valid, with intervening barriers noted at $2,665.36, $2,673.67, and $2,684.45.

Supports at $2,624.58 and $2,614.86 protect the $2,600 zone. The rising 20-day moving average, which provided good support earlier in the rally, comes in at $2,575.17 today.

The COT report showed net speculative long positioning increased 5.3k contracts to 315.4k last week. That's the highest spec long positioning in more than four years.

CFTC Gold speculative net positions

I'm anticipating that gold ETFs saw good inflows last week as well, although my source for that information has not been updated yet. I'll cover ETFs tomorrow.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -0.485 (-1.53%)
5-Day Change: +$0.544 (+1.77%)
YTD Range: $21.945 - $32.657
52-Week Range: $20.704 - $32.657
Weighted Alpha: +43.32

Silver has corrected to the $31 zone on position squaring on this, the last trading day of September and Q3. However, last week's move to fresh 12-year highs has swung the technical picture decisively back in favor of the bull trend off the COVID-era low at $11.703.



I suspect the housing market reforms in China will ultimately have a positive impact on silver, as they have for steel and copper today. Silver has become an increasingly important component in home construction.

The net speculative long position in silver futures jumped 3.9k to 62.2k contracts according to the latest COT report. That's the biggest net-long position since late February 2020 and may be contributing to the recent corrective pressure.

 CFTC Silver speculative net positions

While additional downticks toward the $30 zone can not be ruled out, market focus is likely to remain on buying strategies in anticipation of further tests above $32.

On the upside, I have a Fibonacci projection at $33.972. Intervening barriers are found at $31.829, $32.227, and $32.657. Further out, a key retracement level is highlighted at $35.217 (61.8% retracement of the entire decline from $49.752 to $11.703). 


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/27/2024

Gold and silver turn corrective after this week's big run-ups

OUTSIDE MARKET DEVELOPMENTS: Japan's former Defense Minister Shigeru Ishiba has been chosen to lead the ruling Liberal Democratic Party and is set to become the country's next Prime Minister. Ishiba favors a strong military and close security ties with the U.S.

Ishiba has pledged to continue the economic policies of outgoing PM Fumio Kishia, focusing on increasing real wages, boosting consumption, and ending deflation. He also favors more government spending to revitalize depopulated regions. Addressing Japan's declining population is a priority.

The yen surged in reaction and Japanese stocks fell. Ishiba supports an independent BoJ and the market seems to think there is now a heightened chance of more rate hikes.

Israel and Hezbollah forces in Lebanon continue to trade fire. IDF troops have been told to prepare for possible ground operations within Lebanon. This would be a significant escalation.

“Israel has every right to remove this threat and return our citizens to their home safely. And that’s exactly what we’re doing … we’ll continue degrading Hezbollah until all our objectives are met,” Israeli Prime Minister Benjamin Netanyahu told the UN General Assembly this morning. 

Netanyahu made no mention of the 21-day ceasefire proposal being brokered by the U.S. and France, suggesting that the deal is not in play.

Hurricane Helene has been downgraded to a tropical storm after making landfall on Florida's Gulf Coast last night. Floridians are dealing with mass power outages and flooding. At least 11 have died as the storm tracks north through Georgia causing severe flooding.

U.S. personal income rose 0.2% in August, below expectations of +0.4%, versus +0.3% in July. The savings rate ticked down to 4.8%.

PCE was up 0.2% in August, below expectations of +0.3%, versus +0.5% in July. The PCE inflation rose 0.1% resulting in a 2.2% annualized pace. Core PCE inflation also ticked up 0.1%; 2.7% y.y.  

The final Michigan Sentiment reading for September was 70.1, up from a preliminary print of 69.0 and 67.9 in August. The current conditions index was revised up to 63.3, while the final expectations reading was raised to 74.4. The one-year Inflation rate was adjusted down to 2.7%, the lowest since December 2020.

The U.S. Advance Indicators report for August showed the trade gap narrowed by 8.3% to -$94.3 bln thanks to a better-than-expected $4.1 bln rise in exports to $177 bln. Wholesale inventories rose 0.2% and retail inventories climbed 0.5%. 

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$8.05 (-0.30%)
5-Day Change: +$49.01 (+1.87%)
YTD Range: $1,986.16 - $2,684.45
52-Week Range: $1,812.39 - $2,684.45
Weighted Alpha: +45.46

Gold has slipped to a three-session low as traders took profits after this week's gains. Today is the first day of the week that a new record high has not been established. When September ends on Monday, it will mark the eighth consecutive higher monthly close.



Today's losses are seen as corrective within the well-established uptrend. Renewed buying interest is likely to surface with good supports noted at $2,624.58 (24-Sep low) and $2,414.86 (23-Sep low).

While the trade is arguably getting crowded, all the fundamental factors that have been driving gold higher are still very much in place. Heightened geopolitical tensions, political uncertainty, generally easier global monetary policy, a weaker dollar, Chinese stimulus, and strong central bank buying are all likely to persist and perhaps even intensify.

My next upside target is $2,700.00/$2,709.14. There are psychological barriers at $2,800 and $2,900 on the way to the longer-term objective is $3,000.

On last night's earnings call, Costco CFO Gary Millerchip said their physical gold sales were up "double digits" in Q3. Bullion is a driving force behind Costco's eCommerce revenue. Costco CEO Ron Vachris said the company had "no plans at this time" to create Kirkland Signature branded bullion.

Silver has retreated to approach the midpoint of this week's broad range. Even with today's pullback, the white metal is still up 4.7% this week.



Chinese monetary stimulus and expectations for up to CN¥2 trillion in fiscal stimulus drove silver to a 12-year high of $32.657 on Thursday. This upside breakout returns a measure of credence to the longer-term uptrend that began when silver bottomed at $11.703 in March 2020.

Silver has risen $20.954 (+179%) since that low was established. The $33.00 psychological barrier is the next upside target. Beyond that, there's a Fibonacci projection at $33.972.

An eventual violation of a key retracement level at $35.217 (61.8% of the entire decline from the March 2011 high at $49.752 to $11.703 low) would bolster a scenario that calls for a return to the $50 zone.

Keep in mind that the beta in the silver market is high and corrective action can be volatile. A pullback to the $30 zone can't be ruled out, although such a move is likely to attract additional buying interest.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/26/2024

Gold hit another record and silver extended to 12-year highs in anticipation of Chinese fiscal stimulus

OUTSIDE MARKET DEVELOPMENTS: China's Politburo has pledged to deploy "necessary fiscal spending" to boost growth back to its 5% target. Citing sources, a Reuters article reports that the Ministry of Finance plans to issue CN¥2 trillion in sovereign bonds this year.

This comes on the heels of a surprise move by the PBoC earlier in the week that saw reserve requirements and key interest rates lowered. Bloomberg suggests the additional measures would "supercharge" China's stimulus.

"China’s policymakers are pulling out the stops," said David Qu of Bloomberg Economics. Qu noted that China is showing "an unusually high degree of urgency and determination to support the economy."

European stocks and bonds are rallying on mounting expectations that another ECB rate cut is in the offing. The latest ECB Bulletin sees scope for an uptick in inflation in Q4 before resuming the downward path to the 2.0% target in 2025. However, the central bank believes "risks to economic growth remain tilted to the downside."

U.S. durable orders for August were unchanged, better than the -2.6% market expectations, versus a revised +9.9% in July. The ex-transportation print was -0.5%.

The third report for U.S. Q2 GDP came in unrevised at 3.0%. Consumption was revised down to 2.8% from 2.9% in the second report. The price index was steady at 2.5%.

Initial jobless claims fell 4k to 218k in the week ended 21-Sep, below expectations of 225k, versus an upward revised 222k in the previous week. That's the lowest print since May. Continuing jobless claims rebounded 13k to 1,834k.

Today's U.S. data were generally positive, consequently, bets on another jumbo rate cut have moderated somewhat. The potential for a 50 bps rate cut in November stands at 52.1% currently, down from 57.4% yesterday.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$15.74 (+0.59%)
5-Day Change: +$76.87 (+2.97%)
YTD Range: $1,986.16 - $2,684.45
52-Week Range: $1,812.39 - $2,684.45
Weighted Alpha: +44.90

Gold has now set record highs in five consecutive sessions, nine of the last eleven. News that China will add CN¥2 trillion in fiscal stimulus on top of the monetary stimulus announced earlier in the week is the latest driving force.



While gold has retreated into the range after setting the latest ATH at $2,684.45, pullbacks are still seen as corrective and are expected to attract further buying interest. Initial support is marked by the overseas low at $2.656.34, which protects Wednesday's low at $2,652.08. More substantial supports are at $2,624.58 (24-Sep low) and $2,414.86 (23-Sep low).

With the latest Fibonacci objective at $2,674.84 satisfied and exceeded, focus shifts to $2,700.00/$2,709.14. Confidence in the longer-term target at $3,000 continues to grow.

Incrementum, the producers of the In Gold We Trust report, reminded us via X that their bullish projection from 2020 is "almost exactly on track." Incrementum sees potential to $4.821 by 2030!

The most recent In Gold We Trust report 2024 was released in May and is well worth a read if you haven't done so already. The yellow metal is up nearly 13% since the report came out.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +0.811 (+2.55%)
5-Day Change: +$1.240 (+4.03%)
YTD Range: $21.945 - $32.657
52-Week Range: $20.704 - $32.657
Weighted Alpha: +46.19

Silver clearly likes the idea of "supercharged" Chinese stimulus. The white metal established a new 12-year high of $32.657 before retreating into the intraday range. Silver has gained more than 37% year-to-date.



The violation of the May high at $32.379 reestablishes the 4-year uptrend off the $11.703 low from March 2020. The $33.00 psychological barrier is the next upside target. Beyond that, there's a Fibonacci projection at $33.972.

The next major level I'm watching is $35.217 which marks 61.8% retracement of the entire decline from $49.752 (April 2011 high) to $11.703. 

The Asian low at $31.799 remains protected thus far, keeping yesterday's low at $31.642 at bay. Pullbacks are expected to be viewed as buying opportunities with Chinese stimulus and a global bias toward monetary easing expected to provide a persistent tailwind for the market.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/25/2024

Gold sets another new high as silver consolidates Tuesday's gains

OUTSIDE MARKET DEVELOPMENTS: The U.S. is sending an additional $375M in military supplies to Ukraine, including controversial cluster munitions. Ukraine is still trying to get clearance to use U.S. and UK long-range missiles to strike deep inside Russia.

President Biden said in his final speech before the UN General Assembly, "We will not let up on our support for Ukraine, not until Ukraine wins with a just, durable peace." Meanwhile, President Zelensky of Ukraine contends that "Russia can only be forced into peace." Biden is scheduled to meet with Zelenskiy on Thursday.

President Biden also urged Israel and Hamas to accept the ceasefire proposal that's on the table. "Full scale war is not in anyone's interest, even if situation has escalated, a diplomatic solution is still possible," said Biden.

These two wars are almost certain to outlast Biden's presidency and pose geopolitical challenges for the next administration. Countering growing regional influence by the likes of Russia, China, and Iran will also continue to test the next president.

The yuan reached a 16-month high against the dollar as markets digest China's largest stimulus since the COVID crisis. The market is broadly expecting additional PBoC stimulus.

The greenback has been under pressure since mid-year as markets initially looked forward to the Fed beginning its easing campaign.  interest rate cuts and now anticipate further easing.

The dollar index set a new low for the year last week at 100.21 and this level remains under pressure. A challenge of last year's low at 99.58 is anticipated. If this level also gives way, focus will shift to a Fibonacci level at 78.6.

The Institute of International Finance (IIF) reports that global debt rose by $2.1 trillion to reach a record $312 trillion. Estimates for 2024 global GDP are around $108 trillion, resulting in a debt-to-GDP ratio approaching 300%. Most of the recent rise is global debt is attributable to the U.S. and China.

"With the Fed’s new easing cycle expected to accelerate the pace of global debt buildup, a significant concern is the apparent lack of political will to address rising sovereign debt levels in both mature and emerging market economies," the IIF report said.

As debt burdens continue to grow, countries must allocate an ever-greater share of revenue to servicing that debt. While lower interest rates may lighten the load, the risks to growth are considerable.

U.S. mortgage applications surged 11% in the week ended 20-Sep. Refinancings accounted for most of the gains as 30-year mortgage rates fell to 23-month lows.

New home sales fell 4.7% to 716k in August on expectations of 700k, versus a revised 751k in July. Home inventories rose 1.7% to 467k and the median price fell 2.0% as lower mortgage rates may finally be loosening up an extremely tight real estate market.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$1.42 (-0.05%)
5-Day Change: +$97.05 (+3.79%)
YTD Range: $1,986.16 - $2,667.22
52-Week Range: $1,812.39 - $2,667.22
Weighted Alpha: +44.32

Gold set another record high in overseas trading, pulling within striking distance of the $2,674.84 Fibonacci objective. While the yellow metal has retreated into the range, high geopolitical tensions, rising expectations for another jumbo Fed rate cut, and a weak dollar offer ongoing support.



Fed funds futures now show a 59.5% chance of a 50 bps cut at the November FOMC meeting. That's up modestly from 58.2% yesterday. However, the odds of another 50 bps cut were just 37% a week ago when the Fed announced its initial half-point move.

Initial support is marked by a minor intraday chart point at $2,652.08. More substantial supports are found at $2,614.86, $2,600.00/$2,597.42, and $2,585.74/$2,584.84. Dips that approach $2600 are likely to be viewed as buying opportunities.

The World Gold Council reports that Indian gold demand has normalized since the government significantly cut import duties. However, demand remains strong as we move deeper into the important festival and wedding season that extends through year-end.

The WGC sees potential for improved rural consumption due to a good monsoon season and expectations for higher crop yields. When farmers experience better economic conditions, they buy more gold. Record-high prices are not necessarily a deterrent, particularly if they anticipate the uptrend will continue.

The Reserve Bank of India has bought gold every month of this year through August. The RBI's YTD total stands at 50 tonnes.

While central bank buying is expected to remain a driving force in the gold market, the central bank of the Philippines acknowledged that they were a seller in H1. BSP selling was a strategic move that if anything reinforces the advantage of holding gold as a reserve asset.

"The BSP took advantage of the higher prices of gold in the market and generated additional income without compromising the primary objectives for holding gold, which are insurance and safety." according to a press release. I expect the BSP to be a buyer in the future as circumstances warrant.

Silver is consolidating at the upper end of yesterday's range. The white metal surged 4.6% on Tuesday to close above $32 for the first time since 28-May.



An eventual breach of the $32.379 high from 21-May would establish 12-year highs and signal that the longer-term uptrend is back underway. Such a move would shift focus to $33.972 initially based on a Fibonacci projection.

There's another Fibonacci level at $35.217, which marks 61.8% retracement of the entire decline from $49.752 (April 2011 high) to $11.703 (March 2020 low). This level also makes a logical secondary objective pending new highs for the year.

I continue to see the basic supply/demand dynamics for silver as broadly supportive. China's latest stimulus program, and expectations for additional accommodations, provide an additional tailwind.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/24/2024

Gold and silver continue to march higher

OUTSIDE MARKET DEVELOPMENTS: China's central bank initiated a sweeping stimulus program to halt disinflation and shore up flagging economic growth. The PBoC cut reserve requirements and key interest rates which could unleash up to ¥1 trillion in additional capital at lower borrowing costs.

New swap and funding facilities were announced, providing an initial ¥800 bln in liquidity to support the stock market. A stock stability fund is reportedly being considered as well.

Chinese stocks soared in response. Hong Kong's Hang Seng Index was up more than 4% and is back within 3% of its high for the year.

The PBoC also sought to address the ongoing property crisis by lowering downpayment requirements and cutting existing mortgage rates by 50 bps.

It is widely believed that additional stimulus will be forthcoming. Many see fiscal stimulus as necessary to revive China's economic recovery.

Israel and Hezbollah forces in Lebanon continue to trade cross-border strikes on Tuesday. Tensions remain extremely high with the risk of a broader regional conflict after Lebanon reported that more than 500 were killed on Monday.

Fed Governor Michelle Bowman (centrist-hawk) warns that inflation remains a threat. She worries that last week's 50 bps rate cut “could be interpreted as a premature declaration of victory on our price-stability mandate." Bowman was the lone dissenter in last week's Fed decision, favoring a more cautious 25 bps cut.

The Case-Shiller home price index and the FHFA home price index both reached new record highs in July. Lower mortgage rates driven by easier Fed policy will likely increase demand in a still-hot housing market. I think rates need to come down quite a bit more before homeowners consider rotating out of mortgages with 3 and 2 handles thereby increasing supply.

Consumer confidence tumbled 4.6 points to 98.7 in September, below expectations of 103.0, versus 103.3 in August. It was the largest decline since August 2021. The labor market diffusion index fell to a 42-month low of 12.6. “The deterioration across the Index’s main components likely reflected consumers concerns about the labor market and reactions to fewer hours, slower payroll increases, fewer job openings," said Dana M. Peterson, Chief Economist at The Conference Board.

The Richmond Fed Manufacturing Index fell two points to a post-COVID low of -21 in September, well below expectations of -12, versus -19 in August. The employment component tumbled seven points to −22, the lowest print since April 2009.

Median expectations for September nonfarm payrolls are +145k, but recent labor market readings make me think there's a risk once again for a downside surprise. Perhaps not surprisingly the prospects for another 50 bps rate cut in November are on the rise.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$5.04 (+0.19%)
5-Day Change: +73.96 (+2.88%)
YTD Range: $1,986.16 - $2,647.09
52-Week Range: $1,812.39 - $2,647.09
Weighted Alpha: +43.42

Gold continues to trend higher, buoyed by news of Chinese stimulus, high geopolitical tensions, political uncertainty in the U.S., expectations of more Fed rate cuts, and a soft dollar. The yellow metal is also being helped by surging silver. Gold's latest record high is $2,647.09.



Fed funds futures now favor a 50 bps rate cut in November. The probability for a cut to 4.25%-4.50% now stands at 58.1%, up from 53% yesterday, 29% a week ago, and 13.1% a month ago.

Short-term focus remains on the $2,674.84 Fibonacci objective. Beyond that, the next psychological barrier at $2,700 would be the attraction. Further out, the $3,000 level looks increasingly attractive.

Setbacks into the range are expected to attract additional buying interest. Initial support is marked by an intraday chart point at $2,641.27. Below that, additional supports are noted at $2,614.86, $2,600.00/$2,597.42, and $2,585.74/$2,584.84.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +0.226 (+0.74%)
5-Day Change: +$1.200 (+3.91%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +45.33

Silver is surging, boosted by China's biggest stimulus package since COVID with more thought to be in the offing. The white metal is up more than 4% today.



Gains accelerated following the breach of important resistance at $31.652 (11-Jul high) which likely triggered longer-term stops and cleared the way for a challenge of the high for the year at $32.379 (21-May). An eventual breach of the latter would establish new 12-year highs and shift focus to $33.972 based on a Fibonacci projection.

China is the world's largest consumer of silver and many other commodities as well. Not surprisingly, the commodity sector is celebrating the Chinese stimulus.

Former resistance at $31.652 now marks first support. Secondary supports are noted at $31.413 and $31.249.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/23/2024

Gold sets new record highs as silver fails to sustain gains above $31

OUTSIDE MARKET DEVELOPMENTS: Israel's war intensified on its northern border after escalated rocket and missile attacks by Hezbollah prompted more Israeli airstrikes inside Lebanon. “It is clearly a very dangerous situation and clearly has a potential of escalating dramatically,” said Israeli President Isaac Herzog.

Israel continues to prosecute the war against both Hamas in the south and Hezbollah in the north, despite international pressure for a ceasefire. "We're going to do everything we can to keep a wider war from breaking out," asserted President Biden. The U.S. is reportedly sending additional troops to the region.

Eurozone HCOB flash manufacturing PMI tumbled to a 9-month low of 44.8 in September, below expectations of 45.7, versus 45.8 in August. Services PMI fell to a 7-month low of 50.5 on expectations of 52.3, from 52.9 in August.

Despite mounting growth risks in Europe, ECB Governing Council member Martins Kazaks believes service price inflation is the bigger worry. “In my opinion, the risk of service price inflation is still more significant at the moment," said Kazaks. Such concerns may push the next ECB rate cut into December.

After the BoJ held steady on rates last week, BoJ Governor Ueda indicated that the central bank is in no hurry to hike again. While Ueda sees the Japanese economy as "moving in line with our forecasts," he believes the outlook for the U.S. economy has become more uncertain.

The yen weakened in response, providing some underpinning for the dollar. However, the dollar index remains generally weak within striking distance of last year's low at 99.58 after the Fed launched its easing campaign last week with an oversized 50 bps cut.

It appears that Congress has reached a short-term funding compromise that will avert a government shutdown until after the election. The outcome of the November elections will certainly pose challenges for passing a budget before the new deadline of 20-Dec.

Chicago Fed President Austin Goolsbee (centrist-hawk/nonvoter) believes rates need to come down significantly over the next year. The market has priced in an additional 50 bps in cuts for the remainder of this year, with the Fed's dot plots projecting a Fed funds rate of 2.9% in H1'26.

The Chicago Fed National Activity Index rebounded to 0.12 in August from a negative revised -0.42 in July. The 3-month moving average remained in negative territory for the 23rd month.

U.S. flash manufacturing PMI fell 0.9 points to 47.0 in September. The preliminary read on services PMI came in at 55.4, down from 55.7 in August. 

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence worries that "intensifying political uncertainty" poses a substantial headwind to the economy. Williamson also notes a "reacceleration of inflation" that could be a hawkish influence on Fed interest rate decisions moving forward.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.29 (-0.01%)
5-Day Change: +$47.93 (+1.86%)
YTD Range: $1,986.16 - $2,633.96
52-Week Range: $1,812.39 - $2,633.96
Weighted Alpha: +42.45

Gold continues to set record highs amid heightened geopolitical tensions, last week's launch of the Fed's easing cycle, and a generally soft dollar. While momentum has waned somewhat, the yellow metal has traded as high as $2,633.96 in the U.S. session.



The next upside target is $2,674.84 based on a Fibonacci projection. Beyond that, the next psychological barrier at $2,700 attracts. The Fed dots project another 185 bps in rate cuts in the cycle, which poses a significant headwind for the dollar and makes $3,000 gold look increasingly appealing.

Short-term setbacks are likely to be viewed as buying opportunities. Initial support is marked by the overseas low at $2,614.86. Secondary supports are at $2,600.00/$2,597.42 and $2,585.74/$2,584.84.

Global ETFs saw 3 tonnes in inflows last week. Solid interest from North American investors – to the tune of 8.1 tonnes – more than offset European and Asian outflows. Net inflows have been recorded in five of the last six weeks.

 

The COT report for last week showed that the speculative net long position surged by 27.6k to 310.1k contracts. That's the biggest long position since 03-Jun 2020.

Silver is back on the defensive after setting a 10-week high at $31.413 on Friday. Today's global PMI readings indicate ongoing weakness in manufacturing that could adversely impact demand for the white metal.



However, more record highs in gold are seen as a supporting factor for silver as investors seek a less expensive alternative to the classic safe haven. A short-term breach of the July high at $31.652 is needed to put the high for the year at $32.379 (21-May) in play.

The net speculative long position in silver futures rose 13.6k to 58.3k contracts on last week's rally according to the CME's COT data. It's the biggest net-long position in nine weeks. 

CFTC Silver speculative net position

The German auto industry is demanding more subsidies to stimulate flagging electric vehicle sales. The auto industry currently uses about 80M ounces of silver annually. However, EVs require nearly 75% more silver than conventional ICE vehicles.

Broader adoption of EVs would be good for the silver market. As of last year, only 3.2% of vehicles on the road were electric. That suggests there's plenty of room for growth, but consumers still prefer their gas-fueled cars.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/19/2024

Gold and silver on the bid as markets digest Fed easing

OUTSIDE MARKET DEVELOPMENTS: The Fed went big yesterday, initiating its first easing campaign in over four years with a 'crisis-sized' rate cut of 50 bps.  The last rate cuts greater than 25 bps were in 2020 during the COVID crisis and in 2008 during the global financial crisis.

"In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/2 percentage point to 4-3/4 to 5 percent." – FOMC Policy Statement

That hardly seems like a crisis. One might deduce it was an acknowledgment by the Fed that they were behind the curve on easing in the same way they were tardy in raising rates as inflation climbed. Chairman Powell begged to differ...

"We don’t think we’re behind...We think this is timely, but I think you can take this as a sign of our commitment not to get behind.” – Fed Chairman Jerome Powell

I thought cooler heads would prevail, but there was only one in the board room of the Echles Building over the previous two days. Fed Governor Michelle Bowman (centrist/hawk) was the lone dissenter who saw a 25 bps cut as a more appropriate response to the current conditions. It was the first vote against an interest-rate decision in nearly 20 years.

Those more cynical of the central bank's motivation view the oversized cut as a means to juice the flagging economy with just 47 days until election day.

Some worry that the Fed is seeing something that indicates the economy and/or the labor market is in real trouble, but that's not reflected in the economic projections. The median expectation for 2024 GDP was nudged down to 2.0% from 2.1% in June, while 2025, and 2026 remained at 2.0%. The Fed now also sees 2.0% growth in 2027. The longer-run outlook for GDP was left unchanged at 1.8%. Median expectations for unemployment were up modestly over the June projections. 

Focus now shifts to the pace and size of cuts through year-end and into H1'25. Cuts of 25 bps are favored for each of the two remaining FOMC meetings this year. The dots project a Fed funds rate of 3.4% in 2025 and 2.9% in 2026, where it will hold steady.

That implies that 185 bps in cuts are still to come in the newly launched easing cycle. Markets view this as a big-ol' RISK ON signal from the Fed. The DJIA and S&P500 have surged to new record highs. The NASDAQ is up sharply but remains off its record.

There are worries that the Fed is stoking an asset bubble that's not going to end well for investors. ”The danger this time around is the extreme level of complacency and the widespread consensus that the business cycle has been repealed,” writes Economist David Rosenberg.

Be assured that the business cycle is still a thing. And the Fed has only orchestrated one soft landing (1994-1995) in the modern era. The odds are against them.

The BoE opted to hold steady on rates today, as was widely expected. They signaled that further cuts are still in the cards. "It is vital that inflation stays low, so we need to be careful not to cut too fast or by too much," said Bank of England Governor Andrew Bailey.

Norway's Norges Bank held steady as well and indicated they would remain on hold until 2025.

The U.S. Philly Fed Manufacturing Index jumped to 1.7 in September, above expectations of -1.0, versus -7.0 in August. New orders fell to -1.5 from 14.6. Prices paid rose 10 points to 34.0 while prices received increased 10.9 points to 24.6.  The employment component improved, but the workweek contracted.

The U.S. current account deficit widened to -$266.8 bln in Q2, outside expectations of -$260.0 bln, versus a revised -$241.0 bln in Q1. The $25.8 billion widening of "reflected an expanded deficit on goods" according to the BEA.

Initial jobless claims fell 12k to a 17-week low of 219k in the week ended 14-Sep. Continuing jobless claims fell to 1,829K from a revised 1,843k in the previous week.

Leading Indicators fell 0.2% in August, inside expectations of -0.3%, versus -0.6% in July. There hasn't been an increase since February of 2022. The 100.2 print is the lowest since October 2016.

Existing home sales fell 2.5% in August to 3.86M, below expectations of 3.9M, versus an upward revised 3.96M in July. While prices have moderated somewhat as supply and mortgage rates have improved, considerable headwinds for the real estate market persist.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$29.54 (+1.15%)
5-Day Change: +$30.10 (+1.18%)
YTD Range: $1,986.16 - $2,597.42
52-Week Range: $1,812.39 - $2,597.42
Weighted Alpha: +36.14

Gold is back in the bid after a bout of post-FOMC volatility yesterday. While the yellow metal remains within the confines of Wednesday's range, the record high at $2,597.42 is within striking distance.

 

The $2,597.15 measuring objective off the August/early-September consolidation has been satisfied. A move above $2,600 seems likely amid expectations for significant additional easing by the Fed through Q2'26. The next upside targets are $2,619.35 and $2,674.84 based on Fibonacci projections.

With each new record high, the $3,000 psychological objective looks more and more attractive. Suddenly what seemed like a pretty lofty goal is just over $400 (15.44%) away.

A minor intraday low at $2,573.90 defines initial support and protects the more important $2.552.80/$2.549.18 zone, which is highlighted by today's low and yesterday's low. Additional support is marked by previous highs at $2,529.57/$2,525.52, which continues to correspond with the 20-day moving average which is at $2,527.88 today.

The gold market is still pretty overbought and therefore vulnerable to correction. Traders may want to try and shake out some of the weak longs that recently entered the market. However, the trend remains undeniably bullish and setbacks will likely attract more buyers.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +1.090 (+3.63%)
5-Day Change: +$1.323 (+4.43%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +35.89

Silver remains volatile with another broad range today. The white metal has set a fresh nine-week high of $31.249, clearing the way for a short-term challenge of the $31.652 high from 11-Jul.



Yesterday's big rate cut, expectations of even easier policy in the months ahead, and today's Philly Fed beat have emboldened the bull camp. Considerable credence has been returned to the scenario that calls for an eventual retest of the high for the year at $32.379 (21-May).

A word of caution: Silver frequently makes it hard on bulls. Volatility is high right now so it wouldn't be surprising to see some longs square up ahead of the weekend. While the launch of the Fed's easing cycle provides a tailwind for the market, the odds of a soft landing remain long.

Intraday support at $30.711 stands in front of the low for the day at $29.937 and Wednesday's low at $29.850. Good support is offered by rising moving averages at $29.409/364 (100-day & 20-day) and $28.974 (50-day).


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/18/2024

Gold and silver await Fed decision

OUTSIDE MARKET DEVELOPMENTS: Fed funds futures continue to suggest a 50 bps cut when the Fed announces policy this afternoon. That bias seems to ignore the central bank's "data dependency" mantra. Recent data have reflected an economy that remains resilient and therefore warrants a more conservative 25 bps cut.

The policy statement, economic projections, and Powell's presser will be closely scrutinized for clues as to the likely rate path moving forward. The market continues to price in 100 bps in cuts by year-end, implying that at least one of the three remaining FOMC meetings will end with a 50 bps cut. I just don't think it will be this one.

Former St. Louis Fed President Bullard agrees. He said the case for a half-point Fed rate cut is "overblown" in a CNBC interview this morning.

UK CPI held steady at 2.2% y/y in August. However, core CPI accelerated to 3.6% y/y from 3.3% in July on the back of rising services prices. The BoE was already expected to hold steady on rates tomorrow and the inflation data seals the deal.

The BoE made its initial rate cut in August on a controversial 5-4 vote. The rebound in inflation suggests the decision may have been premature. I'm sure this will be mentioned in the board room of the Eccles Building today.

ECB Governing Council Member and Bundesbank President Joachim Nagel urged patients on inflation, noting that services inflation in particular remains "alarmingly high." Nagel warned that borrowing costs "will certainly not go down as quickly and sharply as they went up." While this hints at an ECB hold in October, recent ECBSpeak has been mixed.

U.S. mortgage applications jumped 14.2% in the week ended 13-Sep as 30-year mortgage rates dropped to a 23-month low of 6.15%. While the purchase index rose 5.4%, high rates remain a headwind for the housing market.

U.S. housing starts rose 9.6% to 1.356M in August, above expectations of 1.311M, versus 1.237M in July. That's the best print since April as a strong 15.8% surge in single-family starts offset a 4.2% decline in multi-family starts. Completions increased by 9.2% to 1.788M.

Reports of a potential explosive device near a Trump rally on Long Island further amplifies political tensions in the U.S. This is a developing story.  


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$6.36 (+0.25%)
5-Day Change: +$58.33 (+2.32%)
YTD Range: $1,986.16 - $2,589.13
52-Week Range: $1,812.39 - $2,589.13
Weighted Alpha: +34.76

Gold is narrowly confined within yesterday's range as the trade eagerly awaits today's Fed decision. A cautious 25 bps cut could initially lead to corrective action, but regardless of the size, the Fed's first rate cut in more than four years is a generally bullish event for the yellow metal.



Even if the Fed goes aggressive and cuts by a half-point it would imply smaller cuts in November and December. This may lead to the "sell the fact" event I've warned about in previous commentary this week.

The guidance provided in the statement, the dots, and Powell's presser will set expectations for the two remaining FOMC meetings this year, and into Q1'25.

Downticks on Tuesday were successfully contained by support at $2,559.79/$2,557.21. This level is reinforced by yesterday's low at $2,561.96. Secondary support is noted at $2,529.57/$2,525.52. The 20-day moving average has provided good support on a close basis for more than a month and comes in at $2,523.13.

If gold sells off on the Fed's decision, it may take a dip below $2,500 to entice renewed buying interest. Solid chart support at $2,474.31/08 is bolstered by the 50-day moving average at $2,469.80.

On the upside, fresh record highs above $2,589.13 would clear the way for attainment of the $2,597.15/$2,600.00 objective. A secondary target is marked by Fibonacci resistance at $2,619.35. New highs would also intensify speculation about an eventual move toward $3,000.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.095 (-0.31%)
5-Day Change: +$1.773 (+6.18%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +31.39

Silver has slipped to new lows for the week as traders are perhaps a little less inclined to go long into the FOMC statement. A softer tone in gold and a slightly better dollar weigh.



A retreat below $30 must be considered if the Fed cuts by just a quarter-point. However, such a move would suggest potential for a retreat to the $29 zone where the important moving averages are clustered.

On the other hand, penetration of resistance at $30.963/$31.073 would keep the white metal on track for a challenge of the $31.652 high from 11-Jul. Above the latter, the high for the year at $32.379 (21-May) would attract.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/17/2024

Gold and silver correct ahead of tomorrow's Fed decision

OUTSIDE MARKET DEVELOPMENTS: German ZEW Economic Sentiment plunged 15.6 points to an 11-month low of 3.6 in September, well below market expectations of 17.0, versus 19.2 in August. The current conditions index dropped to -84.5 on expectations of -80.0, versus -77.3 in August. The current conditions print is the lowest since May 2020.

Two ECB rate cuts have done little to improve the mood in Europe's largest economy. The stalling German economy bodes ill for the rest of the EU. There are worries that Europe is heading for a Japan-like lost decade (or more) of stagnant growth, albeit for different reasons.

Europe has a fertility problem with birthrates well below replacement levels. In Germany, the birthrate fell to 1.36 last year. There is some speculation that birthrates may rebound as the Europeans continue to shake off lingering worries from the COVID crisis but a return to the replacement rate of 2.1 seems unlikely.

Equally significant is the fact that governments in Europe have a spending problem. European Commission data shows that EU general government expenditures are nearly half of GDP. In some individual countries, it's well over 50% of GDP.

As governments grow they require more and more resources, crowding out productive private businesses. The beast must be fed leading to ever higher tax rates. Generous government-funded welfare programs lure workers away and sap productivity.

German Productivity through June 2024

It's worth considering how government decisions to essentially allow unrestrained immigration might be factoring into this reality. The most recent data from Eurostat shows that 5.1 million immigrants entered the EU from non-EU countries in 2022. The Council on Foreign Relations estimates Europe has absorbed 29 million migrants in the past decade and growth risks abound nonetheless.

The U.S. is on a similar trajectory both in terms of demographics and growth of government. Without a course correction, America could face its own lost decades.

And speaking of troubling trends: The International Institute for Democracy and Electoral Assistance reports that the global state of democracy continues to erode, even in high-performing countries in Europe and the Americas. "We now live in an era of radical uncertainty, in which multiple, compounding challenges threaten the patterns of stability and growth on which we have come to rely," the organization warned.

The Fed will seek to address immediate growth risks with its first rate cut in four years at the end of the two-day FOMC meeting that begins today. Fed funds futures continue to favor a 50 bps cut, but there still seems to be a fair amount of debate on the size of the cut.

U.S. retail sales rose 0.1% in August, above expectations of -0.2%, versus +0.4% in July. Ex-auto also rose 0.1% on expectations of +0.2%, versus +0.4%.

U.S. industrial production rose 0.8% in August, above market expectations of +0.4%, versus a negative revised -0.9% in July (was -0.6%). Cap use rose to 78% from 77.4% in July.

U.S. business inventories grew by 0.4% in July in line with expectations, versus +0.3% in June. Sales rose by a solid 1.1% reflecting broad-based strength.

The NAHB Housing Market Index ticked up two points to 41 in September but remains well off the July high of 56 and the 2020 record high of 90.

Much of the incoming U.S. data continues to reflect a resilient economy, pushing the DJIA and S&P500 to record highs. This keeps me leaning toward a cautious 25 bps cut as the Fed's first move.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$10.07 (-0.39%)
5-Day Change: +$46.98 (+1.87%)
YTD Range: $1,986.16 - $2,589.13
52-Week Range: $1,812.39 - $2,5789.13
Weighted Alpha: +34.29

Gold has turned corrective as the dollar firmed intraday and traders square positions ahead of tomorrow's pivotal Fed decision. The yellow metal is off nearly 1% from yesterday's record high at $2,589.13.



While Fed funds futures continue to imply a 50 bps rate cut tomorrow, today's data reflect a resilient economy that may warrant a less aggressive 25 bps cut. If the policy move is 25 bps, gold could face more significant corrective action initially, perhaps back below $2500. However, investors are likely to view such a dip as yet another buying opportunity.

Gold is pressuring support at the $2,559.79/$2,557.21 level. Below that, a minor chart point at $2,529.57 and congestion around $2,500 are noted.

On the upside, the previously established measing objective at $2,597.15/$2,600.00 is now protected by Monday's high at $2,589.13. I've got another Fibonacci objective at $2,619.35.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.035 (-0.11%)
5-Day Change: +$2.255 (+7.94%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +32.63

Silver made another run at the $31 level early in today's U.S. session but upticks stalled at $30.963, leaving yesterday's high at $31.073 well protected. At this point, I don't expect to see the 31-handle again until after the FOMC policy statement tomorrow.



A short-term move back above $31 is likely contingent on a 50 bps rate cut. If the Fed only cuts by 25, I see the white metal retreating to at least the $30 zone as the market reassesses, but the potential would be back to the important moving averages which are clustered around $29.

The bull camp should be heartened by today's generally positive U.S. economic data. However, persistent growth risks in Europe and China are a significant offset in terms of global optimism.

A short to near term breach of $31.073 would keep the white metal on the path for a challenge of the $31.652 high from 11-Jul. Penetration of the latter would further bolster the scenario that calls for a test of the high for the year at $32.379.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/16/2024

Gold sets more record highs, silver trades above $31 

OUTSIDE MARKET DEVELOPMENTS: Market focus is squarely on the FOMC meeting this week. Policy will be announced on Wednesday along with the Fed's latest economic projections.

Bets for a more aggressive rate cut have increased since last week's Wall Street Journal article by Nick Timiraos indicated some policymakers were "nervous" about keeping rates too high for too long. FedSpeak has tilted more dovish recently as well.

The potential for a 50 bps cut stands at 61% to start the new week. That's up from 50% on Friday, 30% a week ago, and 25% a month ago. I continue to believe the Fed will start its easing campaign with a 25 bps cut.

President Biden and UK PM Starmer met on Friday at the White House to discuss authorizing Ukraine to use long-range weapons systems to strike deep inside Russia. Vladamir Putin warned that providing such permission would be tantamount to a declaration of war. "This will mean that NATO countries, the U.S. and European countries are at war with Russia," said Putin.

After the meeting, a national security spokesperson for the Biden administration said there had been no change in the U.S. position on strikes within Russia. It is not clear at this time whether that is also the position of the UK government. However, just the fact that there were high-level talks about allowing Ukraine to use these systems to strike deep within Russia dials up the tension in the region considerably.

The U.S. and UK have expressed deep concern that North Korea and Iran are providing weapons and ammunition to Russia for use against Ukraine.

Houthi rebels in Yemen fired a long-range missile at Israel on Sunday. The rebels claim it was an advanced hypersonic missile. If that's true, the weapon would likely have been provided by Iran.

“This morning, the Houthis launched a surface-to-surface missile from Yemen into our territory. They should have known by now that we charge a heavy price for any attempt to harm us,” said Israeli Prime Minister Benjamin Netanyahu. A retaliatory strike by Israel against the rebels seems likely.

Another assassination attempt on former President Trump has also heightened U.S. political tensions. The would-be assassin never got any shots off at the Republican nominee for President. It was the second attempt on Mr. Trump's life in as many months and occurred just 50 days out from election day.

The September Empire State Index surged to a 29-month high of 11.5, well above expectations of -4.5, versus -4.7 in August. New orders climbed, and shipments grew significantly according to the NY Fed.

Arguably this is another indication that the economy remains resilient despite the current tight monetary policy conditions. A 50 bps cut does not seem warranted.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.34 (-0.01%)
5-Day Change: +$75.65 (+3.02%)
YTD Range: $1,986.16 - $2,589.13
52-Week Range: $1,812.39 - $2,589.13
Weighted Alpha: +35.56

Gold reached a new record high at $2,589.13 in overseas trading before retreating into the range. The yellow metal is being supported by more dovish rate cut expectations for this week and the corresponding weakness in the dollar. Heightened geopolitical and political tensions are also providing some lift. 



The $2,597.15/$2,600.00 objective has come within striking distance. Beyond that, there's a Fibonacci level at $2,619.35.

A sustained push above $2,600 seems unlikely ahead of the Fed's policy decision on Wednesday given the worsening overbought condition. As noted in commentary last week, there is some risk of a 'sell the fact' event on Wednesday. That risk is heightened if the Fed "disappoints" with a 25 bps cut now that expectations have swung in favor of a larger cut.

Nonetheless, short-term setbacks are likely to be viewed as buying opportunities. Initial support at $2,581/78 protects the more important $2,559.79/$2,557.21 level. Below the later, $2,529.57 and congestion around $2,500 are noted.

ETF inflows were back on the rise last week after a brief pause in the first week of September. Net inflows totaled 11.6 tonnes, with North America accounting for 9.2 tonnes.

The COT report showed that net speculative long positions decreased to a 4-week low of 282.5k contracts in the week ended 13-Sep. That's a decline of 5.1k from 287.3k contracts in the previous week.

Gold analyst Jan Nieuwenhuijs has found trade statistics that he claims reveal that "the Saudi central bank has been covertly buying 160 tonnes of gold in Switzerland since early 2022, contributing to the current gold bull market." Nieuwenhuijs notes that some official buying is very transparent while other central banks prefer to operate covertly.

According to Nieuwenhuijs the PBoC is also a covert buyer, to the tune of 1,600 tonnes since the war in Ukraine began. He believes SAMA and the PBoC "must be confident in what direction the gold market is headed."

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.179 (+0.58%)
5-Day Change: +$2.384 (+8.41%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +33.05

Silver has traded with a 31-handle for the first time since 17-Jul, The rise in expectations for a more aggressive Fed rate cut, a weaker dollar, an impressive Empire State Index beat and new record highs in gold all conspire to support the white metal.



Upside potential is now seen to the $31.652 high from 11-Jul, but the worsening overbought condition may be a limiting factor in the short term. Risk that the Fed opts for a more cautious 25 bps rate cut this time around could also result in significant retracement of the recent gains. Beware the volatility.

While a measure of caution is warranted here, recent gains have returned considerable confidence to the longer-term bullish scenario. Suddenly the white metal is back within $2 of the 11-year high set in May at $32.379.

The latest COT report saw net speculative long positions dip 1.4k to 44.7k contracts last week, the lowest since March. Traders likely lightening exposure ahead of last week's inflation data and were reluctant to add positions with the Fed decision looming.

CFTC Silver speculative net position

The low for the day at $30.658 marks initial support. Former resistance at $30.164 down to $30 is the more important level to watch, followed by Friday's low at $29.869.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/13/2024

Gold extends to more record highs as silver trades with a 30-handle for the first time in 8-weeks

OUTSIDE MARKET DEVELOPMENTS: North Korea released photos of  Kim Jong Un touring a secret uranium enrichment facility. Kim said that Pyongyang needs to "exponentially increase" its nuclear weapons stockpile for "self-defense and the capability for a preemptive attack."

Just the mention of a potential nuclear first strike raises the risk factor in the region and globally. There is speculation that North Korea may be planning to run its first nuclear tests since 2017.

The timing of these provocative actions, just 52 days out from the U.S. presidential election, may be designed to send a message to the next U.S. administration. That message seems to be that the DPRK remains a destabilizing force in Asia and a foreign policy challenge for America.

On Thursday, a Wall Street Journal article by the influential Nick Timiraos suggested that a larger 50 bps Fed rate cut was not off the table. The probability of such a cut had tumbled into the teens after Thursday's inflation data but began climbing later in the session, ending at 28%. This morning the probability is at 43%.

Timiraos acknowledged that the Fed preferred to move in 25 bps increments but some policymakers are reportedly "nervous" about keeping rates too high for too long amid signs of mounting growth risks. The market continues to price in 100 bps of cuts by year-end, suggesting at least one of the three remaining FOMC meetings this year will have to end with a 50 bps cut. I continue to believe it won't be the first one.

News that the interest payment on the $35.3 trillion national debt cracked the $1 trillion barrier for the first time may provide additional incentive for the Fed to bring rates down. The government has paid $1.049 trillion to service the debt so far this year, up 30% from the same period last year. This is clearly unsustainable.

U.S. trade prices for August came in weaker than expected providing further evidence that inflationary pressures are moderating. The export price index fell by 0.7%, while import prices dropped 0.3%.

Preliminary Michigan sentiment for September rose to 69.0, versus 67.9 in August. Sentiment continues to improve from July's 8-month low at 66.4. The 1-year inflation index continued to fall, reaching a 45-month low of 2.7%.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$7.98 (+0.31%)
5-Day Change: +$72.83 (+2.92%)
YTD Range: $1,986.16 - $2,581.46
52-Week Range: $1,812.39 - $2,5781.46
Weighted Alpha: +35.39

Gold continues its march higher on Friday after initially pushing to record levels in U.S. trading on Thursday. The yellow metal is up more than 3% this week and will post its first higher weekly close in three. Gold is up nearly 25% YTD.



The yellow metal is being buoyed by revived expectations that the Fed will launch its easing campaign next week, with a 50 bps cut. New lows for the week in the dollar index are providing an additional boost to gold today.

Given the magnitude of this week's rise and the developing overbought condition, there is potential to see some profit-taking ahead of the weekend. However, short-term setbacks are likely to be viewed as buying opportunities in anticipation of a test of $2,597.15/$2,600.00. Beyond that, the next Fibonacci level I'm watching is $2,619.35.

This week's gains have reignited talk about $3000 gold. I'm quoted in a recent Reuters article on that topic.

Besides falling interest rates, Joseph Cavatoni at the World Gold Council suggests uncertainty surrounding the upcoming U.S. election as another source of demand as investors seek to hedge event risk.

Intraday supports around $2,570.00 and at $2,564.67/26 protect the session low at $2,557.21. 

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.121 (+0.41%)
5-Day Change: +$2.268 (+8.12%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +32.52

Silver has surged to 8-week highs above $30.164, helped by record highs in gold and a weaker dollar. The white metal is up nearly 10% this week, the biggest weekly rise since mid-May.



The breach of a minor chart point mentioned in yesterday's comment at $30.584 (18-Jul high) lends credence to the scenario that calls for additional short-term gains to $31.00 and the July high at $31.652. While the May high at $32.379 looks increasingly attractive with each uptick, the volatility we've seen since that high was set warrants continued caution.

The previous highs at $30.164/082 mark first support. Secondary support is defined by the overseas low at $29.869.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/12/2024

Gold and silver surge following today's PPI and claims data

OUTSIDE MARKET DEVELOPMENTS: U.S. PPI rose 0.2% in August, in line with expectations, versus +0.1% in July. The annualized rate of producer inflation fell to 1.7%, versus 2.2% in July.

Core PPI came in at +0.3% on expectations of +0.2%, versus UNCH in July; +2.4% y/y, unchanged from July.

Initial jobless claims rose 2k to 230k in the week ended 07-Sep, which was in line with expectations, versus a revised +228k in the previous week. Continuing jobless claims increased by 5k in the last week of August to 1,850k from a revised 1,845k the previous week. 

With the important inflation data in the rearview mirror, the market is confident that the Fed will ease by just 25 bps next week. Fed funds futures put the probability at 87% this morning. That's a tick higher than yesterday, but 27 percentage points higher than last week and 37 points higher versus 12-Aug.

August import/export prices come out tomorrow but are less important. Median expectations for both are -0.1%.

The ECB cut rates by 25 bps as was widely expected. The central bank noted, "Recent inflation data have come in broadly as expected." 

However, the ECB upped its 2024 forecast for core inflation to 2.9% but then expects a drop to 2.3% in 2025 and 2.0% in 2026. The central bank trimmed its growth projections to 0.8% for 2024, 1.3% for 2025, and 1.5% for 2026. The downward revisions were attributed to expectations of " weaker contribution from domestic demand over the next few quarters."


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$1.44 (+0.06%)
5-Day Change: +$5.33 (+0.21%)
YTD Range: $1,986.16 - $2,548.477
52-Week Range: $1,812.39 - $2,548.47
Weighted Alpha: +31.90

Gold has surged to new all-time following this morning's PPI release. The market now feels confident that a 25 bps Fed cut is in the offing for next week and that all the potential surprises are behind us. The yellow metal has exceeded my long-standing Fibonacci objective at $2,539.77, trading as high as $2,548.47 thus far.



The next upside target is the measuring objective at $2,597.15/$2,600.00. It may take until next week to get there as the market is already becoming a bit overextended. Also, be aware of a potential "sell the fact" event once the Fed announces policy on Wednesday.

Former resistance at $2,529.57/$2,527.97 now defines first support. Secondary support is the overseas low at $2,511.35 and there's congestion around the $2,500.00 level.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.417 (+1.47%)
5-Day Change: +$0.012 (+0.04%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +24.41

Silver surged to 2-week highs above $29 after the release of this morning's inflation and claims data. Everything was in line with expectations and the market now seems clear that the Fed will announce a 25 bps rate cut next week.



Upside momentum is strong this morning and the white metal seems on track for tests back above $30. A word of caution though, rallies have been consistently failing in recent weeks.

A minor chart point at $29.635 (29-Aug high) has been tested and penetration would clear the way for a challenge of the late August highs at $30.082/164. A breach of the latter would target $30.584 initially, with potential to the July high at $31.652.

Former resistance t $29.125 now offers support. Minor intraday support is noted at $28.731, which protects today's low at $28.557.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/11/2024

Gold and silver fade after CPI print further erodes chances for 50 bps Fed cut

OUTSIDE MARKET DEVELOPMENTS: U.S. CPI rose 0.2% in August, in line with expectations, versus +0.2% in July. The annualized rate of consumer inflation slid to 2.5% from 2.9% in July.

Core CPI came in at +0.3%, above expectations of +0.2%, versus +0.2% in July. Core consumer inflation held steady at 3.2% y/y.

Markets have been waiting for confirmation that inflation is still heading in the right direction and that the Fed should now focus on supporting the labor market via easier monetary policy. Today's data favors that rotation and prospects for a larger 50 bps rate cut have fallen to 21%. That's down from 34% yesterday, 44% a week ago, and 51% a month ago.

We'll get August PPI data tomorrow. The market is expecting a 0.2% m/m rise. Import/export prices come out on Friday.

BoJ policymaker Junko Nakagawa suggested a rate hike is still on the table a day after a Bloomberg article reported the central bank sees little need to raise rates again next week. The yen surged in reaction, pushing the USD-JPY rate to a new low for the year of 140.72.

The ECB is widely expected to trim rates by 25 bps tomorrow. Eurozone Q2 GDP was revised down to -0.2% q/q, versus a preliminary print of +0.3%. Government spending continues to rise as fixed investment tumbles.

This prompted former ECB chief Mario Draghi to warn that steps must be taken to correct this, or Europe will face a "slow agony." A 25 bps rate cut won't be enough. Draghi is advocating for up to €800bn a year in investment to pull the EU back from the brink.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$5.30 (+0.21%)
5-Day Change: +$27.74 (+1.11%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +31.90

Gold set a new 2-week high at $2,527.18 following the benign CPI print, but has since retreated into the range, leaving the record high from 20-Aug at $2,529.57 intact. Focus now shifts to tomorrow's PPI data.



Dimmed prospects for a larger 50 bps rate cut are keeping the dollar underpinned, providing a bit of a headwind for the yellow metal. The dollar index eked out a new high for the week, despite today's strength in the yen.

Choppy consolidative trading within the range is likely to continue at least through tomorrow's PPI report. The market seems to want to be 100% sure that inflation is in check before committing to a direction.

There is at least one near-certainty: The Fed will launch its easing campaign next week, most likely with a 25 bps cut. The trade will be very interested in the forward guidance and will start speculating about the size of cuts in November and December.

Initial support is a zone from $2,507.93 (20-day SMA) down to yesterday's low at $2,500.63. Secondary support at $2,487.11/06 protects the short-term range lows at $2,474.31/08.

On the upside, the $2,539.77 and $2,597.15/$2,600.00 objectives remain valid, contingent on a move to new all-time highs.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.417 (+1.47%)
5-Day Change: +$0.627 (+2.23%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +24.25

Silver traded as high as $28.842 in post-CPI trading before fading into the range once again. Resistances marked by the 20-, 50-, and 100-day moving averages at $28.930, $29.010, and 29.188 were left intact, leaving last week's high at $29.125 well protected.



Yesterday's low at $28.08 defines first support, protecting the recent lows at $27.791/732. Below the latter, I'm watching $27.505 and $27.237.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/10/2024

Gold and silver remain rangebound ahead of inflation data later this week

OUTSIDE MARKET DEVELOPMENTS: Fed funds futures are steady today with prospects for a 50 bps rate cut holding at 27%. The market awaits tomorrow's CPI report and Thursday's PPI data, which will bring us within a week of the FOMC policy announcement. A 25 bps rate cut is the most likely outcome.

The ECB will announce policy on Wednesday this week. A 25 bps cut is widely expected as worries about persistently slow growth override lingering inflation risks.

Germany – Europe's largest economy – contracted by 0.1% in Q2 and is threatening to slip back into recession. Annualized growth this year is a scant 0.2%.

Former ECB President Mario Draghi is pitching a new coordinated industrial policy for Europe to boost competitiveness and lift the EU out of its doldrums. Draghi recognizes that productivity is "very weak" and a significant investment of up to €800bn a year will be needed to keep the Continent from falling further behind the U.S. and China.

According to a Bloomberg article, the BoJ reportedly sees little need to raise rates again next week. Officials are still monitoring lingering market volatility in the wake of the July hike and are keen to see how markets react to the anticipated first easing move by the Fed in more than four years.

U.S. NIFB small business optimism tumbled 2.5 points to 91.2 in August, versus 93.7 in July. Fewer firms are planning to hire as those expecting a better economy plunged to -13% from -7% in July. The uncertainty index rose 2 points to 92, the highest since October 2020.

Fed Vice Chair Michael Barr (centrist) is slated to speak on Basel III later this morning. 


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$1.03 (+0.04%)
5-Day Change: +$14.33 (+0.57%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +30.84

Gold is pushing higher but remains confined to Friday's range for a second session. Consolidative trading is likely to prevail ahead of U.S. inflation data later this week.



The yellow metal continues to hold the 20-day moving average on a close basis, which is encouraging for the bull camp. The all-time high at $2,529.57 (20-Aug high) defines the upper boundary of the range.

A move to new record highs would reestablish the uptrend and confirm potential to the $2,539.77 Fibonacci objective. Beyond that, the $2,597.15/$2,600.00 zone.

Initial support is at $2,501.33/$2,500.63, where the 20-day SMA corresponds closely with today's overseas low. More substantial support at $2,487.11/06 protects the short-term range lows at $2,474.31/08.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.117 (+0.41%)
5-Day Change: +$0.395 (+1.41%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +22.12

Silver edged higher within Friday's range into early U.S. trading. Just over 50% of the decline from $29.125 (5-Sep high) to $27.732 (6-Sep low) was retraced, but the white metal came under renewed pressure and has since fallen to fresh intraday lows.

  
A minor chart point is noted at $28.079 which stands in front of the recent lows at $27.791/732.

Choppy trading within the range is likely to prevail through Thursday's PPI release. Market expectations for both CPI and PPI are +0.2%. It would take something significantly hotter than expectations to get the market to believe the Fed will hold steady next week. 

A short-term close back above the 20-, 50-, and 100-day moving average complex is needed to return a measure of credence to the underlying uptrend and call for another run at $30. Those are out of reach today at $28.884, $29.052, and $29.174 respectively.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/6/2024

Gold and silver initially rallied on NFP miss, but subsequently retreated

OUTSIDE MARKET DEVELOPMENTS: U.S. nonfarm payrolls rose 142k in August, below expectations of +162k, versus a negative revised +89k in July (was +114k). June was revised lower by 61k from 179k to 118k.

The unemployment rate ticked down to 4.2% in line with expectations, versus 4.3% in July.

Hourly earnings rose 0.4% on expectations of +0.3%, versus a 0.2% rise in July.

The average workweek ticked up to 34.3 hours in line with expectations, versus 4.2% in July.

The 20k miss on the August payrolls print wasn't as bad as some of the whispers. However, -86k in back-month revisions to the previous two months strengthened – at least initially – the probability of a 50 bps rate cut on 18-Sep.

The likelihood of a 50 bps cut jumped to 59% immediately after the jobs report but those odds plunged in subsequent trading. As of this writing, the chances are just 25%, 5 percentage points lower than last week.

"[I]t is now appropriate to dial down the degree of restrictiveness in the stance of policy," said New York Fed President John Willams (centrist). However, Williams claims not to have a personal opinion on the appropriate size of a September rate cut, repeating the Fed's 'data dependence' mantra.

“The balance of risks has shifted toward the employment side of our dual mandate,” said Fed Governor Chris Waller (hawk). He noted that recent jobs data "no longer requires patience, it requires action." Waller said he was "open-minded about the size and pace of rate cuts," but seemed to hint at a preference for a slower pace of rate cuts.

I continue to believe the Fed's first step on the easing path will be a cautious one. In commentary earlier this week, I suggested a sub-100k August payrolls print might get me to change my view. While July was revised down below 100k, August was just moderately below expectations.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$2.45 (+0.10%)
5-Day Change: +$7.86 (+0.31%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +31.81

Gold jumped to a new high for the week after nonfarm payrolls missed expectations prompting more aggressive rate-cut bets and a drop in the dollar. However, gains stalled ahead of the record high at $2,529.57 and the yellow metal retreated into the range.



Despite today's volatility, gold still appears poised to register a higher weekly close. If confirmed with a close above $2,503.45, it would be the fourth higher weekly close in six.

Tests of the downside this week were successfully contained by the 20-day moving average on a close basis. I find that to be technically encouraging.

Price action since the record high was established on 20-Aug has been only mildly corrective; dropping just 2.2% from high to low. Arguably the tone for the past two weeks has been more consolidative than anything.

The underlying trend remains decisively bullish. The yellow metal is up more than 20% year to date and has closed higher every month except January. Gold is up nearly 30% since 06-Sep'23.

A short-term move to new all-time highs will favor a test of the $2,539.77 Fibonacci objective. Beyond that, potential is to the $2,597.15/$2,600.00 zone.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.021 (+0.07%)
5-Day Change: -$0.360 (-1.25%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +23.08

Silver modest upticks after the jobs report stalled ahead of yesterday's high at $29.125 leading to a sharp sell-off to new 3-week low. The white metal is now down more than $1 on the day and trading below $28.



Silver is poised for a second consecutive lower weekly close. This market sucks you in with encouraging signals and then spits you right back out again.

The resilience displayed by gold should provide some underpinning to the market, but that's not readily apparent at this point. Suddenly the $27.303 Fibonacci level (78.6% retrace of the August rally) is back in play.

I don't think it will get there today as this move is already pretty overdone. I wouldn't be surprised to see at least some short-covering into the close.

There are still 12 days until the FOMC announces policy. A lot can happen between now and then. Look for silver to remain volatile as traders on each side of the 25 bps or 50 bps debate continue to duke it out.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/5/2024

Gold and silver retrace recent losses and await jobs data

OUTSIDE MARKET DEVELOPMENTS: Heightened growth risks continue to weigh on global stocks. Most of the major overseas indices were lower once again today. U.S. shares are called lower today.

The ADP Employment Survey showed private payrolls rose by just 99k in August, well below market expectations of 148k, versus a negative revised 111k in July (was 122k). This is the weakest print since Jan 2021 and adds to whispers of a potential nonfarm payrolls miss tomorrow.

Challenger Layoffs surged 50k to 75.9k in August, a 193% increase over July. That's the highest August print in 15 years. 

Initial jobless claims fell 5k in the week ended 31-Aug to 227k, below expectations of 232k, versus a revised 232k in the previous week. Continuing claims dipped 22k to 1,838k, versus a downward revised 1,860k in the previous week.

U.S. Q2 productivity was revised up to +2.5% on expectations of +2.4%, versus +2.3% preliminary read. Unit Labor Costs were slashed to +0.4%, below expectations of +0.8%, versus +0.9% preliminary read.

U.S. S&P Global Services PMI was revised up to 55.7 from a preliminary read of 55.2. It was the 19th consecutive month above 50, and the highest print since March 2022.

U.S. Services ISM rose to 51.5 in August, above expectations of 51.0, versus 51.4 in July. Prices rose to 57.3 from 57.0 in July. Employment fell 0.9 points to 50.2 retracing some of the strong 5-point gain seen in July.   

While the services sector continues to show strength, signs from the labor market are raising concerns about the economy. Traders have boosted expectations for a 50 bps Fed rate cut this month to 45%. That's up from 34% a week ago, but down significantly from 85% a month ago.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$22.26 (+0.89%)
5-Day Change: -$3.30 (-0.13%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +32.31

Gold has rebounded to new highs for the week, buoyed by an uptick in bets that the Fed will be more aggressive in cutting rates this month and a weaker dollar. The record high at $2,529.57 (20-Aug high) is suddenly back within striking distance.



I don't see gold setting new highs before tomorrow's nonfarm payrolls report. However, if payrolls miss expectations, 50 bps rate cut bets would increase, the dollar will weaken further, and gold will be back on track for attainment of previously established objectives at $2,539.77 (Fibonacci) and  $2,597.15/$2,600.00 (measuring objective).

While the low from 22-Aug at $2,474.31 was slightly exceeded yesterday, I'm going to call this level technically intact. I'm also encouraged by gold's inability to sustain tests below the 20-day moving average on a close basis.

Global gold ETFs saw inflows of 14.3 tonnes last week as the yellow metal was consolidating just off its record high. North American investors accounted for the vast majority of that interest (11.6 tonnes).

Gold ETFs notched a fourth monthly net inflow in August. Inflows totaled 28.5 tonnes for the month with North American investors responsible for 17.2 tonnes of buying interest.

UBS Global Research claimed in August that the uptrend in gold has legs and could continue for the next couple of years. The report went on to say that "Gold models are unable to explain the bulk of gold’s rally," even though aggressive official sector (central bank) buying is heavily featured.

Jan Nieuwenhuijs of the Gold Observer believes the PBoC hasn't paused its gold buying at all. Covert PBoC gold buying is hidden in plain sight in global customs data according to Nieuwenhuijs. It's a great piece of research that goes a long way toward explaining what UBS models can not.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.542 (+1.92%)
5-Day Change: -$0.693 (-2.36%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +24.42

Silver has rebounded smartly to test back above $29 as choppy trading prevails ahead of Friday's payrolls report. New highs for the week have been established and more than 50% of the pullback from last week's high at $30.164 has been retraced.



The 50- and 100-day moving averages come in at $29.123 and $29.160 today and have successfully capped the upside thus far. The market now awaits the jobs data.

If job growth is weaker than expected, silver should follow gold higher on heightened expectations of a 50 bps rate cut on 18-Sep and a weaker dollar. Secondary resistance is noted at $29,583/635.

A short-term breach of last week's highs at $30.082/164 would put the yellow metal back on the path for a challenge of the July high at $31.652 and eventually the 11-year highs from May at $32.379.

A beat on the jobs front would likely send the precious metals back down into their ranges as rate-cut bets are pared. A decisive swing back in favor of a 25 bps Fed rate cut would support the dollar.

Minor intraday support is noted in silver at $28.655, which protects the lows from Wednesday and Tuesday at $27.791/779. 


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/4/2024

Gold and silver recover somewhat on more aggressive Fed bets

OUTSIDE MARKET DEVELOPMENTS: U.S. stocks dropped sharply on Tuesday after signs of economic weakness sapped risk appetite. The DJIA ended the session with a 1.5% loss, the S&P500 fell 2.1%, and the tech-heavy Nasdaq tumbled 3.3% weighed by heavy selling of NVIDIA shares.

Global stocks took their queue from Wall Street with the major indexes recording losses: Nikkei 225 -4.2%, DAX -0.8%, CAC 40 -0.8%, FTSE 100 -0.8%. U.S. equities began Wednesday's session under pressure, but rising bets for more aggressive Fed easing are providing some market relief.

Risk-off is the theme to begin the month of September. In two weeks the Fed will announce policy and we'll see their latest economic projections. Between now and then key incoming data points that could materially impact policy are August payrolls (Friday), August CPI (11-Sep), August PPI (12-Sep), and Retail Sales (18-Sep).  

JOLTS nonfarm job openings fell 237k to 7,673k in July, the lowest print since January 2021. Layoffs rose 202k to 1,762k, the highest since March 2023. Hires rebounded 273k to 5,521k following a 407k plunge to 5,248k in June.

Incoming jobs data continue to suggest weakness in the labor market and may be a harbinger for a payrolls miss on Friday. The median estimate for August nonfarm payrolls stands at +162k, an improvement on the +114k reported in July. Nonetheless, a sub-160k payrolls print would likely result in Fed funds futures favoring a 50 bps cut.

Barring a dramatic payrolls miss (sub-100k), I still believe the Fed will initially be cautious as they embark on their first easing cycle since the pandemic. The last easing cycle actually began on 01-Aug 2019 and culminated with two large emergency cuts in March of 2020 as the COVID crisis ensued.

The Bank of Canada lowered its policy rate today by 25 bps to 4.25%. The move was widely expected.

U.S. factory orders rebounded 5.0% in July on expectations of +4.9%, versus -3.3% in June. It was the biggest monthly jump since July 2020. Most of the strength remains attributable to the transportation sector. Ex-trans a much more modest 0.4% gain was recorded.

Auto and light truck sales come out later today. Market expectations are 1.9M and 9.7M respectively.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$3.76 (-0.15%)
5-Day Change: -$15.32 (-0.61%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +30.22

Gold began the session on the defensive, edging to a two-week low of $2,474.08. However, the yellow metal rebounded as weak job openings data boosted bets for a 50 bps Fed rate cut, and weakened the dollar.



Earlier losses saw a slight breach of support at  $2,474.08 (22-Aug low), but gold is now trading back above the 20-day moving average. I suspect the range is now defined until the jobs data come out on Friday. Choppy consolidative trading should prevail until then, although a close back above $2500 would hearten the bull camp.

Key resistance is well-defined by the highs from the previous two weeks at $2,527.97/$2,529.57. A breach of this level is needed to return credence to previously established objectives at $2,539.77 (Fibonacci) and  $2,597.15/$2,600.00 (measuring objective).

The World Gold Council reports that, despite record-high prices, net central bank gold purchases more than doubled to 37 tonnes in July. The top three buyers in July were Poland, Uzbekistan, and India.

Official gold buying for reserve diversification is expected to remain an ongoing source of demand. Additions of gold to reserves are primarily coming at the expense of dollar holdings.

Goldman Sachs noted emerging market central bank buying as just one reason investors should buy gold. "Our preferred near-term long is gold. It remains our preferred hedge against geopolitical and financial risks, with added support from imminent Fed rate cuts and ongoing EM central bank buying," according to Goldman Sachs analysts.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.010 (-0.04%)
5-Day Change: -$1.068 (-3.67%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +20.48

Silver is consolidating within yesterday's range as soft U.S. economic data boosts the probability of an aggressive move by the Fed in two weeks. The rebound in factory orders led by the transportation sector, which is a heavy user of silver, may have given the bears some pause.



However, the magnitude of the losses seen since last week's failed tests above $30 has me thinking that the low is not yet in. The market certainly had become oversold, which helped prevent follow-through losses today.

With more than half of the August rally already retraced, further attacks on the downside can not be ruled out. Yesterday's low at  $27.779 now provides an intervening barrier ahead of the next Fibonacci level at $27.303 (61.8%).

A climb back above $29 would ease pressure on the downside and perhaps re-embolden the bull camp. However, choppy trade with a bias to the downside is likely ahead of Friday's jobs data.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/3/2024

Gold and silver remain defensive as focus shifts to Friday's jobs data

OUTSIDE MARKET DEVELOPMENTS: The bodies of six more Israeli hostages were discovered in Gaza over the weekend, including Israeli-American Hersh Goldberg-Polin. Israelis took to the streets demanding that the Netanyahu government reach a cease-fire deal and secure the release of the remaining hostages.

Negotiating with terrorists never seems to work out in the long run. Despite the intense internal and international pressure, the latest hostage deaths likely steel the resolve of Netanyahu to achieve “total victory” over Hamas.

NATO member Turkey has formally applied to join the BRICS economic block in a bid to boost its global influence. According to Bloomberg, Turkish President Recep Tayyip Erdogan recognizes that "the geopolitical center of gravity is shifting away from developed economies."

The BRICS group is growing; recently adding Iran, the United Arab Emirates, Ethiopia, and Egypt. Saudi Arabia has been asked to join, while Malaysia, Thailand, the Philippines, Vietnam, and Azerbaijan are considering joining.

With America's global economic influence eroding, the BRICS – most notably China – are eager to fill the void. This shift plays into the de-dollarization theme.

Prospects for a 50 bps Fed rate cut had been hovering around 30% but were boosted by signs of economic weakness in today's data:

U.S. manufacturing PMI was adjusted lower to a final August print of 47.9, the lowest since June of 2023. That's down from a preliminary print of 48.0 and 49.6 in July.

“A further downward lurch in the PMI points to the manufacturing sector acting as an increased drag on the economy midway through the third quarter. Forward looking indicators suggest this drag could intensify in the coming months," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

While August manufacturing ISM rose to 47.2, the print was below expectations of 47.8. The indicator is less than a point off the 3-year low of 46.4. Prices paid rose 1.1 points to 54.0, versus 52.9 in July. New orders tumbled 2.8 points to a 15-month low of 44.6.

Construction spending fell 0.3% in July, below expectations of +0.1%, versus an upward revised UNCH in June. Back month revisions offset the headline number netting a modestly positive report.

Focus this week is squarely on U.S. jobs data, out on Friday. The market is estimating payrolls to rise by 162k and the jobless rate to tick down to 4.2%. Weaker-than-expected jobs growth would boost bets for a 50 bps rate cut.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$2.22 (-0.09%)
5-Day Change: -$44.36 (-1.76%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +29.55

Gold is trading lower for a third session after failing to extend to new record highs last week. A firmer dollar is weighing on the yellow metal as market focus moves to Friday's nonfarm payrolls report for August.



Gold is currently testing below the 20-day moving average at $2,483.77, leaving the low from 22-Aug at $2,474.31 vulnerable to a test. The close that day at $2,484.57 is the lowest close since 15-Aug. Chart points at $2,451.50 (16-Aug low) and $2,435.86 (15-Aug low) offer additional support.

The latest COT report shows spec long positioning rose 3.1k last week to 294.4k contracts. That's the biggest long position since the week ended 13-Mar of 2020.

Given the long positioning, it's not surprising to see some position-squaring ahead of this week's jobs report. Those jobs data have significant implications for the Fed policy decision that is just 15 days out.

A close back above $2,500 would ease pressure on the downside somewhat. While the underlying trend remains bullish, corrective/consolidative action is likely to prevail until Friday.

Last week's high at $2,527.97 reinforces the record high from the previous week at $2,529.57. Beyond that, established objectives at $2,539.77 (Fibonacci) and  $2,597.15/$2,600.00 (measuring objective) remain valid.




SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.234 (-0.82%)
5-Day Change: -$2.097 (-7.00%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +19.34

Silver has extended to the downside, weighed by weak manufacturing data and a firmer dollar. The white metal is decisively back below the 20-day moving average and more than 50% of the August rally has been retraced.



Silver has disappointed yet again, failing to sustain last week's probes above $30. A sustained breach of this level would have had silver on track for a challenge of the high for the year $32.370 (21-May).

Those tests above $30 drew some new longs into the futures market last week. The COT report showed net long positions increased by 2.9k to 52.2k contracts, a 6-week high. Alas, those longs seem to be weak.

The next supports I'm watching are minor chart points at $27.505 and $27.425. These levels protect the more important $27.303/237 zone.

Monday's low at $28.352 and today's intraday high at $28.558 define initial resistances. A climb back above $29.00 is needed to ease pressure on the downside, but that seems unlikely before Friday's jobs report.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

8/30/2024

Gold and silver slide ahead of the holiday weekend on pared rate cut bets and a stronger dollar

OUTSIDE MARKET DEVELOPMENTS: The table remains set for a Fed rate cut in September following this morning's economic data. It would be the first rate cut in more than four years.

Chicago PMI rose to 46.1 in August, above expectations of 44.5, versus 45.3 in July. Boeing issues remain a headwind, keeping the indicator in contraction territory.

The final Michigan Sentiment reading for August edged up to 67.9, from the preliminary print of 67.8. Sentiment remains well off the high for the year set in March at 79.4.

One-year inflation expectations were adjusted to a 44-month low of 2.8%, versus a preliminary print of 2.9%. The Buying Conditions for Houses index reached an all-time low of 23.

U.S. PCE rose 0.5% in July, above expectations of +0.4%, versus +0.3% in June. Personal income climbed 0.3% on expectations of +0.2%, versus +0.2% in June.

The chain price index – the Fed's preferred inflation indicator – rose 0.2% in July, in line with expectations. The annualized rate held steady at 2.5%. Core inflation also rose 0.2% m/m. The annualized rate was unchanged at 2.6% y/y on expectations of 2.7%.

I'd call the inflation readings benign, with year-over-year readings less than half of the post-COVID highs, but still above target. This lends further credence to the belief that the Fed's focus has shifted from price risks to growth risks.

The probability for a 50 bps rate cut edged lower, providing some support for the dollar. The dollar index set a new high for the week at 101.65.

There was some troubling news in this morning's data: The savings rate dropped to 2.9%, versus a negatively revised 3.1% in June. That leaves the savings rate just above the 14-year low of 2.7% from June 2022.

Dollar General shares plunged this week after the company slashed earnings and profit guidance. CEO Todd Vasos said their core customers are "less confident of their financial position" and are having to make hard choices at the discount retailer.

"Inflation has continued to negatively impact these households with more than 60% claiming they have had to sacrifice on purchasing basic necessities due to the higher cost of those items, in addition to paying more for expenses such as rent, utilities and healthcare," said Vasos. Those who earn the least are the most impacted by inflation, particularly when it comes to necessities such as food, fuel, and shelter.

"More of our customers report that they are now resorting to using credit cards for basic household needs and approximately 30% have at least one credit card that has reached its limit," added Vasos.

Credit card balances increased by $27 billion in Q2 to reach a record high $1.14 trillion according to a recent report by the New York Fed. Contrasting rising credit card debt with the declining savings rate paints a pretty grim picture.

With the average credit card interest rate at 27.64%, according to Forbes Advisor’s weekly credit card rates report, this is a hole that many simply won't be able to claw their way out of. Not surprisingly, the delinquency rate reached a more than 12-year high of 3.25% in Q2.

Looking at total household debt, the picture is even more disturbing. Total household debt rose by $109 billion to reach a record $17.80 trillion in Q2.

This week's upward revision in Q2 GDP to 3.0% was driven largely by stronger-than-expected consumer spending. Consumption was revised up to 2.9% from 2.3% in the first report.

However, that strong consumption is being fueled largely by debt. That's simply unsustainable.

While the Fed is rightly shifting its attention to growth risks, policymakers must be careful not to restoke inflation in the process. I think they will be cautious with the first cut in September unless there is a significant downside surprise in August jobs data, which comes out next Friday.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$6.07 (-0.24%)
5-Day Change: -$14.27 (-0.57%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +30.32

Gold went back on the defensive in early U.S. trading, weighed by diminished expectations for a 50 bps rate cut and a stronger dollar. While the yellow metal appears poised for a lower weekly close, it will notch a seventh consecutive higher monthly close.



At this point, the low for the week set on Wednesday at $2,494.93 remains intact. This keeps more important support at $2,474.31/16 (22-Aug low, and 20-day SMA) at bay.

A rebound back above $2500 early next week would bode well for another run at $2,527.97/$2,529.57. Penetration of the latter would establish new record highs and boost confidence in my previously established upside objectives at $2,539.77 (Fibonacci) and  $2,597.15/$2,600.00 (measuring objective). 

Thin holiday trading is likely to be seen on Monday with U.S. markets closed in observance of Labor Day. Our Tornado precious metals hedging platform will close early at 12:30 CDT on Monday, September 2.

A study by Wisdom Tree found that a gold allocation of 16–19% in a portfolio maximizes risk-adjusted returns. A special report by Incrementum was released today that identifies the ideal allocation to gold as 14–18%. 

 "A 40% gold allocation might offer the highest returns, but it also comes with significantly higher volatility and drawdowns." according to the report.

In a post on X today, Incrementum notes that gold's total estimated market capitalization is approaching %18 trillion.

Perhaps surprisingly, many investors have little or no allocation to gold at all. Do you have enough gold?

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.010 (-0.03%)
5-Day Change: -$1.082 (-3.63%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +20.43

Silver tumbled to a new low for the week in U.S. trading on Friday. The white metal is poised to notch its first lower weekly close in three (outside week), and a third consecutive lower monthly close (confirmed on a close below $28.998).

 

Perhaps there's a growing realization that while consumer electronics, solar panels, and EVs all require significant loads of silver, at least American consumers are losing confidence and are already saddled with a massive amount of debt. Who's going to buy these silver-laden products?

The violations of supports at $29.176/159 (50- and 100-day SMAs) and $28.830 (22-Aug low) leave the 20-day moving average at $28.556 vulnerable to a test. Secondary support is noted at $28.078/$28.000.

A climb back above the 50- and 100-day moving averages would take the short-term pressure off the downside, but silver continues to disappoint. The failure to sustain gains above $30 this week leaves the highs for the year above $32 well protected for the time being.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

8/29/2024

Gold and silver recover somewhat, await Friday's PCE data

OUTSIDE MARKET DEVELOPMENTS: U.S. Q2 GDP was revised up to 3.0% in the second report. That's above expectations of 2.8%, versus a preliminary print of 2.8%. The gains are largely attributed to sizable upside adjustments to personal consumption.

The GDP Chain Price Index was revised up to 2.5%, on expectations of 2.3%, versus 2.3% in the first report. Core prices were revised down to 2.8% from 2.9%.

Initial jobless claims dipped 2k to 231k in the week ended 24-Aug, below expectations of 235k, versus a revised 233k in the previous week. Continuing claims rose 13k to 1,868k, just off the 32-month from late July at 1,871k.

The U.S, Advanced Goods Trade deficit widened to -$102.7 bln in July, outside expectations of -$97.0 bln, versus a revised -$96.6 bln in June. Exports were unchanged at $172.9 bln, while imports rose 2.3% to $275.6 bln.

The NAR Pending Home Sales Index tumbled 5.5% to a record low 70.2 in July, below expectations of 75.5, versus 79. in June. "A sales recovery did not occur in midsummer. The positive impact of job growth and higher inventory could not overcome affordability challenges and some degree of wait-and-see related to the upcoming U.S. presidential election," said NAR Chief Economist Lawrence Yun.

The U.S. economy continues to display resilience in terms of growth, but inflation was sticky above target in Q2. Hints of weakness in the labor market persist and housing affordability remains a challenge.

Yields and the dollar have firmed in reaction. While the Fed is still likely to start easing in September, bets for a 50 bps rate cut have been pared somewhat.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$1.29 (-0.05%)
5-Day Change: +$28.84 (+1.16%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +31.47

Gold is trading higher on the day, despite follow-through gains in the dollar. Price action remains confined to yesterday's range, but Wednesday's reversal day may keep sellers at least somewhat interested ahead of tomorrow's inflation data.



A higher close today will diminish the significance of that chart pattern although the bulls are unlikely to jump back in until the PCE report is behind us. The market is expecting a scant 0.1% increase in PCE inflation. A print at or below expectations would re-embolden the bull camp.

A hotter-than-expected reading from the Fed's preferred measure of inflation would decrease 50 bps rate cut expectations. Further retracement of recent dollar losses would be expected, weighing on gold.

An FT article suggests that the uptrend in gold has "staying power," noting 22% gains already this year and the outperformance of the S&P 500.  Investors traditionally rotate into gold when interest rates fall. With other major central banks already easing and the Fed on the verge of joining them, "Rich individuals and financial investors have been filling their vaults," according to the FT.

At this point, important short-term support levels remain protected. Yesterday's low at $2,494.93 now provides a barrier ahead of Friday's low at $2,484.53. More substantial support is noted at $2,474.31 (22-Aug low) and corresponds closely with the rising 20-day moving average at $2,471.21 today.

On the upside, yesterday's high at $2,527.97 reinforced the record high from last week at $2,529.57. Nonetheless, the dominant trend remains bullish with targets at $2,539.77 (Fibonacci) and  $2,597.15/$2,600.00 (measuring objective) still valid.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.441 (+1.51%)
5-Day Change: +$0.397 (+1.37%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +24.16

Silver has rebounded from yesterday's weak close and is consolidating within the confines of Wednesday's range. Just over 50% of yesterday's losses have been retraced.



While the white metal probed back below the 50- and 100-day moving averages, the bears were unable to take the market lower, leaving last week's low at $28.830 well protected. Like gold, silver seems to be ignoring the headwind of a stronger dollar today.

Better-than-expected Q2 growth seems to be providing some lift for the white metal intraday. While concerns about the Chinese economy persist, the demand for silver should continue to expand as the world electrifies.

The market is increasingly excited about Samsung's new solid-state silver batteries as an alternative to traditional lithium-ion batteries. The new technology employs a silver-carbon composite layer for the anode. Reportedly, when used in EVs they will increase range, and slash charging times. On top of that, they're lighter and less costly.

That sounds like a win all the way around. However, for a market already in deficit, sourcing adequate supplies of silver could be an issue if the technology is widely adopted. That would lead to higher prices.

A breach of Monday's 6-week high at $30.164 is needed to keep the white metal on track for a challenge of the May high at $32.370. Intervening resistances are noted at $31.126 (78.6% retracement of the May/Aug decline) and $31.652 (11-Jul high).


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

8/28/2024

Gold and silver correct, weighed by a firmer dollar

OUTSIDE MARKET DEVELOPMENTS: Risk appetite has waned somewhat as markets seek more data to clarify central bank policy intentions. While a Fed rate cut in September is now a foregone conclusion in the eyes of many, the debate on how big that first cut will be is underway.

The Fed's favored measure of inflation comes out on Friday. The PCE Chain Price Index is expected to show a scant 0.1% rise, which would reinforce Fed Chairman Powell's contention that "upside risks to inflation have diminished."

The dollar index has rebounded from yesterday's 13-month low. This action was likely associated with profit-taking ahead of formidable support at 99.58 (last year's low) and the upcoming long holiday weekend.

However, with the market still pricing in 100 bps of cuts by the end of the year, further losses in the dollar are considered likely. Fed funds futures are projecting more than 200 bps of easing through the end of next year. 

While the Fed is about to embark on an easing path, the BoJ will likely tighten again before year-end. Jaideep Tiwari, global head of FX strategy at Citi Wealth, told CNBC earlier this week that the dollar could reach the mid-130s against the yen next year. The USD-JPY rate is currently trading at 144.50.

Tiwari believes most of the speculative money has already been shaken out of the yen carry trade. However, impending changes in interest rate differentials could lead to further market volatility like we experienced early in the month.

I've written this year about the developing demographic issue facing China and the possible implications for the global economy. Surging school closures in China highlight how dire the situation has become.

According to NikkeiAsia, the number of children enrolled in preschool fell by 5 million last year to 40.92 million, the lowest figure in a decade. More than 20,000 schools have been shuttered in the past two years due to declining enrollment.

China's population fell by more than two million in 2023 to 1.409 bln. UN projections see China's population nearly halving by 2100. 

As the population ages in the years ahead, the workforce will continue to shrink. Meanwhile, the retirement-aged population is expected to swell to more than 400 million – bigger than the population of the entire U.S. – over the next 20 years.

Fewer employees and employers will be supporting all those retirees, straining the pension system and stoking a fiscal crisis. "The fiscal strain as a result of ageing is immediate and concerning," warned Economist Intelligence.

China is not alone. Demographic challenges are also manifesting in Japan, South Korea, and parts of Europe. Birth rates in Canada and the U.S. are also well below the replacement rate at 1.43 and 1.66 respectively.

According to the Institute for Health Metrics and Evaluations, "over half of all countries and territories (110 of 204) [are] below the population replacement level of 2.1 births per female as of 2021."

It's a disturbing global trend with far-reaching economic implications, perhaps especially for countries saddled with soaring debt burdens. Are the open border policies that have emerged in recent years in much of the West related to the burgeoning demographic issues?


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$18.75 (-0.74%)
5-Day Change: -$13.03 (-0.52%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +30.42

Gold eked out a new high for the week in early-Asian trading at $2,527.97, but could not take out last week's record high at $2,529.57. The yellow metal retreated in subsequent trading weighed by a stronger dollar and perhaps some position squaring ahead of the long holiday weekend.



From a technical perspective, the outside day and a likely lower close are at least short-term troubling. Tests below $2500 leave Friday's low at $2,484.53 vulnerable to a test. More substantial support is noted at $2,474.31 (22-Aug low) and corresponds closely with the rising 20-day moving average at $2,467.42 today.

A close above $2,506.22 would somewhat diminish the significance of the bearish reversal day. However, at this point, new record highs are probably off the table at least until July PCE data come out on Friday.

With gains in the dollar seen as corrective, losses in gold are seem as corrective as well. Further challenges of the upside are expected, with $2,539.77 and  $2,597.15/$2,600.00 still seen as valid objectives.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.477 (-1.59%)
5-Day Change: -$0.328 (-1.11%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +23.50

Silver tumbled to new lows for the week after repeatedly failing to sustain tests above $30. The white metal is off more than 3% from Monday's 6-week high at $30.164.



Silver is challenging the 50- and 100-day moving averages at $29.217/141, which protect more important chart supports at $28.950 (23-Aug low), 28.830 (22-Aug low), and 28.781 (19-Aug low). If the latter gives way, focus will shift to the 20-day moving average at $28.498.

A rise above the halfway back point of today's range at $29.611 would ease short-term pressure on the downside. However, the market seems to be waiting for some new catalyst to either push it toward the highs for the year above $32 or send it back into the range below $28.

A weak inflation reading in the PCE data on Friday would increase bets for a 50 bps Fed rate cut in September, putting the dollar back on the defensive and providing a renewed lift for the precious metals.  A more neutral inflation print would have the market looking further down the road to the following Friday and August jobs data. 

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

8/27/2024

Gold and silver consolidate recent gains

OUTSIDE MARKET DEVELOPMENTS: With everyone seemingly in agreement that the Fed will begin easing in September, market focus is now on the size of that first cut. This morning, the probability of a larger 50 bps cut stands at 29.5%.

Fed funds futures continue to predict 100 bps of easing by year-end. With only three FOMC meetings remaining this year, at least one upsized cut would be required to meet that expectation.

Given the Fed's cautiousness in the lead-up to this first move, I think they'll start with a 25-bps cut. They claim to be data-dependent, and August jobs data will be a determining factor, but are they looking at asset prices?

The Dow Jones Industrial Average closed at a record high on Monday. This morning, the S&P/Case-Shiller Home Price Index for June printed at an all-time high.

Lower rates will drive asset prices even higher. However, ever-higher housing prices threaten to undermine the Fed's efforts to get inflation back to its 2% target.

News that Libya would take its oil production offline amid a dispute between rival governments initially sent oil prices higher. Libya produces 1.2 million barrels of oil per day, most of which is exported to Europe.

Given the revenue generated by oil – regardless of which government is in charge – I don't imagine the supply disruption will last very long. Nonetheless, the situation has the potential to drive up energy prices ahead of upcoming central bank policy decisions.

U.S. Consumer Confidence rose to a 6-month high of 103.3 in August, above expectations of 100.5, versus an upward revised 101.9 in July (was 100.3). The year-ahead inflation index fell to a 4-year low. However, it wasn't all rosy: The job strength diffusion index fell to a 41-month low, a level not seen since the pandemic.

The Richmond Fed Manufacturing Index slid to a 4-year low of -19 in August, below expectations, versus -17 in July. The employment component fell 10 points to -15, the weakest print since May 2020.

Today's data indicate some downside risk for August payrolls.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$9.11 (-0.36%)
5-Day Change: -$1.45 (-0.06%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +31.42

Gold continues to consolidate recent gains and is trading just off the all-time high set last week at $2,529.57. Corrective activity since that record was set has been minimal, favoring further tests of the upside.



The technical outlook remains unchanged. The next upside target is $2,539.77 (Fibonacci) with $2,529.57 marking the intervening barrier. Beyond the former, a measuring objective at $2,597.15/$2,600.00 attracts.

The dollar remains defensive, which is also helping gold. The dollar index hit a 13-month low on Monday and scope is now seen for a test of the 99.58 low from July 2023.

Net gold ETF inflows were 8 tonnes last week, most of which was attributable to North American buyers. European investors bought 4.4 tonnes, while Asia accounted for 3.7 tonnes of outflows. ETF flows remain broadly supportive.

Initial support is marked by the overseas low at $2,506.22. Friday's low at $2,484.53 protects more substantial support at $2,474.31 (22-Aug low) and the rising 20-day moving average that comes in at $2,464.24 today.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.011 (-0.04%)
5-Day Change: +$0.540 (+1.83%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +27.67

Silver continues to probe above $30, but price action remains confined to yesterday's range thus far. A breach of yesterday's 6-week high of $30.164 would confirm the breach of the $30.142 Fibonacci level, clearing the way for additional retracement to $30.584 (18-Jul high).



A more convincing breach of $30.142 would also highlight the next Fibonacci level which comes in at $31.126 (78.6% retracement of the May/Aug decline). Further out, the May highs above $32 are looking increasingly attractive.

India's demand for silver is on pace to nearly double this year, driven largely by demand for solar panels and consumer electronics. H1 imports have already exceeded the 3,625 tonnes of total imports in 2023. The CEO of a leading Indian silver importer told Reuters he believes imports could be as high as 7,000 tonnes this year.

This would offset concerns about demand destruction associated with the faltering Chinese economy. The IMF is forecasting 5% growth in China this year, and 7% growth in India.

India slashed import duties on gold and silver to 6% from 15% previously. That's a pretty substantial effective price drop, which is further stoking demand.

In terms of support. the overseas low at $29.821 now protects Monday's low at $29.665. More substantial support is marked by last week's lows at $28.950/$28.781. The 50- and 100-day moving averages provide intervening barriers at $29.227 and $29.127 respectively.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

8/26/2024

Gold just below record territory as silver trades above $30

OUTSIDE MARKET DEVELOPMENTS: “The time has come for policy to adjust,” was Fed Chairman Powell's unequivocally dovish message from Jackson Hole on Friday. The Fed's focus is turning from the two-year fight against inflation to supporting the labor market.

While Powell didn't specifically mention the September FOMC meeting for that first policy adjustment, his keynote, the minutes from the July meeting, and recent FedSpeak from other policymakers all send a pretty clear signal. The market has been fully pricing in a September rate cut for some time now and it's just a matter of whether it will be 25 bps or 50 bps.

I believe it will be the former unless August employment data are significantly weaker than expected. Median expectations for nonfarm payrolls are +150k. That report comes out on Friday, 06-Sep.

There's still plenty for the market to hash out in terms of the longer-term policy outlook after Powell through in the 'data-dependence qualifier'. "The timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks,” said Powell.

Except for the BoJ, major central banks are either currently on easing paths or about to embark on one. This should keep pressure on yields and currencies, most notably the dollar. However, once that first Fed rate cut is behind us, the market should be more focused on interest rate differentials.

The dollar index fell to a new 13-month low in earlier trading today. This leaves the 99.58 low from July 2023 vulnerable to a test. Below that, Fibonacci support at 98.97 (61.8% retracement of the rally from 89.20 to 114.78).

Israeli forces struck Hezbollah positions in southern Lebanon over the weekend in an effort to thwart anticipated missile and drone strikes on Israel. Hezbollah claims they were still able to launch hundreds of missiles and drones resulting in the death of one IDF soldier.

The risk of a wider conflict in the Middle East persists amid retaliation after retaliation. Last week's optimism about a potential cease-fire between Israel and Hamas has fizzled.

U.S. durable orders rebounded 9.9% in July, well above market expectations of +4.5%, versus a negative revised -6.9% in June. The strength was in the transportation sector, which saw a 34.8% bounce, mostly associated with aircraft. Orders ex-transportation fell 0.2%.

The Dallas Fed Index rose 7.8 points in August to reach a 19-month high of -9.7, versus -17.5 in July. Nonetheless, the index has been signaling contraction for 27 months.

Today's data lend a little credence to the soft landing scenario. We should see 50 bps rate cut bets pared today. 

GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$13.06 (+0.52%)
5-Day Change: +$21.63 (+0.86%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +32.37

Gold moved back within striking distance of last week's record high at $2,529.57, buoyed by Fed rate cut expectations and the resulting weakness in yields and the dollar. The yellow metal is also getting a boost from heightened Middle East tensions. Price action has been narrowly confined so far today due to the Summer Bank Holiday in the UK.

 

While gold retreated following a solid U.S. durable goods print, downticks within the range are likely to be viewed as buying opportunities. An eventual move to new all-time highs would clear the way for a challenge of the previously established $2,539.77 Fibonacci objective and will lend additional credence to the secondary objective at $2,597.15/$2,600.00.

The COT report for last week showed that net speculative long positions increased by 24k contracts to 291.3k contracts. That's a more than 4 year high.

Initial support is marked by the overseas low at $2,509.25. Friday's low at $2,484.53 protects more substantial support at $2,474.31 (22-Aug low) and the rising 20-day moving average that comes in at $2,458.85 today.

Here are a couple of fun facts to start your week:

According to the World Gold Council, a 400-ounce good delivery gold bar now costs more than $1,000,000!

Guess what you could have bought a 400-ounce gold bar for in 1971?

It would have been $14,000 before 15-Aug and $17,440 after Nixon closed the gold window.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.296 (+0.99%)
5-Day Change: +$0.677 (+2.30%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +28.52

Silver has traded with a 30-handle for the first time in more than a month. While upticks above $30 have been tentative thus far, the breach of the $30.142 retracement level (61.8% of the decline from $32.379 to $26.524) should embolden the bull camp.



The next levels I'm watching on the upside at $30.584 (18-Jul high), and $31.126 (78.6% retracement of this year's correction). Further out, potential is back to the high for the year at $32.379.

With the Fed poised to support the economy with easier monetary policy, we could see some mitigation of growth risks that would underpin the white metal. Heraeus thinks industrial demand looks "relatively strong" according to their weekly report, driven by ongoing growth in the solar energy sector.

Net speculative long positions rose 4k contracts to 49.3k contracts according to last week's COT report. It was the first increase in six weeks.

CFTC Silver speculative net positions

The overseas low at $29.665 marks initial support. The 50-day moving average at $29.221 and the 100-day at $29.110 now look to be well protected. More substantial short-term support is defined by last week's lows at $28.950/$28.781.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

8/23/2024

Gold and silver firm ahead of Powell's speech

OUTSIDE MARKET DEVELOPMENTS: Market focus today will be on Fed Chairman Jerome Powell's keynote speech in Jackson Hole. Recent FedSpeak and the minutes from the July FOMC meeting have laid the groundwork for a September rate cut as long as the incoming data cooperate.

I think Powell will stick to that messaging. I am interested to hear his thoughts on the labor market in the wake of this week's big negative revision to payrolls for a period when the Fed was still tightening.

The market believes the probability of an ease in September is 100%. The chances for a larger 50 bps cut continue to fluctuate but have mostly settled into the 25% zone.

Powell is scheduled to take the podium at 10:00 EDT. We'll also hear from BoE Governor Bailey at 11:00 EDT, and ECB Executive Board Member Philip Lane at 12:25 EDT.

The BoE and ECB have already started down the easing path. Both are expected to cut rates further before the end of the year, and September is on the table in each case.

The BoJ on the other hand has begun raising rates. Bank of Japan Governor Kazuo Ueda hinted today that further tightening is likely. "Japan's short-term rates are very low. If the economy is in good shape, they will move up to levels deemed neutral," Ueda told Parliament.

The expansion of interest rate differentials stemming from rising yen rates and declining rates elsewhere threatens to precipitate further unwinding of yen carry trades, leading to additional market volatility. "Markets at home and abroad remain unstable, so we will be highly vigilant to market developments for the time being," Ueda said. 

U.S. new home sales rose 10.6% to a 14-month high of 739k in July, above expectations of 625k, versus an upward revised 668k in June (was 617k). The median price rose 3.1% to $429,800, still well above the pre-pandemic high of $343,400. 

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$14.50 (+0.58%)
5-Day Change: -$5.48 (-0.22%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +32.31

Gold has been choppy since setting a new record high at $2,529.57 on Tuesday, but the dominant uptrend remains highlighted. Setbacks into the range are considered corrective and should continue to attract buying interest. A close above $2,507.65 is needed to register a second consecutive higher weekly close.



Dovish central bank bets – with Japan as the notable exception – and ongoing haven flows remain broadly supportive of the yellow metal. The market is eager for Fed Chairman Powell to tip in a September rate cut in his speech today.

In an FT article earlier this week, John Reade, chief market strategist at the World Gold Council noted that Western investors and speculators are returning to the gold market. More than 90 tonnes in holdings have been added to gold-backed ETFs since May alone.

The same article notes that demand in India has surged in recent weeks, stoked by seasonal festival buying and a substantial cut in import duties. “India is seeing huge amounts of physical demand for gold,” said Ruth Crowell, chief executive of the LBMA.

With gold probing back above $2,500 ahead of Powell's speech, scope is seen for a short-term retest of Tuesday's high. A move to new record highs would put the yellow metal back on track for a challenge of the $2,539.77 Fibonacci objective. Beyond that, potential is seen to $2,597.15/$2,600.00 based on a measuring objective.

On the downside, the overseas low at $2,484.53 protects more important support marked by yesterday's low at $2,474.31. Secondary support remains defined by Friday's low at $2.451.50, which now corresponds with the 20-day moving average.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.451 (+1.56%)
5-Day Change: +$0.467 (+1.61%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +24.77

Silver is trading higher, but remains within the confines of yesterday's range. Despite the inability of the white metal to regain $30 this week, and yesterday's setback, I remain cautiously bullish.



A close above $29.015 today would confirm a second consecutive higher weekly close. The white metal would also register its first close above the 20-week moving average in five weeks with a close above $29.079. These events would further embolden the bull camp.

I've been impressed by the bullish moment since silver formed a key reversal on 08-Aug. Silver has rallied $3.353 (+12.64%) since the low on that day. More than half of the retreat off the May high at $32.379 has been retraced.

While considerable credence has been returned to the longer-term uptrend, I'd still like to see a breach of $30.00/14 to clear the way for a move back to the $32 zone. The $30.14 level marks 61.8% retracement of the decline from $32.379 to the cycle low at $26.424.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

8/22/2024

Gold and silver corrected as 50 bps rate cut bets ebb

OUTSIDE MARKET DEVELOPMENTS: Minutes from the last ECB meeting revealed acceptance of the need to review the policy stance in September with an "open mind." While the 'data dependency' qualifier remains, recent signs of growth risks have the market leaning toward another rate cut in September. The ECB cut rates for the first time in nearly five years in June.

On Wednesday, ECB Governor and Banca d'Italia President Fabio Panetta hinted that another rate cut was in the offing. "It is reasonable to think that we are going toward a phase of loosening of monetary policy," said Panetta.

Earlier in the week, Olli Rehn, ECB Governor and Bank of Finland President was a little more forthright. "The recent increase in negative growth risks in the euro area has reinforced the case for a rate cut at the next ECB monetary policy meeting in September, provided that disinflation is indeed on track," said Rehn.

Minutes from the Fed's July FOMC meeting revealed "several" members could have supported a rate cut at that meeting based on slowing inflation and the rise in the unemployment rate. While that didn't happen, expectations for a September rate cut have been reinforced.

"The vast majority observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting." – FOMC minutes

A rate cut has been fully priced in by the market for some time, but the absence of anything overly dovish in the minutes saw prospects for a 50 bps cut wane to 28.5%. I don't think Powell's speech in Jackson Hole tomorrow will offer anything new.

ZeroHedge asks that we speculate on what will happen to record-high asset prices once the Fed starts easing. It'll be great fun for the owners of such assets...at least initially, but it has the potential to end badly. 

This is all quite fascinating in light of the tax policies being bandied about at the DNC. The Harris campaign has endorsed the tax policies espoused within the Biden-Harris administration's fiscal year 2025 budget proposal.

“Together, the proposals would increase the top marginal rate on long-term capital gains and qualified dividends to 44.6 percent,“ according to the budget. It also includes a proposal for a 25% tax on unrealized capital gains for individuals with income and assets exceeding $100 million.

Such changes to the tax code would require the consent of both houses of Congress. Arguably the buffer is the GOP's razor-thin majority in the House.

It's also worth noting in the wake of yesterday's revelation that payrolls were likely overstated by 818,000 for the 12 months ending March 2024, the Fed was still raising rates during that period to the tune of 50 bps. The FOMC hiked by 25 bps in May 2023 and another 25 bps in July 2023.

Would weaker jobs data at the time have altered those decisions? That's hard to say, but the BLS payrolls guidance certainly reinforces the notion that the Fed is behind the curve. When half of your mandate is "maximum employment," it's really helpful to have good data.

Initial jobless claims for the week ended 17-Aug rose 4k to 232k, below expectations of 235k, versus a revised 228k the previous week. Continuing claims rose 4k to 1,863k, just below the 32-month high of 1,871k at the end of July.

U.S. S&P Flash Global Manufacturing PMI fell 1.6 points to 48.0 in August, the weakest print since December. Services PMI rose 0.2 points to 55.2, versus 55.0 in July.

The Chicago Fed National Activity Index fell to -0.34 in July, versus a revised -0.09 in June (was 0.05).

U.S. existing home sales rose 1.3% in July to 3.950M, above expectations of 3.910M, versus an upward revised 3.900M in June. Sales remain weak amid limited supply as owners are reluctant to leave their existing homes in the current high mortgage rate environment. Persistently tight supply leaves affordability near historic lows.


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$6.65 (-0.26%)
5-Day Change: +$45.45 (+1.85%)
YTD Range: $1,986.16 - $2,527.10
52-Week Range: $1,812.39 - $2,527.10
Weighted Alpha: +32.29

Gold has fallen back below the $2,500 level, as diminished prospects for a 50 bps rate hike bolster yields and the dollar. However, downticks are seen as corrective within the well-established uptrend.


The move to new lows on the week leaves Friday's low at $2.451.50 vulnerable to a challenge. The 20-day moving average comes in at $2,445.74 today, lending import to this support zone.

Chinese gold imports fell 24% in July to 44.6 tonnes. Economic weakness and record-high prices conspired to drive imports to the lowest level since May of 2022. However, as I wrote about yesterday, the PBoC providing higher import quotas to commercial banks may indicate expectations for higher demand.

A short-term move back above $2,500, particularly on a close basis, would bode well for further attacks on the upside. A breach of Tuesday's record high at $2,529.57 would keep the yellow metal on track for tests of previously established objectives at $2,539.77 and $2,597.15/$2,600.00.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.003 (-0.01%)
5-Day Change: +$1.144 (+4.03%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +25.06

Silver breached initial support marked by Tuesday's low and the 50-day moving average at $29.240/209. The white metal ticked briefly below the 100-day moving average and the $29 level before rebounding into the range.



The inability of silver to reclaim the 30-handle so far this week and today's retreat leaves the medium-term tone neutral. However, I still think the corrective low is in place at $26.524 (08-Aug low).

That could certainly change if incoming U.S. and/or Chinese data signals heightened growth risks. In that case, industrial demand destruction worries could overwhelm safe-haven interest and put silver back on the defensive.

I continue to watch resistance at $30.00/14, penetration of which would return focus to the highs for the year at $32.254/379. Tuesday's 5-week high at $29.877 provides a good intervening upside barrier.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

8/21/2024

Gold consolidates recent gains, while silver plays catch-up

OUTSIDE MARKET DEVELOPMENTS: The dollar index slid to a 7-month low in overseas trading. The greenback fell to its lowest level since January against the euro and a 13-month low versus Sterling.

Meanwhile, the yen is showing signs of renewed strength after BoJ research highlighted persistent inflationary pressures. This suggests another rate hike remains on the table, which could prompt additional yen carry trade unwinding, putting the recent risk-on tone in jeopardy.

Economist Art Laffer recently warned that the dollar is becoming "an unhinged paper currency," noting flight to alternatives such as gold and bitcoin. "We're in a new period of collapse of the U.S. dollar, and it's quite frightening," said Laffer.

The U.S. must rebuild trust in its currency or the global de-dollarization trend will continue. Unsound money leads to high interest rates, high inflation, and ever-more government debt, which all weigh on growth prospects.

MBA data showed mortgage applications fell 10.1% last week, even as the 30-year mortgage rate fell to a 15-month low of 6.50%. Purchases were off 5.2%, while refinances declined by 15.2%. With lending still well below the January highs, home sales still face considerable headwinds from high mortgage rates.

BLS payrolls guidance suggested a likely annual revision of -818k jobs for the 12 months ending in March. That's the largest downward revision since the period that included the global financial crisis (-824k), indicating the U.S. economy may be weaker than many believe. 

While a Fed rate cut is fully priced in for September, expectations as to whether it will be 25 bps or 50 bps continue to fluctuate. The probability of a 50 bps cut has edged up recently amid signs of slowing growth.

The market will be looking for clues in the FOMC minutes from the July meeting, which will be released this afternoon. Traders will also look to glean insight into the Fed's policy intentions from the KC Fed's Jackson Hole Symposium, particularly Chairman Powell's speech on Friday.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -4.82 (-0.19%)
5-Day Change: +$64.53 (+2.64%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +33.08

Gold has turned mildly corrective in the wake of Tuesday's move to new record highs. However, the trend remains decisively bullish and dips are likely to be viewed as buying opportunities.



The breach of support at $2,500.00/$2,498.32 leaves Monday's low at $2,488.19 vulnerable to a test. The latter protects more important support marked by Friday's low at $2.451.50, which should correspond closely with the 20-day moving average early next week.

Short-term upside potential remains to the $2,539.77 Fibonacci objective, with Tuesday's all-time high at $2,529.57 now providing an intervening barrier. Further out, $2,597.15/$2,600.00 attracts based on a measuring objective.

The PBoC reportedly gave several commercial banks new import quotas this month after a 2-month pause. This suggests that the central bank is anticipating increased demand from the world's largest consumer of gold, despite record high prices. Gold set a new record high against the yuan on Tuesday at ¥18,089.60, and is up nearly 25% YTD.

The PBoC hasn't made any official purchases of gold for the past three months, through July. However, it is widely believed that China's appetite for gold remains robust as it diversifies its reserves away from dollars.

Revived buying interest from Chinese investors, and the official sector could be the catalyst that drives gold to $3,000. More and more analysts seem to be subscribing to the $3,000 objective in recent weeks.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.155 (+0.53%)
5-Day Change: +$2.081 (+7.55%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +25.88

Silver is consolidating within yesterday's range after setting a 5-week high on Tuesday just shy of the important $30 level. The longer-term uptrend in silver regained some credence with gold's move to new all-time highs.



While global growth risks remain a headwind for industrial demand, silver typically garners some safe-haven spillover interest as a much less expensive alternative to gold. The gold/silver ratio recently reached a 4-month high of 90.048 before retreating to a 3-week low of 84.461 on Tuesday.

I see potential in the ratio back to the 80 zone initially as silver continues to play catch-up. That should equate with a silver price approaching $32. A breach of Fibonacci resistance at $30.14 would bolster confidence in this scenario.

Yesterday's low at $29.24 corresponds closely with the 50-day moving average and marks the first tier of support. More substantial support is at $29.04 (100-day SMA) down to Monday's low at $28.781.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

8/20/2024

Silver buoyed by fresh record highs in gold

OUTSIDE MARKET DEVELOPMENTS: The dollar has fallen to new 7-month lows on high expectations that the Fed will begin easing at next month's FOMC meeting. This week's market focus is on tomorrow's release of the minutes from the July FOMC meeting and the KC Fed's Jackson Hole Symposium.

At least a 25 bps rate cut is fully priced in for September, but investors are still seeking clarity on the central bank's policy intentions for the remainder of the year. They're hopeful that the minutes and/or Chairman Powell's speech at Jackson Hole on Friday will provide that clarity.

FedSpeak from Bistic and Barr is on tap for today.

As ceasefire talks continue in the Middle East, the bodies of six Israeli hostages were recovered in Gaza. U.S. Secretary of State Antony Blinken said earlier in the week that Israel had agreed to a ceasefire for hostages deal. Hamas has not signed on yet and it's not clear at this point if the deaths of the six hostages have changed the mood of the Israelis.

The Democratic National Convention is underway in Chicago, with President Biden taking a victory lap and passing the reigns to Kamala Harris. Harris's recent policy proposal to curtail inflation with price controls didn't go over so well, leaving many to wonder if she'll back away from that position when she speaks before the party faithful on Thursday evening.

The Philly Fed Nonmanufacturing Survey suggests the services sector remains weak. The current regional activity index fell 6 points to -25.1, the lowest reading since December 2020.


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +18.40 (+0.73%)
5-Day Change: +$61.70 (+2.50%)
YTD Range: $1,986.16 - $2,527.10
52-Week Range: $1,812.39 - $2,527.10
Weighted Alpha: +34.15

Gold extended to the upside in early U.S. trading to establish a new record high at $2,529.57 before retreating into the range. The yellow metal is getting a boost from lower rates, a weaker dollar, and burgeoning speculative interest.



Gold ETFs saw solid net inflows of 8.5 tonnes last week, 7.4 tonnes of which were attributed to North American investors. European investors added 1.1 tonnes, while Asian investors accounted for 1.6 tonnes of outflows.

The COT report showed that net speculative long positions rebounded 28.6k to 267.3k contracts last week. Most of the declines from the previous two weeks have been retraced and I suspect long positions will continue to build this week. 

CFTC Gold speculative net positions

The World Gold Council expects India's "pro-gold policy measures" to bolster demand by 50 tonnes or more in H2. The slashing of import duties effectively resulted in a 6% reduction in the price of gold, making for an attractive buying opportunity. The WGC also sees the RBI continuing with its gold-buying campaign.

Upside potential in gold based on Fibonacci and measuring objectives remain highlighted at $2,539.77 and  $2,597.15/$2,600.00. 

Initial support is noted at $2,500.00/$2,498.32. This level protects Monday's low at $2,488.19.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.309 (+1.05%)
5-Day Change: +$1.904 (+6.84%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +26.52

Silver has garnered some buoyancy from the latest round of new all-time highs in gold, reaching a 5-week high of $29.877 in early U.S. trading. However, upticks faltered ahead of $30 and the white metal retreated to trade lower on the day.



Nonetheless, price action this week has improved the technical picture significantly.  Notably, silver has now retraced more than half of the nearly $6 decline since the May high at $32.379, and is back above the 20-, 50-, and 100-day moving averages.

I'd still like to see a convincing move above $30.00/$30.14 to return additional credence to the underlying uptrend. Any signs of heightened growth risks – such as today's Philly Fed survey – are likely to weigh on industrial metals such as silver.

While scope for further retreats into the range should not be ruled out, the new record highs in gold have me fairly confident the low is in for silver. I'll be more confident with a trade above $30.14.

Today's low at $29.24 corresponds closely with the 50-day moving average, marking initial support. Secondary support is at $29.02 (100-day SMA) down to yesterday's low at $28.781.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

8/14/2024

Gold and silver retreat as prospects for a 50 bps rate cut ebb

OUTSIDE MARKET DEVELOPMENTS: Hamas has said that it will not participate in the latest round of cease-fire talks with Israel, even as international pressure intensifies to end the 10-month-old conflict. Nobody seems optimistic that the latest talks will bear fruit.

Meanwhile, worries of a wider regional war persist. The U.S. has pledged to defend Israel and is rushing additional military assets to the region as a signal to Iran and its proxies of that commitment. The U.S. has also approved a new $20 bln weapons sale to Israel.

A Ukrainian military commander proclaimed that his troops now control nearly 400 square miles of Russian territory. Reports say about 200,000 people have been evacuated from the Kursk border region as the Russian military mounts a counterattack.

U.S. CPI rose 0.2% in July, in line with expectations, versus -0.1% in June; 2.9% y/y, down from 3.0% in June. Core CPI rose 0.2% as well on expectations of the same, versus +0.1% in June; 3.2% y/y, versus 3.3% in June.

In conjunction with yesterday's PPI data, the U.S. inflation picture was largely benign in July. The market still expects the Fed to begin easing in September, although prospects for a 50 bps cut have moderated since yesterday. Nonetheless, Fed funds futures continue to suggest scope for 100 bps of cuts by year-end.

Atlanta Fed President Raphael Bostic said yesterday that he wants to see "a little more data" before he'll be ready to support rate cuts. Bostic is an ardent dove, so his apprehension is tantamount to hawkishness. "I am willing to wait, but it's coming ... It is coming," Bostic said. 

The final inflation reads for the week come out tomorrow in the form of import and export price indexes. The market is expecting unch for exports and -0.1% for imports.


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$9.88 (+0.40%)
5-Day Change: +$87.98 (+3.69%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +31.73

Gold failed to set new all-time highs despite modest easing in annualized consumer inflation that likely keeps the Fed on track for a rate cut in September. The yellow metal has retreated into the range as prospects for a larger 50 bps rate cut ebbed, but weakness in the dollar should be a limiting factor on the downside.



Today's setback without reaching new highs bolsters the prospects for further choppy trade within what appears to be a symmetrical triangle pattern. Look for the lows to be higher within the range and perhaps more lower highs as well, before gold ultimately breaks out to the upside.

A breach of the record high at $2,481.33 (17-Jul) is needed to clear the way for an upside extension to  $2,500.00/$2,503.27 initially. Beyond that, the $2,539.77 Fibonacci objective attracts.

On the downside, a minor chart point at $2,440.37/$2,440.00 offers support. If this level gives way, scope is seen for additional retracement to the $2424.62/$2,417.67 zone, where the lows from Monday and Friday correspond with the 20-day moving average.

Wells Fargo notes that Asian gold ETF holdings have increased 56% year-to-date, with the vast majority of that growth attributed to China. Chinese investors are seeking diversification in the tried and true asset amid growing economic uncertainty and an ongoing real estate crisis. Asian interest, despite near-record highs, is a bullish signal for gold.

While the PBoC has reported no purchases of gold for 3-months now, a recent World Gold Counsel survey suggests central banks will continue to be net buyers for the remainder of the year. Central bank interest should continue to be broadly supportive for gold.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.111 (+0.40%)
5-Day Change: +$1.258 (+4.73%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +21.01

Silver started the U.S. session modestly higher, but once again upticks have proven unsustainable. The white metal appears poised for a second consecutive lower close and nearly all of Monday's gains have been retraced.



The three-month downtrend remains highlighted. New lows for the week below $27.255 would constitute more than a 50% retracement of the bounce from last week's cycle low at $26.524. Such a move would shift focus to $27.098 initially, but the cycle low would be considered back in play.

I suggested yesterday that "fresh highs in gold might prevent new cycle lows in silver." That didn't happen today, so the downside in silver remains vulnerable.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

8/13/2024

Gold flirts with record highs, while silver remains defensive 

OUTSIDE MARKET DEVELOPMENTS: The New York Fed Survey of Consumer Expectations indicated that U.S. consumers see spending increasing at a slower 4.9% pace over the next 12 months. That's the smallest increase in spending since April 2021, when inflation was first taking hold.

July retail sales data come out on Thursday, so we'll see if consumers have started pulling back. The market is expecting a 0.4% m/m rise. We will also get earnings reports from some key retailers this week.

As consumers refuse to pay high prices and reduce spending inflation tends to cool. Three-year-ahead inflation expectations tumbled 0.6% to a new series low (since June 2013) of 2.3% in July. 

While it seems extremely likely that the Fed will cut rates in September, at least consumers think inflation will remain above the central bank's 2% target for several more years. If that's the case, while rates may come down, monetary policy will likely remain broadly restrictive for some time to come.

Home Depot's CFO says that consumers continue to have a “deferral mindset” when it comes to buying/selling homes and making home improvements due to high prices, high interest rates, and growing uncertainty about the economy. While Q2 earnings and sales beat expectations, guidance is calling for a decline of 3% to 4% in full-year comparable sales.

U.S. PPI rose 0.1% in July, below expectations of +0.2%, versus +0.2% in June; 2.2% y/y, down from a revised 2.7% in June. Core was unchanged, below expectations of +0.2%, versus a revised +0.3% in June; 2.4% y/y, down from 3.0% in June.

U.S. yields and the dollar slid in reaction as Fed easing expectations once again favor a 50 bps cut at the September FOMC meeting. Focus now turns to tomorrow's CPI release and import/export prices on Thursday.

The NFIB Small Business Optimism Index rose 2.2 points in July to 93.7, the highest reading since February 2022. However, the 50-year average for the index is 98, and June was the 31st consecutive month below that average.

Inflation remains the most significant issue weighing on small business optimism. “Cost pressures, especially labor costs, continue to plague small business operations, impacting their bottom line," said NFIB Chief Economist Bill Dunkelberg.

We'll hear FedSpeak from Atlanta Fed President Bostic this afternoon. Bostic is a fervent dove.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$9.83 (-0.40%)
5-Day Change: +$83.26 (+3.48%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +31.85

Gold breached resistance at $2,474.58 (02-Aug high) in overseas trading, establishing a fresh 4-week high at $2,476.29 before dipping back into the range. The yellow metal appears poised for new all-time highs, with just the $2,481.33 peak from 17-Jul left to beat.



Gold back above the 20-, 50-, and 100-day moving averages and all are tracking higher once again. We just need new highs to confirm the uptrend is back underway after a very reasonable four-week corrective/consolidative phase.

I suspect gold will be tentative ahead of tomorrow's CPI print, but the technical picture is looking pretty good at this point. Even if there is a pullback into the range, I anticipate the lows will be higher and I would look for a continuation pattern to continue developing.

A confirmed upside breakout would target $2,500.00/$2,503.27 initially. Beyond that, $2,539.77 would attract based on a Fibonacci projection.

Initial support is defined by the overseas $2,459.42. There's some minor intraday support from yesterday at $2,440.37/$2,440.00, but the more substantial $2424.62/$2,417.83 zone appears to be well protected at this point.

Not surprisingly, last week's sharp sell-off led to outflows from gold ETFs. North Americans were the biggest sellers. Asian investors took advantage of lower prices and were net buyers.

 
Inflows in July were the largest in more than two years and it was the third consecutive month of net inflows. North Americans and Europeans led the charge. With mounting growth risks in the front of investors' minds, gold is likely to remain attractive portfolio diversification moving forward.

The most recent COT report showed speculative net positions declined further last week to 238.7k contracts, versus 246.6k in the previous week. It was the second consecutive decline from the near two-year high of 273.1k at the end of July.

CFTC Gold speculative net positions

I imagine this week's price action is wooing back at least some of those spec longs. New record highs would attract further buying interest.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.243(-0.87%)
5-Day Change: +$0.671 (+2.49%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +19.57

Silver was unable to sustain yesterday's gains and is currently trading more than 1% lower on the day. The white metal seems to be largely ignoring gains in the gold market.



This suggests that worries about global growth risk and demand destruction in the industrial sector are overwhelming the haven appeal of silver.

So far, today's price action remains confined to Monday's range. However, the fact that silver continues to attract selling interest on upticks leaves more important resistances at $29 and $30 well protected.

With the market still below the important 20-, 50-, and 100-day moving averages, further attacks on the downside can not be ruled out. However, fresh highs in gold might prevent new cycle lows in silver below last week's low at $26.524.

A sharp drop in consumer inflation tomorrow might help the cause as well. That would heighten Fed rate hike expectations and weigh on the dollar.

The COT report for silver showed that net speculative positions held steady at 49.1k last week. I see that as somewhat encouraging given the magnitude of last week's decline.

CFTC Silver speculative net positions

I think the specs are likely to remain cautious, even at these arguably attractive prices. If we see an increase in the net long position this week without making new lows, I'd be a little more confident about suggesting the low is in.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

8/12/2024

Gold and silver trade higher as the market looks ahead to U.S. inflation data

OUTSIDE MARKET DEVELOPMENTS: U.S. Defense Secretary Lloyd Austin pledged "to take every possible step to defend Israel" in a call with Israeli Minister of Defense Yoav Gallant. Amid ongoing fears of an Iranian retaliatory strike on Israel, Austin has ordered the USS Georgia guided missile submarine to the region and the USS Abraham Lincoln carrier strike group to "accelerate its transit" to the Middle East.

Ukrainian President Zelensky confirmed over the weekend that Ukrainian troops are operating inside Russia. The incursion is entering its seventh day and Russian forces are still trying to contain the attack. The U.S. is sending an additional $125M worth of weapons to Ukraine, bringing total military aid to $55.6 bln since the beginning of the war.

The slowing Chinese economy is leading to labor unrest in the country. Nikkei Asia reports that labor strikes in China rose 3% in H1 to 719 incidents, led by the construction and manufacturing sectors. This number is probably low, but the fact that workers are willing to take such risks is a testament to how dire the situation is becoming.

Japanese markets were closed on Monday in observance of the Mountain Day holiday. Further near-term yen and stock market volatility are likely.

Today's U.S. economic calendar is light with just the release of July Treasury Budget on the agenda. The market is anticipating a deficit of $242 bln, versus -$66 bln in June and -$228 bln a year ago. The ever-rising level of U.S. debt is an ongoing concern for investors with significant implications for Treasuries and the dollar.

Focus this week is on U.S. inflation data. July PPI comes out tomorrow with median expectations of +0.2% m/m and a drop to 2.2% y/y. July CPI data will be released on Wednesday. The market is expecting +0.2% m/m with the annualized rate holding steady at 3.0%. 


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$12.49 (+0.51%)
5-Day Change: +$32.37 (+1.34%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +29.64

Gold is trading higher for a third session with more than 78.6% of the early-August sell-off now retraced. The yellow metal is being buoyed by rate-cut expectations and ongoing geopolitical tensions as markets await U.S. inflation data this week.



Hotter-than-expected inflation readings could temper Fed easing expectations and ramp volatility yet again. If inflation comes in as expected or below expectations, the Fed will remain on track for up to a 50 bps rate cut at the September FOMC meeting. Fed funds futures currently put the probability of a 25 bps cut at 52.5% and a 50 bps cut at 47.5%.

The underlying trend for gold remains bullish but be prepared for additional short-term choppy trade. The unwinding of yen carry trades factored into the volatility seen early last week and further unwinding remains a risk.

The BoJ only pledged to stall further tightening "when financial markets are unstable," but the writing is on the wall. The BoJ is on a tightening path and the Fed is on the verge of easing. The BoJ will announce policy on 20-Sep just two days before the next policy statement from the FOMC.

Fresh all-time highs in gold may be difficult before the CPI release. However, the closes last week back above the 20-day moving average, and today's upside follow-through all bode well for the bull camp.

The series of lower highs and higher lows that have emerged since the record high was set at $2,481.33 on 17-Jul is indicative of a symmetrical triangle. This chart formation is typically a continuation pattern within the dominant trend, so an eventual upside breakout is favored.

The 02-Aug high at  $2,474.58 marks initial resistance. A breach of this level would clear the way for a retest of $2,481.33. Beyond that $2,500.00/$2,503.27 would attract.

Initial support is defined by an intraday chart point at $2,440.37/$2,440.00. More substantial support is found at the 2424.62/$2,417.62, where today's overseas low, and Friday's low converge with the 20-day SMA.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.479 (+1.74%)
5-Day Change: +$0.673 (+2.47%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +21.23

Silver is trading higher on the day, probing into the upper half of last week's range. While the white metal is garnering some support from a more bullish gold market, global growth risks continue to weigh.



On top of persistent worries about Chinese and U.S. growth, there are increasing concerns that waning economic confidence and weaker manufacturing orders could tip Germany back into a technical recession in Q3. Japan remains in a tenuous position as well. Worries about the four largest global economies do not bode well for industrial metals, which include silver.

Today's action may be short covering ahead of U.S. inflation data. A move back above $28 could trigger additional position squaring with potential at that point back to the 20-day moving average at $28.483.

However, I'd still like to see trades with a 29-handle to at least suggest the corrective low is in place. Such a move seems unlikely ahead of Wednesday's CPI report unless PPI comes in shockingly low.

Further out, the $30 level must be regained to return confidence to the longer-term uptrend and put the July high at $31.652 and the May high at $32.379 back in play. That seems unlikely without some significant change to global growth prospects, leaving the bears in control.

A more likely scenario is that a consolidative pattern emerges within the broad $32.379/$26.524 rage that developed over the past several months, particularly if haven buying can offset some of the demand-destruction-related selling. 

Initial support is noted at $27.703/681, which protects the overseas low at $27.255. The latter corresponds pretty closely with the halfway back point of the recent bounce.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

8/5/2024

Gold and silver pressured amid global stock rout

OUTSIDE MARKET DEVELOPMENTS: U.S. stocks start the new week under heavy pressure as the rout that began on Friday continues. Asian and European markets were slammed overnight as well.

The VIX volatility index surged above 60, the highest level since the pandemic sell-off in 2020. While the VIX has moderated somewhat, it's still up significantly from last week when it was trading in the teens before firming into the 20s on Friday.



Signs of weakness in U.S. jobs data on Friday triggered recession fears. Markets were already on edge about mounting growth risks in China. The risk that the world's two largest economies could be heading into recessions sparked an exodus from just about every asset class.

Treasuries are a notable exception. Treasuries surged on risk-off buying and expectations that the Fed will now cut more than 25 bps in September. Fed funds futures put the probability of a 50 bps cut at 91.5% and 8.5% for a 75 bps cut. 

The Fed chose to hold steady at the end of the July FOMC meeting just last week. The next FOMC meeting is 44 days away. The last time the Fed did an emergency rate cut was in March 2020 during the COVID crisis.

The other exception is the Japanese yen, which surged to 7-month highs against the dollar today. A lot of U.S. stock purchases were funded by the yen carry trade. Those trades are getting unwound after the yen bottomed in early July on expectations that the BoJ was pivoting to tighter policy. The BoJ did indeed hike rates on 31-Jul to a 15-year high of 0.25%.

US Secretary of State Antony Blinken warned the G7 that an Iranian and Hezbollah attack on Israel is imminent. While Blinken reportedly said the buildup of US forces in the region was for defensive purposes only, worries of a widening conflict are elevated and may provide some underpinning for safe-haven assets.


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$29.61 (-1.21%)
5-Day Change: +$2.89 (+0.12%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +24.87

Gold has retreated more than 4% (high to low) after gains stalled shy of the all-time high at $2,481.63 on Friday on deleveraging associated with the global markets rout. When investors run to the sidelines, even safe-haven assets frequently get sold initially.



However, once the dust settles safe-haven buyers will likely return to the yellow metal. When you consider that the Nikkei was down more than 12% today, one could argue that gold is holding up relatively well. 

At this point, it's a question of where the buyers are likely to come in. The 50-day moving average has contained the downside since early July and comes in at $2,365.73 today. Good chart support marked by the 25-Jul low at $2,354.48 remains protected. The 100-day moving average ($2,340.21 today) should rise to bolster the late-July low by next week.

A close above $2,400 today would be mildly encouraging. While I envision a consolidation pattern developing over the short term, possibly a symmetrical triangle, an Iranian attack on Israel could quickly put the record high back in play. 

CFTC Gold speculative net positions

The COT report for last week showed that net speculative positions fell by 26.5k to 246.6k. I suspect we'll see an additional contraction of the spec position this week unless things really heat up in the Middle East.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$1.316 (-4.61%)
5-Day Change: -$0.839 (-3.01%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +16.45

Silver extended to a 3-month low of $26.571 in early U.S. trading as U.S. recession risks were heaped atop existing concerns about the Chinese economy. Focus remains squarely on the downside on worries about demand destruction.



The white metal has pulled away on the downside from the 20-, 50-, and 100-day moving averages. The 20-day crossed below the 50-day in mid-July, indicating that the dominant trend is down.

The 200-day SMA climbed above the $26 level last week and now corresponds closely with the $26.049 low from 02-May. This level could provide a formidable downside barrier.

The white metal is already 3% off the intraday low, so there is some buying interest down here. Some of it is certainly profit-taking, but I imagine there's some bargain-hunting going on as well. 

CFTC Silver speculative net positions

The COT report shows that the net speculative long position in silver fell 2.3k to 49.1k in the week ended 02-Aug. It was the second consecutive weekly drop.

A climb back above $28 would ease pressure on the downside somewhat, but resistance marked by last week's highs at $29.125/133 must be exceeded to suggest potential back to the $30 zone.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

8/2/2024

Gold and silver collapse after early safe-haven gains

OUTSIDE MARKET DEVELOPMENTS: Iran is reportedly preparing for a direct attack on Israel that could happen as soon as Friday evening. The Jerusalem Post reports that Israelis are bracing for a 1000-rocket, multi-proxy attack.

If Israel does indeed come under attack, there are growing concerns that the U.S. won't be able to restrain the inevitable Israeli response. This raises the risk of an all-out war in the Middle East.

According to The New York Times, Hamas leader Ismail Haniyeh was killed by a bomb smuggled into the Tehran guest house in June. It had been widely reported that an Israeli airstrike killed Haniyeh.

U.S. nonfarm payrolls rose a lean 114k in July, below expectations of +181k, versus a downward revised +179k in June (was +206k). The jobless rate increased to a 33-month high of 4.3%, above expectations of 4.1%, versus 4.1% in June. Hourly earnings came in at +0.2%, on expectations of +0.3%. The average workweek declined to 34.2 hours.

There had been whispers of a better-than-expected payrolls print based on some encouraging labor market data earlier in the week. However, this report was a real disappointment and markets reacted immediately. Treasury yields slid, the dollar fell to 4-month lows, stocks tumbled, and gold neared its all-time high.

Prospects for a 50 bps Fed rate cut in September have surged to 62.5%, from 22% yesterday. Fed funds futures now show an 85.4% probability that the Fed funds rate will be lower by 100 bps or more after the December FOMC meeting.

U.S. factory orders slid 3.3% in June, below expectations of -3.0%, versus -0.5% in May. Transportation orders plunged 20.6%. Inventories were unchanged, after a scant 0.1% rise in May.

With growth risks mounting in the U.S., it's clear that the Fed is behind the curve on easing, just days after their most recent opportunity to cut rates. Hopes that the Fed would be able to orchestrate a soft landing have been dashed. I have been steadfastly less than optimistic that the Fed would be able to make that happen.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$17.85 (+0.73%)
5-Day Change: +$71.47 (+2.99%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +29.24

Gold came within striking distance of its all-time high at $2,481.63 on expectations of an Iranian attack on Israel. The prospects of a wider war in the Middle East have sparked risk aversion, providing a safe-haven bid in the yellow metal.

However, the record high survived the initial challenge and strong selling emerged mid-morning, driving gold lower on the day. This may be associated with deleveraging as risk-off selling on Wall Street intensifies, but it's difficult at this early stage to diagnose selling of this nature.



Kitco News ascribes the plunge to "heavy profit taking" and liquidation by weak longs. They may well be right, but it seems like more than that to me. 

A lower daily close seems all but assured at this point. The yellow metal still appears poised to close higher on the week, which would be the first higher weekly close in three. However, with the market cascading lower, a drop below $2,400 would put Monday's open at $2,389.10 in jeopardy.

Weak jobs data and a slump in factory orders have caused Fed easing expectations to surge. This comes mere days after the Fed announced no change to policy at the end of its July FOMC meeting. Yields are dropping and the dollar index has slumped to 4-month lows. Stocks are getting hammered.

At this point, I continue to believe the dominant trend is up and that losses within the $2,481.63/$2,354.58 range that emerged in the June/July period are corrective. Let's wait for the smoke to clear and hopefully, I'll be able to provide some clarity in Monday's report.  


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.447 (+1.57%)
5-Day Change: +$0.982 (+3.52%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +24.58

Silver was initially garnering some support from a strong gold market today, once again testing above $29. However, when gold collapsed from just in front of its record-high, silver plunged back into the range.



Signs of weakness in the U.S. labor market along with indications this week of weakness in the U.S. manufacturing sector suggest mounting growth risks. This adds to existing concerns about the slumping Chinese economy that have been weighing on silver – and more broadly commodities – for weeks.

Silver is trading just below the midpoint of this week's range ($27.425/$29.133) and appears set for a lower daily close. However, it still seems likely that the white metal will notch its first higher weekly close in four.

Nonetheless, the dominant trend remains negative. High geopolitical risks should provide some underpinning for silver, but new cycle lows below $27.425 can not be ruled out.

On the upside, $29 has gained importance as a resistance level, as has the 100-day moving average on a close basis ($28.662 today). However, I still think trades back above $30 are needed to reinvigorate the bull camp. 


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

8/1/2024

Gold buoyed by haven interest amid rising Middle East tensions

OUTSIDE MARKET DEVELOPMENTS: The Bank of England cut the bank rate by 25 bps to 5% by a narrow 5-4 vote. "MPC continues to remain highly alert to risks of inflation persistence," said BoE governor Bailey.

While the inflation rate in the UK is presently at the BoE target of 2%, they see risk for an H2 rise in CPI to 2.75%. The policy statement indicated that the MPC will ensure the bank rate remains sufficiently restrictive until risks to inflation dissipate further. Future policy decisions will be made on a meeting-to-meeting basis.

Cable (GBP-USD) fell to 4-week lows, providing some lift to the dollar. 

The BoE move comes on the heels of yesterday's BoJ rate hike and a generally dovish hold by the Fed. All of this week's central bank decisions aligned with market expectations.

The Fed seems to be on track to begin easing in September. In yesterday's presser, Fed Chairman Powell said, "A reduction in our policy rate could be on the table as soon as the next meeting in September,” if incoming data remain on the current path.

Tensions are on the rise in the Middle East after Israeli airstrikes hit Beirut and Teheran. Key Hezbollah and Hamas leaders were targeted and reportedly killed in these actions. 

Iran’s supreme leader has ordered retaliatory attacks on Israel, further escalating the risk of all-out war in the region. Israeli Prime Minister Netanyahu acknowledged “There are challenging days ahead.”

U.S. Challenger Layoffs were 25.9k in July, the lowest in nearly two years, down from 48.8k in June. Planned layoffs slowed to 9.2% y/y, versus 19.8% y/y in June.

Initial jobless claims jumped 14k to 249k in the week ended 27-Jul. Continuing claims rose to a 32-month high of 1,877k, versus a revised 1,844k in the previous week.

U.S. Q2 productivity (prelim) surged to 2.3%, above expectations of 1.7%, versus a positive revised +0.4% in Q1 (was +0.2%). Unit Labor Costs (ULC) fell to 0.9%, below expectations of 2.0%, versus a revised 3.8% (was 4.0%).

Manufacturing PMI and ISM edged up in July, to 49.6 and 46.8 respectively, reflecting some level of resilience in the U.S. economy. The ISM prices paid index rose to 52.9, versus  52.1 in June driven by higher input costs.

U.S. construction spending was -0.3% in June, below expectations of +0.2%, versus a revised -0.4% in May (was -0.1%). It was the second consecutive monthly contraction as high mortgage rates continue to adversely impact single-family home construction.


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$11.95 (-0.49%)
5-Day Change: +$76.34 (+3.23%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +27.91

Gold began the U.S. session modestly lower, but has rebounded to set new intraday and 2-week highs. The yellow metal is trading higher for a third session.



Despite recent corrective activity, gold ended the month of July with an impressive 5.2% gain. It was the sixth consecutive higher monthly close. This suggests the dominant uptrend is very much alive and well. If Israel and Iran go to war, I'd expect new highs in gold pretty quickly on safe-haven buying.

More than 78.6% of the correction has now been retraced, clearing the way for a retest of the record high from 17-Jul at $2,481.63. Intervening chart resistance is noted at $2,469.09/$2,473.97.

A lower interest rate environment and expectations of further global easing should continue to be broadly supportive of gold. The exception is Japan, but remember they're raising rates from negative territory.

The ever-rising U.S. national debt is another bullish catalyst for gold. The $35 trillion milestone was surpassed on 
Friday. The debt-to-GDP ratio remains above 120%. Interest payments on the massive debt pile are now greater than the entire U.S. defense budget. The CBO projects high interest payments could drive the debt-to-GDP ratio to 166% by 2054.

"The borrowing just keeps marching along, reckless and unyielding," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. Regardless of how U.S. elections go in November, I don't expect any relief.

There are few choices for reducing debt, as politicians are generally loathe to cut spending or raise taxes on the majority of Americans. Increasing taxes on the "rich" alone isn't going to make a dent. Inflation through dollar devaluation becomes the only viable solution, which drives hedging interest in gold.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.110 (-0.38%)
5-Day Change: +$1.100 (+3.95%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +24.82

Silver remains comparatively soft, unable to sustain recent tests back above $29. Increased haven appeal seems unlikely to overcome demand destruction concerns associated with a weakening Chinese economy, at least not in the short term. A war between Israel and Iran could certainly change that.



I've been saying for some time that $30 needs to be regained to reinvigorate the bull camp. That level seems well protected at this point.

Wednesday's close above the 100-day moving average was encouraging, but silver has retreated to trade right around that indicator at $28.632 today. A close this week above $29 would make $30 more attractive.

New intraday lows on the other hand would put yesterday's low at $28.304 to the test. Penetration of the latter would favor a return to the $28 zone.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

7/31/2024

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$7.67 (+0.32%)
5-Day Change: +$28.15 (+1.17%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +26.86

Gold opened this morning at $2,391.63 ahead of this week's central bank policy decisions. The July U.S. Jobs data report is set to be released this Friday. 


 
The Bank of Japan "BOJ" raised interest rates to levels unseen in 15 years. The rate hike was the largest since 2007 and came only months after the BOJ ended eight years of negative interest rates. The BOJ raised interest rates today to 0.25% by a 7-2 vote and projected inflation to stay around its 2% target in the coming years. BOJ Governor Kazuo Ueda did not rule out another hike this year and stressed the bank's readiness to keep raising borrowing costs to levels deemed neutral to the economy.

The World Gold Council asserts India's gold demand in the June quarter fell 5% from a year earlier, but consumption in the second half of 2024 should improve due to a correction in local price following a steep reduction in import taxes. Gold prices were back on track to register their best month since March on Wednesday led by geopolitical concerns and hopes of an interest rate cut in September. 

Gold futures rose 0.5% to $2,429.7/oz following the assassination of Hamas leader Ismail Hanieyah in Tehran and a top Hezbollah commander in Beirut.



SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.189 (+0.67%)
5-Day Change: -$0.131 (-0.45%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +23.81

Silver is trading above the new 11-week low at $27.425 on Monday, breaching the $28.00/0z mark. 




Silver scaled higher for the second straight day on Wednesday 7/31 and climbed to a multi-day peak during the Asian session.

Silver consolidated at around the $28.50/oz mark after diving into a two-month low of $27.31/oz. The white metal fell below the $29.00/oz figure and cleared support levels like the 50 and 100-day moving averages. Silver opened Wednesday at $27.91/oz after a previous close above the $28.00/mark. The White Metal is currently trading around the $28.781/oz mark amid rising tensions in the Middle East. 

Traders await today's FOMC decision for guidance. 


Tom Garland, Jr. 
Vice President, Relationship Management 
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-205-7906 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
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Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

7/30/2024

Gold and silver are modestly higher as markets await central bank decisions

OUTSIDE MARKET DEVELOPMENTS: The market's focus is on central bank interest rate decisions. The BoJ, Fed, and BoE will all announce policy this week.

The BoJ is expected to raise rates. The Fed is expected to hold steady. The BoE is a bit of a toss-up with a bias toward a rate cut.

Eurozone Q2 GDP came in slightly better than expected at +0.3% q/q. Markets seem to be embracing this beat and shrugging off the unexpected 0.1% contraction in German GDP.

Eurozone economic sentiment ticked down a scant 0.1 points to 95.8 in July. The market had been expecting a much more substantial erosion of sentiment

German CPI inflation edged up to a 2.6% annualized pace in July, versus 2.5% in June.

Crude oil futures fell to 2-month lows below $76/bbl. The slowing Chinese economy has led to reduced imports by the world's second-largest economy. This has overshadowed heightened Middle East tensions, which tend to underpin oil historically.

The S&P/Case-Shiller home price index rose 1% in May, reflecting a 6.8% annualized appreciation in U.S. home prices. The FHFA home price index was steady at +5.7% y/y in May, after a downward revision from +6.3% in April. Despite persistently high mortgage rates, home prices continue to rise on tight supply.

U.S. consumer confidence rose to 100.3 in July, above expectations of 99.6, versus a revised 97.8 in June (was 100.4). Improved expectations were the driving force, but the present situation index fell to a 39-month low of 133.6, and the 1-year ahead inflation index remained elevated at 5.4%.

JOLTS job openings fell 46k to 8,184k in June. There are 1.2 available jobs for each unemployed job seeker 

Anti-Maduro protests are growing in Venezuela amid accusations that the long-ruling socialist strongman stole Sunday's election. Opposition leader Maria Corina Machado claims the opposition received 73.2% of the vote, but the national electoral authority proclaimed Maduro the winner.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$8.17 (+0.34%)
5-Day Change: -$22.42 (-0.93%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +24.04

Gold remains consolidative just below the $2400 level as traders await this week's central bank policy decisions. The trade is also eagerly anticipating Friday's release of U.S. jobs data for July.

 

I continue to watch the 20-day moving average, which comes in at $2,397.76 today, bolstering chart/Fibonacci resistance at $2,400.70/$2,403.05. Penetration of the latter would clear the way for a test of the next Fib level at $2,418.06 initially. Beyond that, $2,430.89/$2,433.06 (24-Jul high and 61.8% retrace) would be the attraction.

On the downside, the overseas low at $2,378.09 provides an intervening barrier ahead of yesterday's low at $2.374.13. More important support is defined by the lows from late last week at $2.358.18/$2,354.48. The 50-day moving average provides reinforcement and is at $2.358.60 today.

The World Gold Council reports that demand for gold fell 6% y/y in Q2 to 929 tonnes (ex-OTC) as record-high prices sapped jewelry consumption. Inclusive of OTC investment, demand grew 4% to 1,258 tonnes the highest Q2 reading in the series.

Global gold jewelry consumption dropped 19% y/y to a 4-year low of 391 tonnes. Chinese jewelry demand was particularly weak, exacerbated by the slowing economy.

Central bank gold buying rose 6% y/y to 184 tonnes. Soft demand in the West led to a 5% y/y decline in retail bar and coin investment. Gold used in technology was +11% y/y, driven by the AI trend.

Overall, the demand picture looked pretty bright through Q2. Meanwhile, supply rose 4% to 1,258 tonnes. The fundamentals remain broadly supportive.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.045 (+0.16%)
5-Day Change: -$1.387 (-4.74%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +18.37

Silver is trading modestly higher after setting a new 11-week low at $27.425 yesterday. As of Monday, silver has closed lower in nine of the last twelve sessions. The total decline since the 11-year high in May stands at just over 15%.



Momentum on upticks continues to disappoint and there just doesn't seem to be much incentive to rally out of this area. A close above the 100-day moving average ($28.550 today) would offer some encouragement.

However, the white metal really needs to regain the $30-handle to return confidence to the longer-term uptrend. Such a move would constitute a more than 50% retracement of the entire decline and put silver back above the 20- and 50-day moving averages.

Yesterday's low at $27.425 reinforces the $27.404 Fibonacci support level (78.6% retrace of the rally from $26.049 to $32.379). A move below this area would leave the $26.049 low from 02-May vulnerable to a test.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

7/29/2024

Gold and silver fail to sustain overseas gains

OUTSIDE MARKET DEVELOPMENTS: Israel is blaming Iran-backed Hezbollah for a weekend rocket attack on the Golan Heights that killed 12 children on a soccer pitch. Israel is expected to retaliate escalating risks of a wider conflict in the Middle East.

Israel struck an area in Gaza on Saturday that included a school where Hamas militants were reportedly operating. There were civilian casualties including children.

Cease-fire talks continued in Rome on Sunday. However, Israeli PM Netanyahu vowed "total victory" over Hamas in a fiery speech before a joint session of Congress last week.

U.S. economic data at the end of last week prompted a recovery on Wall Street. PCE data released on Friday broadly supported expectations that the Fed will begin easing in September. Equity futures are indicating upside follow-through to start the new week.

The FOMC will hold a two-day meeting beginning tomorrow. Policy will be announced on Wednesday. While no change is anticipated, the statement – and eventually the minutes (21-Aug) – may provide some clues as to the central bank's intentions for the remainder of the year.

BoJ policy will be announced tomorrow. Rising expectations for another rate hike helped boost the yen further off its multi-decade low last week.

The BoE also meets this week, and the policy decision is more of a toss-up. The latest Reuters survey is leaning toward a cut, but markets are only pricing in a 50% chance of easier policy.

The U.S. calendar is light today with just the Dallas Fed Index, which is expected to narrow modestly from -15.1 in June. 


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +5.48 (+0.23%)
5-Day Change: -$7.33 (-0.31%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +24.20

Gold ticked back above $2,400 in overseas trading, perhaps benefitting from a bit of a haven bid associated with the latest worries of a wider Middle East conflict. The yellow metal remains narrowly confined at the high end of last Thursday's range with weak upside momentum.

  
Today's action has seen tests back above the 20-day moving average, but intraday upticks have proven unsustainable thus far. A close above this indicator at $2,394.96 would be mildly encouraging. However, the more important close-in level I'm watching is $2,400.70/$2,403.05, where last Thursday's high corresponds closely with the 38.2% retracement level of the decline off the $2,481.63 record high from 17-Jul.

A breach of $2,400.70/$2,403.05 would shift focus to $2,418.06 (50% retrace) initially. Beyond that, $2,430.89/$2,433.06 (24-Jul high and 61.8% retrace) would attract.

Fresh intraday lows below $2,387.36 would leave the 50-day moving average ($2,359.34 today) vulnerable to further challenges. Gold tested below this indicator on Thursday and Friday last week, but was unable to close below it.

Gold ETFs saw 9.8 tonnes of net inflows last week. It was the sixth consecutive week of net inflows suggesting investors in all regions were buying into the correction. North America accounted for more than half of the net inflows. 

Gold ETF Flows by Region

Sources: Bloomberg, Company Filings, ICE Benchmark Administration, World Gold Council

Further evidence of buying interest comes from the latest COT report, which saw speculative net futures positions increase by 18.3k contracts last week to 273.1k contracts. That's the highest since November of 2022 when gold set a low of $1,617.06 which ended up being the third low of a triple bottom.

CFTC Gold speculative net positions

That being said, the market is very long. If gold doesn't rally out of this area, long liquidations could have rather bearish implications. Persistent weakness in silver remains a concern.

China Gold Association reported H1 gold production of 180 tonnes, up 1% over H1 2023. Gold consumption fell 5.6% y/y to 523.8 tonnes, weighed primarily by poor consumer sentiment that led to a sharp drop in jewelry buying.

Jewelry demand plummeted 26.8% to 270 tonnes. However, those same worries about the economy caused bar and coin demand to surge 46% to 213.6 tonnes.

“There are very limited choices in asset preservation due to capital control and the lack of investment options,” Gary Ng, senior economist with Natixis Corporate and Investment Banking, told the South China Morning Post.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.221(+0.79%)
5-Day Change: -$1.054 (-3.62%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +19.66

Silver remains defensive, having proven unable to sustain overseas gains. Last week's low at $27.524 has been exceeded, establishing new 11-week lows.



Concerns about the health of the Chinese economy are the biggest fundamental factor weighing on the commodities sector. In the wake of the Third Plenary Session, there is growing concern that the recent economic turmoil will lead to greater government controls.

Downside potential is initially to the $27.404 Fibonacci level (78.6% retrace of the rally from $26.049 to $32.379). A breach of that level would leave the $26.049 low from 02-May vulnerable to a challenge.

Perhaps not surprisingly, speculative net long positions in silver declined last week by 9.7k contracts to 51.1k. That's the lowest long positioning since the week ended 29-Mar.

CFTC Silver speculative net positions

A short-term close back above the 100-day moving average ($28.508 today) would take at least a little pressure off the downside. However, I still think $30 needs to be regained to re-instill confidence in the longer-term uptrend. And that level keeps getting further and further away.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

7/26/2024

Gold recovers somewhat ahead of the weekend, but silver remains defensive 

OUTSIDE MARKET DEVELOPMENTS: U.S. stocks are recovering somewhat from sharp losses earlier in the week, buoyed by recent U.S. data which are boosting confidence that the Fed will successfully orchestrate a soft landing. Arguably this has only happened once (1994-1995) in the past 60 years so the odds are probably against them.

Stock market weakness yesterday overshadowed positive U.S. growth news. Q2 advanced GDP came in at +2.8%, well above market expectations. While the U.S. economy continues to look resilient, the trade is increasingly worried about growth risks in China.

China's NDRC announced a new 'cash for clunkers' program on Thursday.  The latest effort to stimulate the lagging economy will focus directly on consumers by dedicating 150 bln yuan ($20.7 bln) to the replacement of old cars, appliances, bicycles, and other goods. 

The U.S. PCE price index – the Fed's favored measure of inflation – ticked up 0.1% in June, but the annualized rate dipped to 2.5%, from 2.6% in May. Core inflation rose 0.2% m/m, holding steady at 2.6% y/y.

Personal income rose 0.2% in June, below expectations of +0.4%, versus a negative revised +0.4% in May (was +0.5%). PCE came in at +0.3%, in line with expectations, versus an upward revised +0.4% in May (was +0.2%).

While more aggressive Fed rate cut bets are being pared, the market is still pricing in two cuts this year beginning in September. The probability that the Fed funds rate will be 25 to 50 bps lower after the September FOMC meeting stands at 99.6%.

With Fed easing widely anticipated to begin in September and the BoJ expected to tighten again next week, the market is reassessing a wide array of leveraged bets based on the yen carry trade. This is contributing to broader market volatility.



The USD-JPY rate slid to a two-month low on Thursday of 151.946, more than 6% off the multi-decade high set early in July at 161.948. The 200-day moving average has come within striking distance.

While it's premature to suggest the yen has reversed, the technical picture has deteriorated significantly in recent weeks. Narrowing interest rate differentials with the U.S. and the ongoing threat of direct BoJ intervention in support of the yen definitely have markets on edge. 


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$8.44 (+0.36%)
5-Day Change: -$22.64 (-0.94%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +23.01

Gold has stabilized somewhat after Thursday's sharp sell-off to a two-week low of $2,354.48. While the yellow metal is higher on the day, price action remains confined to yesterday's range.

 

Gold appears poised for a second-consecutive lower weekly close with last week's close at $2,400.39 seemingly out of reach today. The 20-day moving average is at $2,391.68 and has come within striking distance today. I'd consider a close back above the 20-day as moderately encouraging.

While gold probed below the 50-day moving average yesterday and earlier today, this indicator remains intact on a close basis. Yesterday's low at $2,354.48 reinforces chart support noted in yesterday's commentary at $2,355.03/$2,352.28.

If this level were to give way, gold would be vulnerable to the next Fibonacci level at $2,329.15. Below that, the June lows at $2,295.86 and $2,287.64 would be back in play.

With silver still very much on the ropes, gold bulls need to be cautious here. I'd need to see the yellow metal move decisively back above $2,400 to set a more favorable short-term tone, which is likely predicated on more favorable price action in silver.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.079 (+0.27%)
5-Day Change: -$1.440 (-4.93%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +15.78

Silver remains defensive below $28 in the wake of yesterday's 3.7% plunge. Baring a miraculous rebound, the white metal will notch a third consecutive lower weekly close.



Silver has closed lower in nine of the last eleven sessions. Over that period, the white metal has tumbled below the 20-, 50-, and 100-day moving averages, leaving focus squarely on the downside.

While silver has been leading the charge lower, weighed by mounting growth risks in China, a rebound in gold could provide some underpinning to the market. I still think silver needs to recapture the $30 level to really reinvigorate the bulls. However, incremental gains above $28.476 (100-day SMA) and $29.00 would offer some encouragement along the way.

Yesterday's low at $27.524 now offers intervening support ahead of the $27.404 Fibonacci level (78.6% retrace of the rally from $26.049 to $32.379). An eventual penetration of the latter would leave the $26.049 low from 02-May vulnerable to a challenge.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

7/25/2024

Gold and silver weighed by China concerns

OUTSIDE MARKET DEVELOPMENTS: President Biden spoke to the nation last night saying, “I’ve decided the best way forward is to pass the torch to a new generation." He didn't provide any information about what prompted his decision to drop out of the race. Was it his health? Was it the diminished prospects for victory after his debate performance? Was it pressure from within his own party? It likely was all of those things.

Israeli Prime Minister Benjamin Netanyahu delivered a fiery speech before a joint session of Congress yesterday, vowing "total victory" over Hamas. Despite global protests and international diplomatic pressure, Netanyahu remains committed to the destruction of Hamas.

Netanyahu is supposed to meet separately with President Biden and VP Harris today. Donald Trump said on Truth Social that he would meet with Netanyahu on Friday.

China's central bank unexpectedly cut its MLF rate by 20 bps to 2.30%. The PBoC also injected 235.1 bln yuan into markets through a reverse repo operation.

However, markets reacted negatively, reading the urgency of this week's PBoC operations as evidence that growth risks in China are greater than previously perceived. Deflation and slower growth in the world's second-largest economy have far-reaching global implications. That seems to be manifesting most notably in commodity and equity markets this week.

Chinese leaders announced their optimistic Third Plenum policy goals on Thursday but provided no details on how they might be achieved. China is on the verge of deflation and possibly a debt crisis. Gordon G. Chang worries that China's having its 2008 financial crisis at the worst possible time.

Major U.S. stock indexes fell sharply on Wednesday. The Nasdaq lost 3.6%, its biggest daily decline since October 2022. The S&P 500 ended the day with a 2.3% decline, its worst single-day performance since December 2022. U.S. shares are under pressure again today.

U.S. Q2 Advance GDP came in at 2.8%, well above expectations of 1.9%, versus 1.4% in Q1. The beat was attributed to a solid 2.3% rise in consumption.

Better-than-expected growth in the U.S. somewhat tempers the rising concerns about China. One might also imagine that today's GDP print decreases the urgency for the Fed to start easing, yet the market is still pricing in a September rate cut. 

U.S. durable orders plunged 6.6% in June, well below expectations of +0.6%, versus +0.1% in May. A huge 20.5% in transportation orders (most notably aircraft) is the reason. The ex-transportation reading was +0.5%.  

GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$17.02 (-0.71%)
5-Day Change: -$80.36 (-3.29%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +22.08

Gold tumbled to 2-week lows after failing to sustain Wednesday's gains. Mounting concerns about the Chinese economy are negatively impacting global markets broadly.



The overseas breach of Monday's low at $2,385.50 also constituted a violation of the 20-day moving average and likely triggered stops.

The yellow metal has completed a 61.8% retracement of the rally from $2,287.64 (07-Jun low) to $2,481.63 (17-Jul high). The $2,361.74 Fibonacci level corresponds closely with the 50-day moving average at $2,360.62.

One might expect gold to garner support from safe-haven interest, but sometimes deleveraging pressures must play out first. Gold and silver are components of just about every commodity fund and ETF. As investors exit commodities they are invariably selling gold and silver as well.

Minor chart support is noted at $2,355.03 down to $2,352.28. Penetration of this area would leave gold vulnerable to the next Fibonacci level at $2,329.15. Below that, the June lows at $2,295.86 and $2,287.64 would be back in play.

First resistance is defined by intraday chart points around $2,375.00. The halfway back point of today's range is at $2,381.23. However, $2,397.98/$2,400.70 needs to be regained to set a more positive short-term tone.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.915 (-3.17%)
5-Day Change: -$2.298 (-7.70%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +14.32

Silver extended losses in overseas trading to negate key support at $28.618 (26-Jun low). Stops were triggered pushing the white metal through the 100-day moving average at $28.442 to a new 11-week low of $27.524.



Silver is being dragged lower with the rest of the commodities complex amid rising growth risks in China. While the U.S. economy still looks healthy based on today's advanced Q2 GDP print, China is the second-largest global economy and our third-largest trading partner.

The silver market has retreated almost exactly 15% since establishing an 11-year high at $32.379 on 21-May. The market remains decisively in a corrective mode.

While the market is presently trading off the lows, the downside remains vulnerable. The next significant support level I'm watching is $27.404 (78.6% retrace of the rally from $26.049 to $32.379). Today's earlier low at $27.524 makes a good intervening barrier.

Intraday resistance is noted at $27.990/$28.032. The halfway back point of today's decline comes in at $28.232. It would probably take a rebound above $29 to re-instill some measure of optimism in the bull camp.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

7/24/2024

Gold and silver trade higher for a second session

OUTSIDE MARKET DEVELOPMENTS: President Biden is expected to address the Nation from the Oval Office this evening. He presumably will be talking about his decision to not seek reelection.

Israeli Prime Minister Benjamin Netanyahu is in DC and will address a joint session of Congress this afternoon in hopes of shoring up support for Israel's ongoing war against Hamas. He will likely receive a mixed reaction, with some Democrats planning to boycott the event. Netanyahu's visit has triggered protests that have already resulted in hundreds of arrests.

Netanyahu is scheduled to meet separately with President Biden and VP Harris on Thursday. He may meet with former President Trump as well.

Eurozone composite PMIs fell to 5-month lows. Weakness in both manufacturing and services lends credence to expectations that the ECB will cut rates again in September.

UK PMIs on the other hand came in strong. Manufacturing PMI rose to a 24-month high of 51.8. Services PMI reached a 2-month high of 52.4. This supports forecasts that suggest the BoE will remain on hold in August.

U.S. PMIs were a bit of a mixed bag: Manufacturing PMI tumbled to a 7-month low of 49.5 in July, versus 51.6 in June. It was the first sub-50 print this year. Services PMI rose to 56.0, versus 55.3 in June.

In a Bloomberg opinion piece, former NY Fed President Dudley said the Fed should cut rates at next week's meeting.  Dudley warned that it may already be too late to "fend off a recession" implying that the Fed is behind the curve.

While Dudley's comments nudged July rate cut potential up to 6.7%, I believe the Fed will hold steady next week. Barring any upside surprises in inflation data leading up to the September FOMC meeting, that's when the Fed's easing campaign is most likely to commence. Fed funds futures have that fully priced in at this point.

The U.S. Advanced Goods Trade deficit narrowed to $96.8 bln in June, inside expectations of -$98.0 bln, versus a revised -$99.4 bln in May (was -$100.6 bln). The deficit remains on a narrowing path from the -$121.2 bln all-time wide in March of 2022.

U.S. new home sales rose 0.617M in June, below expectations of +0.643M, versus a revised +0.621M in May. This is the slowest pace since November as high mortgage rates continue to weigh on the market.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$4.91 (+0.20%)
5-Day Change: -$36.44 (-1.48%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +26.23

Gold is trading higher for a second session buoyed by some risk-off sentiment in stocks and a weaker dollar. More than 38.2% of the decline from last week's record high at $2,481.63 has already been retraced, lending credence to a challenge of the 50% retracement level at $2,433.56.



Corrective action in gold has been limited by strong expectations that the Fed will begin easing in September. Two rate cuts are widely anticipated for this year. 

Treasury yields are under pressure today, which has pushed the dollar index to new lows for the week. The softer dollar is helping to underpin gold as well.

Elon Musk took to X yesterday and warned that the dollar is heading for "destruction" and that the soaring $35 trillion national debt could "bankrupt" the U.S. While interest rate differentials are likely to support the dollar comparatively in the medium term, the longer-term trend is decisively bearish, providing a tailwind for gold as a means to preserve wealth. 

A recent Mining.com article highlighted gaps between consumer gold demand and mined production in some countries.


Data source: World Gold Council, tabulated by The Gold Bullion Company

Consumer demand in India, China, Turkey, and the U.S. exceeds production, meaning that demand needs to be satisfied with supply from elsewhere. Q1 data from the WGC shows global demand of 1.101.9 tonnes and the sum of mine production and recycled gold at 1,243.8 tonnes. That's just shy of a 13% surplus.

India is the world's second-largest consumer of gold but does not produce much. India's cut of import duties on gold to 6% from 15% and expectations for an above-average monsoon could boost demand and support the price.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.079 (+0.27%)
5-Day Change: -$0.947 (-3.12%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +25.19

Silver eked out a higher close on Tuesday as I had hoped, ending the series of lower closes at four. Modest upside follow-through is being seen today, but momentum remains lackluster.



I still think silver needs to regain $30 to encourage the bull camp and shake out some of the shorts. More important resistance is marked by the 20- and 50-day moving averages that now come in at $30.141 and $30.209 respectively. Such a move seems unlikely today, so let's see if there's additional upside follow-through on Thursday.

Failure to close higher today would suggest that the downside and important support at $28.618 remains vulnerable to challenges. Yesterday's low at $28.723 reinforces this level.

Data from China's National Energy Administration show that 23.3 GW of solar energy was installed in June, +36% y/y. More than 100 GW of solar capacity was added in H1, +31% versus H1-23. In addition, global electricity demand is forecast to increase by approximately 4% this year according to the International Energy Agency. The comprehensive supply/demand dynamic for silver remains broadly supportive suggesting the recent price decline is corrective.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

7/23/2024

Gold rebounds modestly while silver remains defensive

OUTSIDE MARKET DEVELOPMENTS: Democrats have rallied behind Kamala Harris as their presumptive nominee. She has reportedly secured the support of enough delegates to clinch that nomination, but it's still nearly 4 weeks until the DNC and I would categorize the situation as fluid. The fact that Harris raised a record-setting $81 million yesterday is further evidence of coalescing support.

There has been speculation that President Biden's health is deteriorating rapidly, stoking concerns that he won't be able to complete his term. Political uncertainty remains high.

Secret Service Director Kimberly Cheatle has resigned after yesterday's relentless grilling before Congress.

Recent U.S. political turmoil has had little impact on the greenback. The dollar index edged to a 7-session high in overseas trading but remains just about the midpoint of this year's range. 

ECB Vice President Luis de Guindos hinted at a September rate cut as inflationary pressures continue to moderate. ECB projections see inflation falling to their 2.0% target in Q4. The euro slid to an 8-session low providing some lift for the dollar.

The Richmond Fed Index tumbled to a 4-year low of -17 in June, versus -10 in May. Prices paid moderated to 3.00%, down from 3.58% in May. Prices received fell to 1.31% from 2.35%. Cooling prices and an uptick in contraction risks arguably lend credence to Sep rate cut expectations.

The Philly Fed Services Index plunged to -19.1 in July. That's a 4-year low right after hitting a 2-year high of 2.9 in June. Weakness in business activity was broad-based. Employment fell to -4.9. Prices paid rose 30.4 from 24.4. "Everything is so broken," quipped Zerohedge on X.

U.S. existing home sales fell 5.4% to 3.890M in June, below expectations of 3.990M, versus 4.110M in May. The sales trend remains right around the 13-year low from 2010 as mortgage rates continue to pose a considerable headwind.

The median sale price rose 2.33% to a record high $426,900. That price is above new home prices for the first time since COVID and the price differential is at a new record.


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$11.28 (+0.47%)
5-Day Change: -$61.27 (-2.48%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +25.16

Gold has rebounded modestly from the last four sessions of losses. While upside momentum has not been terribly impressive, bulls can be encouraged by the fact that the yellow metal has held above the 20-day moving average.



Support marked by the halfway back point of the most recent leg-up at $2,384.64 was approached yesterday but remains intact. This level is now reinforced by yesterday's low at $2,385.50.

So far today, price action has been contained by yesterday's range. A breach of yesterday's high at $2,411.65 would encourage the bulls and likely shake out some of the shorts. Secondary resistance is at $2,433.56 which is defined by the 50% retracement level of the decline off last week's record high at $2,481.63.

India slashed import duties on gold and silver today to 6% from 15% ostensibly to help reduce smuggling. The move is likely to boost retail demand in India, which is the second-largest consumer of gold behind China. Jewelry demand in particular has been stymied by record-high prices.

The move is not without cost as it will likely cause India's trade deficit to widen and put additional pressure on the rupee. The rupee fell to a record low against the dollar of 83.69 after stocks slid on a proposed hike to capital gain taxes.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.053 (-0.18%)
5-Day Change: -$2.191 (-7.01%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +23.41

Silver remains defensive, having set a new 4-week low at $28.723 in overseas trading. However, the previous corrective low from 26-Jun at $28.618 remains intact thus far.



Silver hasn't recorded 5 consecutive lower closes since December, so I'm cautiously optimistic that the existing oversold condition will generate a little short covering today. But even if the white metal manages to close above $29.122 the downside remains vulnerable.

I'd like to see silver climb back above $30 to ease pressure on the downside. The 20- and 50-day moving averages at $30.103 and $30.212 respectively are arguably the more important short-term levels to be watching.

If support at $28.618 gives way, the 100-day moving average at $28.358 would be vulnerable to a test. Below the latter, $28.00 and $27.404 would be in play.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

7/22/2024

Gold and silver remain defensive for fourth consecutive session

OUTSIDE MARKET DEVELOPMENTS: President Biden announced on Sunday that he would not seek reelection. This comes less than a month before the DNC and just over 100 days ahead of the general election.

Biden endorsed Vice President Kamala Harris and she is considered the front-runner for the top of the Democratic Party ticket. However, a fair amount of uncertainty remains as Ms. Harris is not particularly popular. The Democratic National Committee Chair Jaime Harrison promised "a transparent and orderly process to move forward.”

China's PBoC cut its 7-day reverse repo rate by 10 bps to 1.7%. It was the first reduction in nearly a year and came as a bit of a surprise. In addition, 10 bps cuts were made by Chinese banks to their 5-year and 1-year prime loan rates. The yuan dropped in reaction.

The moves comes on the heels of weaker-than-expected Q2 economic data last week. China is trying to stimulate the economy and get back on track to achieve its 2024 growth target of 5%. That may be a challenge without more direct stimulus.

Today's U.S. economic calendar is light with just the Chicago Fed National Activity Index. The index fell to 0.05 in June, versus a revised 0.23 in May. According to the report, "Three of the four broad categories of indicators used to construct the index decreased from May, and three categories made negative contributions in June."


Focus this week falls on Friday's PCE data for June, most notably the chain price index. The Fed's favored measure of inflation is expected to come in unchanged which would further heighten expectations for a September rate cut. The FOMC meets next week, with steady policy expected for July.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$6.38 (+0.27%)
5-Day Change: -$26.63 (-1.10%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +24.28

Gold rose modestly in Asian trading on the Biden news but gains could not be sustained. Some short-term technical damage was done to the chart last week when new record highs were followed by a lower daily close and a lower weekly close.



With minor chart support at $2,394.20 (12-Jul low) now negated, the halfway back point of the most recent leg-up at $2,384.64 is vulnerable to a test. Below that, $2,371.16 (11-Jul low) protects the 61.8% retracement level at $2,361.74.

At this point, losses are still considered to be corrective. Gold hasn't seen four consecutive lower closes since February. A close above $2,400.39 today would prevent that. A move back above today's overseas high at $2,411.65 would offer some encouragement to the bull camp.

Gold ETFs saw their fifth consecutive weekly net inflows last week, led by North American and European interest. Net inflows were 11.1 tonnes (~$913M). Global AUM rose to $243 bln.

Gold ETF flows by region

The latest COMEX long positioning data as of 16-Jul saw gold interest jump to 897.39 tonnes. Market sentiment based on the COT remains broadly supportive.

Comex Net Long Positioning

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.168 (+0.55%)
5-Day Change: -$1.824 (-5.95%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +22.12

Silver remains on the defensive, trading lower for a fourth consecutive session. The white metal hasn't seen four consecutive lower daily closes since January.



While it seems unlikely silver will close higher today (above $29.215), the oversold condition has thus far prevented a true test of important support at $28.618 (26-Jun low). With this level intact, the medium and longer-term trends are still neutral to favorable.

A rebound above $30 is needed to lend some encouragement to the bull camp. The overseas high at $29.420 and Friday's high at $29.835 offer intervening barriers.

The COT report for silver shows net speculative long positions as of 16-Jul were steady at 61.1k contracts versus the previous week. While that's somewhat encouraging, based on last week's price action I suspect next week's COT data will reflect a deterioration of sentiment.

CFTC Silver Speculative Net Positions

If support at $28.818 gives way, it will likely trigger some stops with initial potential to challenge the 100-day moving average at $28.302. Below the latter, $28.00 and $27.404 would be the levels to watch.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

7/19/2024

Gold and silver lower on the week as yields and the dollar correct

OUTSIDE MARKET DEVELOPMENTS: Donald Trump accepted the Republican Party's presidential nomination last night in Milwaukee. Trump talked about last weekend's assassination attempt and his speech had a softer tone that resonated with some voters.

The former president promised to secure the border, defeat inflation, and boost fossil fuel production. Trump also pledged to protect U.S. manufacturing jobs by imposing tariffs on trading partners. He hit all the talking points, but the speech was short on policy details.

Trump also warned that "our planet is teetering on the edge of World War III," pointing to the war in Ukraine, the Israel/Hamas conflict, and tensions with China regarding Taiwan. He implied that his strong leadership could calm global tensions.

Meanwhile, it seems increasingly likely that President Biden will step aside and not seek reelection. The burning question is will his unpopular VP Kamala Harris be elevated to the top of the ticket, or will Democrats try to bring in someone else?

China's economy slowed to a 4.7% annualized pace in Q2, down from 5.3% in Q1. This was below expectations and weighed heavily on commodities.

The ongoing property crisis is adversely impacting household wealth and confidence, causing consumers to reduce spending. Chinese leaders have gathered to discuss reforms and modernization plans that could give the sluggish economy a boost.

The U.S. economic calendar is empty today, save for FedSpeak from Williams (centrist) and Bostic (dove).


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$32.53 (-1.33%)
5-Day Change: -$15.33 (-0.64%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +24.58

Gold came under more intense corrective pressure in overseas trading on Friday as U.S. yields and the dollar rebounded. The yellow metal is at risk of a lower weekly close after setting a record high at $2,481.63 on Wednesday.



A close above $2,411.66 is needed to avert a reversal on the weekly chart. However, sub-$2400 intraday prices could attract buying interest ahead of the weekend.

Initial support is marked by the 12-Jul low at $2,394.20, which should help keep the 50% retracement level of the most recent leg-up at $2,384.64 protected. Today's downside extension also leaves gold oversold intraday.

The market has priced in a September rate cut, so I suspect the rebound in yields and the greenback are corrective in nature. Even after yesterday's strong Philly Fed data, Fed funds futures continue to put the probability of a Sep cut at 98%.

I think investors will continue to view setbacks in the range as buying opportunities. FedSpeak from Williams and Bostic could provide some underpinnings for the market. Next week, focus will be on the latest PCE inflation reading out on Friday.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.649 (-2.18%)
5-Day Change: -$1.664 (-5.40%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +23.06

Silver extended losses on Friday to trade below $29. The white metal is poised for a second consecutive lower weekly close.



Concerns about the Chinese economy have contributed to three consecutive daily declines in silver. However,
given the oversold condition that has developed, important support at $28.618 (26-Jun low) looks to be well protected.

In accepting the Republican presidential nomination last night, Donald Trump pledged to roll back the Biden administration's efforts to combat climate change. He also said he would strive for U.S. energy independence by increasing domestic oil and gas production.

Less federal funds for alternative energy sources such as solar, could dampen industrial demand for silver.  

A rebound above $30 would ease short-term pressure on the downside. Price action since May has the makings of a continuation pattern within the dominant uptrend.

I'm leaning toward a symmetrical triangle if the $28.618 low holds. If that's the case, look for further choppy consolidation within the defined range culminating with an eventual upside breakout.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

7/18/2024

Gold consolidates within yesterday's range, as silver trades defensively

OUTSIDE MARKET DEVELOPMENTS: The ECB held steady on rates today, in line with expectations. The policy statement noted that "domestic price pressures are still high, services inflation is elevated and headline inflation is likely to remain above the target well into next year."

The ECB is prepared to keep policy sufficiently restrictive to "ensure that inflation returns to its 2% medium-term target in a timely manner." They went on to say that the Governing Council is not pre-committing to a particular rate path, but will remain data-dependent.

Even if the Fed cuts in September, interest rate differentials will continue to favor the dollar for some time. In more normal times, I might see dollar strength as a headwind for the precious metals. However, geopolitical risks, rising debt-to-GDP ratios, and central bank demand have the potential to continue overriding the historic inverse correlation between gold and the dollar.

Once the Fed does start easing it will give other central banks, including the ECB, more room for cuts. Even in this scenario, dollar yields would remain comparatively attractive.

President Biden is facing reinvigorated calls to step aside. Biden has come down with COVID a day after saying that being diagnosed with a “medical condition” could prompt him to drop out of the race. If that were to happen, an unpopular Vice President Harris would likely move to the top of the Democratic Party ticket.

Former President Trump's popularity surged after he displayed courage and resolve following last weekend's failed assassination attempt but it remains to be seen whether he can carry that momentum through election day. There is still plenty of uncertainty surrounding the U.S. election in November, but this week markets seem to be pricing in a Trump advantage.

U.S. initial jobless claims surged 20k to an 11-month high of 243k in the week ended 13-Jul, above expectations of 230k, versus a revised 223k in the previous week. Continuing claims also jumped 20k to a 31-month high of 1,867k. The uptrend in claims since April creates some downside risk for the next payrolls report.

U.S. Philly Fed Index jumped to 13.9 in July, well above expectations of 2.9, vs 1.3 in June. This is the highest reading since the 15.5 print in April. The 6-month outlook index surged to 38.7, versus 13.8 in June. A strong reading on future employment tempers the bad claims data somewhat.

Leading indicators fell 0.2% in June, inside expectations of -0.3%, versus a revised -0.4% in May. 

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$5.79(+0.24%)
5-Day Change: +$50.37 (+2.09%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +29.55

Gold is consolidating within yesterday's range with focus still very much on the upside. The yellow metal set a new record high in overseas trading on Wednesday at $2,481.63.



While yesterday's lower close after a new high is perhaps a little troubling for the short term – as is the comparative weakness in silver – the dominant trend remains unquestionably bullish. I'm looking to a Fibonacci objective at $2,511.11 next. Beyond that, $2,530.19 attracts.

First support is marked by yesterday's low at $2,452.34 which is bolstered by the previous record high at $2,449.34.

Focus remains on Fed rate cut expectations. Today's claims data suggest the labor market may be cooling, which should add weight to calls for the central bank will begin easing in September.

Tempered demand in Asia may lead to some short-term volatility as investors and jewelry buyers acclimate to the latest round of record highs. We could see some selling out of Asia but I suspect setbacks will continue to be met with buying interest.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.168 (+0.55%)
5-Day Change: -$1.030 (-3.28%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +30.70

Silver remains defensive in the wake of yesterday's retreat to 2-week lows. It would seem that the silver market is a little less optimistic about growth prospects.



I also suggested yesterday that Trump pledges to "drill baby drill" if he is elected may indicate that aggressive green initiatives and emissions standards could get walked back early in a Trump administration. This could have a detrimental impact on silver demand.

Mounting concerns that the Chinese economy is slowing are certainly a factor as well. Adding to those worries is the fact that the Trump/Vance ticket is very hawkish on trade, perhaps especially with regard to China.

My initial support area at $30.573/509 was taken out yesterday, leaving $30.15/00 vulnerable to a challenge. A dip below $30 would shift focus to $29.777.

A rebound above $30.509/584 is needed to ease short-term pressure on the downside and clear the way for renewed tests above $31. Such a move would return focus to last week's high at $31.652.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

7/5/2024

Gold and silver surge to 4-week highs on Fed rate cut expectations
 
OUTSIDE MARKET DEVELOPMENTS: The Labour Party scored a historic victory in UK elections, ending a 14-year Tory Party reign. Incoming Prime Minister Keir Starmer says "change begins now."

He is likely referring to the homefront, where he plans to tackle the cost-of-living crisis, illegal immigration, crime, and long NHS wait times. Foreign policy is expected to remain largely unchanged, including continued robust military support for Ukraine.

Labour views Russia as a threat to Europe and their manifesto favors NATO membership for Ukraine. NATO on its border is a red line for Russia and that threat arguably played a significant role in Putin's decision to invade.

The latest polling in France suggests Marine Le Pen's National Rally party which made strong gains in the first round of voting may still fall short of a majority in the National Assembly. There has been increased violence in France during the election process including attacks on candidates. Prime Minister Gabriel Attal called on the French people to "reject the climate of violence and hatred that's taking hold."

Iranians voted between hardliner Saeed Jalili and reformist Masoud Pezeshkian in a runoff presidential election. Regardless of the winner, Supreme Leader Ayatollah Ali Khamenei will still have the final say on just about everything of consequence.

Widespread apathy and calls for a boycott to protest the regime led to low voter turnout in the first round. A Jalili win would likely bend policy toward closer ties with Russia and China and a push forward in nuclear weapons development. It's doubtful that Pezeshkian has the wherewithal to develop a more moderate tone toward the West.

The Nikkei 225 continued to set record highs on Thursday, led by heavy buying in tech and automaker shares. The breakout above the previous record high set in 1989 initially occurred in March and gains have been mounting since, driven largely by the AI frenzy that is also lifting U.S. equities.

U.S. nonfarm payrolls rose 206k in June, above expectations of +200k, versus a negative revised +218k in May (was +272k). While the headline number was good, private payrolls were just +136k, below expectations of +175k, versus a negative revised +193k (was +229k).

The unemployment rate ticked up to 4.1% on back-month revisions, weak civilian employment, and an uptick in the labor force participation rate to 62.6%. Hourly earnings were up 0.3% in line with expectations. The average workweek was steady at 34.3 hours.

Hints of weakness in the jobs report give further confidence to the sooner-than-later-rate-cut camp. The prospects for a September rate cut have jumped to 71.8% based on Fed funds futures. Additionally, the FOMC minutes released on Wednesday revealed that policymakers saw "modest further progress toward the 2% inflation goal," a gradually cooling economy, and policy as restrictive.

Nonetheless, the FOMC is still displaying enough uncertainty as to the appropriateness of current policy and the tack of incoming data to cast doubt on a September rate cut. Proximity to the November election may be a Fed consideration as well.

Fed Chairman Powell's monetary policy testimony before the House and Senate next week may provide additional clues to the Fed's intentions. I expect him to maintain his cautious tone and maybe even come off a little hawkish to temper the recent market reactions.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$7.86(+0.33%)
5-Day Change: +$38.05 (+1.64%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34
Weighted Alpha: +24.65

Gold has surged to 4-week highs on mounting expectations that the Fed will cut rates twice this year, despite persistent words of caution from Fed policymakers. The yellow metal is poised for a second consecutive higher weekly close.



An upside breakout of the symmetrical triangle pattern that formed since the record high was set on 20-May at $2,449.34 bodes well for a continuation of the dominant uptrend. However, sustained gains above $2400 may be difficult initially due to the current overbought condition.

Former resistances at $2,367.22 and  $2,364.17/$2,361.88 now define initial support levels.

Ole Hansen, Head of Commodity Strategy at Saxo Bank remains bullish on gold based on persistent geopolitical risks, strong retail demand in China, ongoing central bank demand, rising debt-to-GDP ratios among major economies (most notably the U.S.), and higher rate cut expectations. Hanson's year-end gold forecast is $2500.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.212 (+0.70%)
5-Day Change: +$1.455 (+4.99%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +38.93

Silver is adding to gains having broken out above channel resistance earlier in the week. Heightened expectations of a September rate cut are helping the cause. 



The white metal is up more than 6% this week and is currently trading at 4-week highs. The 61.8% retracement level of the corrective decline from $32.379 has been negated at $30.942 lending considerable credence to the notion that the corrective low is in place at $28.618.

The next level to watch on the upside is $31.516 (07-Jun high) which corresponds closely with the 78.6% retracement level at $31.574. A push through this level may prove difficult initially given the developing overbought condition, but short-term setbacks are likely to be viewed as buying opportunities.

Former resistances at $30.78/82 and $30.622/56 now mark the first two tiers of support.

Saxo Bank's Hansen is sticking with his year-end target of $35.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

7/3/2024

Gold and silver jump on rising Fed rate cut expectations

OUTSIDE MARKET DEVELOPMENTS: Markets seem to be reading yesterday's comments by Fed Chairman Powell at the Central Banking Forum in Portugal as dovish. U.S. yields and the dollar have weakened, providing a lift for the precious metals.

In my view, Powell didn't say anything new or exciting. The market however has latched on to his statement that "we are getting back on the disinflationary path.” That's just another way of saying we've made progress on inflation, but Powell added that more data are needed before the Fed can start easing policy.

Nonetheless, the prospects for a September rate cut have edged higher. Fed funds futures put the probability at 62% this morning. Attention now turns to this afternoon's release of the minutes from the June FOMC meeting to see if any additional clues are revealed.

ECBSpeak out of Portugal suggests the European Central Bank is on hold for July due to "sticky inflation." However, mounting growth risks likely warrant additional rate cuts later in H2.

The U.S. ADP Employment Survey saw private payrolls increase by 150k in June, below expectations of +165k, versus an upward revised +157k in May.

Initial jobless claims were 238k in the week ended 29-Jun, above expectations of 235k, versus an upward revised 234k in the previous week.

Challenger layoffs declined to 48.8k in June, versus 63.8k in May. That's the lowest print since December.

The U.S. trade deficit widened to -$75.1 bln in May, inside expectations of -$76.4 bln, versus a revised -$74.5 bln in April. Both imports and exports dropped. The deficit remains well off the historic wide of -$101.9 bln from March 2022.

Factory orders fell 0.5% in May, below expectations of +0.3%, versus a negative revised +0.4% in April (was +0.7%).

Services PMI rose modestly to 55.3 in June from 55.1 in May. However, services ISM tumbled to 48.8 in June, well below expectations of 52.5, versus 53.8 in May.

Today's generally weak U.S. economic data – and neutral jobs data – may give the Fed room to make their first rate cut sooner than later.  


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$16.63 (+0.71%)
5-Day Change: +47.66 (+2.07%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34
Weighted Alpha: +23.29

Gold jumped in overseas trading helped by an easier dollar. Gains extended in early U.S. trading and the yellow metal has reached a 2-week high of $2,354.41.


With resistances at $2,337.90/$2,338.03 and $2,339.36 negated, the 21-Jun high at $2,367.22 is the next attraction. While short-term price action has been rather choppy, June's range is intact and June's range was within May's.

Taking all that into consideration, trading since the all-time high was set at $2,449.34 on 20-May sure looks like a continuation pattern within the dominant uptrend. A breach of the June high at $2,386.90 would offer additional encouragement to the bull camp. However, such a move may prove difficult ahead of tomorrow's holiday session given the developing overbought condition.

The World Gold Council's mid-year outlook notes that gold has benefitted this year from "continued central bank buying, Asian investment flows, resilient consumer demand, and a steady drumbeat of geopolitical uncertainty."

The WGC sees gold garnering support in H2 from falling yields along with, "investors looking to hedge bubbling risks amid a complacent equity market and persistent geopolitical tensions."


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.648 (+2.19%)
5-Day Change: +1.471 (+5.11%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +36.72

Silver surged back above $30 overseas and added to those gains in early U.S. trading. The white metal is up over 3% on the day, buoyed by growing confidence that the Fed will cut rates twice this year.



Today's gains constitute an upside breakout of the bear channel that developed over the 6 weeks since silver established an 11-year high at $32.379 on 21-May. As noted in yesterday's commentary, I like it when silver leads on rallies. I really like it when there's buy-in from the gold market.

The $30.824 high from 21-Jun is the next resistance level I'm watching. Given the intraday overbought condition that has developed and tomorrow's holiday, look for the upside to be somewhat limited ahead of Friday's jobs data. However, the underlying uptrend has regained some credence with today's gains.

Today's FOMC minutes remain a potential wild card.

Maria Smirnova, chief investment officer for Sprott Asset Management said, "We expect silver prices to continue to improve, driven by low interest rates, more robust physical, ETF purchases and increased industrial demand.”


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
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Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

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
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals