Blog

Gold trades higher on risk-off sentiment, but remains within Friday's range

OUTSIDE MARKET DEVELOPMENTS: Moody's downgraded the U.S. credit rating one notch from AAA to Aa1 late on Friday. Treasuries, stocks, and the dollar begin the week on defense due to heightened risk aversion.

On Meet the Press, Treasury Secretary Bessent downplayed the downgrade. “Moody’s is a lagging indicator — that’s what everyone thinks of credit agencies,” said Bessent.

If anything, Moody's is late to the party. The other two major credit agencies, S&P and Fitch, downgraded the U.S. from their highest ratings in 2011 and 2023, respectively. The national debt was $14.3 trillion in Q2 2011 and had risen to $32.3 trillion in Q2 2023.

“Successive U.S. administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs. We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration,” according to Moody's.

Moody's joining the other two ratings agencies with a one-notch downgrade is arguably an event of negligible significance. However, it is the latest in a long line of warning signs that have historically been disregarded by most politicians in DC. At some point, the debt and funding burden will reach levels where a course correction is no longer an option. 

It may be implied that Moody's doesn't hold out much hope for Trump's "Big Beautiful Bill" to meaningfully address the growing government debt. “We are determined to bring the spending down and grow the economy,” vowed Bessent.

On Sunday, the House Budget Committee passed the reconciliation bill, overcoming challenges from budget hawks within the GOP. The House may vote on the legislation as soon as this week and is expected to split along party lines, making passage dependent on GOP unity.

President Trump spoke with Putin, Zelenskyy, and other European leaders today. After the call, Trump said Russia and Ukraine "will immediately start negotiations toward a Ceasefire and, more importantly, an END to the War."

Leading Indicators fell 1.0% in April, in line with expectations, versus a revised -0.8% in March (was -0.7%).


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$41.86 (+1.31%)
5-Day Change: +$5.85 (+0.18%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,287.64 - $3,495.89
Weighted Alpha: +40.31

Gold is trading higher, boosted by risk-off sentiment stemming from the Moody's downgrade. A softer dollar is providing some additional lift, although price action remains confined to Friday's range thus far.



The inability of gold to sustain the probe below the 50-day moving average provides some encouragement to the bull camp, but it's unclear at this point if the corrective low is in place. A breach of Friday's high at $3,251.05 would allow for a test of previous highs at $3,256.01 and 3,262.11.

A move back above $3,300 would put the yellow metal back above the 20-day MA. The midpoint of the range comes in at $3,311.51.

On the downside, today's low at $3,203.51 protects Friday's low at $3,161.16. Below the latter, the more important $3,127.12 low from last week would be back in play.

Global ETFs saw net outflows of 30 tonnes last week as investors shifted back to riskier assets on optimism that the worst of the tariff uncertainty was behind us. All regions were net sellers. It was the biggest net outflow since the week of 30-Sep'22.

The COT report for last week showed net speculative long positions fell 1.3k to 161.2k contracts, versus 162.5k in the previous week.  It was the fourth straight weekly decline.

Silver is consolidating within Friday's range. A firmer gold price and softer dollar are providing support, but the Moody's downgrade calls to mind the headwind posed to the economy by our massive debt burden.



Selling above $33 and buying below $32 still looks like an attractive short-term strategy until fresh inputs allow the white metal to pick a direction.

The 20- and 50-day MAs at $32.714/758 mark resistance once again. However, there are mutiple tiers of resistance above that limiting the upside. The key levels are the high for the year at $34.543 and the 22-year high from October at $34.853.

On the downside, Friday's low at $31.945 protects Thursday's low at $31.701. More important support comes in at $31.362/114 zone, where the 200-day MA corresponds with an important retracement level.

The latest report showed net speculative long positions declined by 1.5k to 47.8k contracts, versus 49.3k in the previous week. It was the second consecutive weekly decline.

CFTC Silver speculative net positions

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com

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.

Gold poised for weekly loss as easing of trade and geopolitical tensions stoked risk appetite

OUTSIDE MARKET DEVELOPMENTS: Risk appetite has returned after Russia and Ukraine held their first face-to-face meeting since 2022. Putin did not attend, perhaps signalling a halfhearted commitment. The talks ended without a ceasefire agreement.

However, the two sides reportedly agreed to exchange 1,000 prisoners and to hold a follow-up meeting. "The parties have agreed in principle to come together again," said Turkish Foreign Minister Hakan Fidan.

President Trump concluded a four-day Middle East trip, visiting Saudi Arabia, Qatar, and the UAE, where he was warmly received and secured investment deals worth over $2 trillion. The trip focused heavily on economic agreements, including a $600 bln Saudi commitment and a $200 bln UAE AI deal, while also lifting U.S. sanctions on Syria.

During his trip, the President repeatedly said that Iran can not be allowed to have a nuclear weapon, and indicated they were "very close" to a deal. However, Trump still rattled the sabre, saying there are only two paths forward. "There’s a friendly and a non-friendly, and non-friendly is a violent course, and I don’t want that," he warned.

As I've been saying for several days, markets are eager for fresh positive news on the trade front. President Trump acknowledged that things are progressing too slowly and that tariffs will go up again if deals aren't struck.

Housing Starts rose 0.022M to 1.361M in April, near expectations of 1.362M, versus a revised 1.339M in March (was 1.324M). Permits fell 0.069M to 1.412M. Completions -0.091M to 1.458M.

Import Price Index rose 0.1% in April, above expectations of -0.4%, versus a revised -0.4% in March (was -0.1%); +0.1% y/y, down from +0.8% in March. Ex-petro +0.4% m/m.

Export Price Index rose 0.1% in April, above expectations of -0.4%, versus a revised +0.1% in March (was unch); +2.0% y/y, down from +2.6% in March. 

Michigan Sentiment (Preliminary) fell 1.4 points to a 35-month low of 50.8 in May, below expectations of 53.5, versus 52.2 in April. Year-ahead inflation expectations surged to 7.3%, versus 6.5% in April. "Consumers continue to express somber views about the economy," according to the report.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$64.77 (-2.00%)
5-Day Change: -$143.83 (-4.32%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,287.64 - $3,495.89
Weighted Alpha: +34.24

Gold is poised for its biggest weekly loss since the 11-Nov'24 week, as the easing of trade and geopolitical tensions this week stoked risk appetite. While Thursday's rebound into the range faded, the low for the week at $3,127.12 appears protected, at least ahead of the weekend.



A close above the 50-day moving average at $3,169.97 seems likely today, which would provide some encouragement to the bull camp. However, The $3,300 level must be regained to truly return confidence to the underlying uptrend. The 20-day MA comes in at $3,302.21 and the midpoint of the corrective range is at $3,311.51.

A breach of Friday's low at $3,161.16 early in the week ahead would leave $3,127.12 vulnerable to a retest. Below the latter, the next tier of Fibonacci support at $3,076.12 and the $3,000 zone would look increasingly attractive.

Incremtum's In Gold We Trust report thinks a correction as $2,800 is possible without damaging the "long-term Big Long case."  Their price models continue to indicate "the gold bull market still has considerable room to run."


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$0.505 (-1.55%)
5-Day Change: -$0.686 (-2.10%)
YTD Range: $28.565 - $34.543
52-Week Range: $26.524 - $34.853
Weighted Alpha: +3.16

Silver is defensive to end the week after failing to sustain uptricks above $33 once again. While the white metal should be encouraged by optimism on trade and the reduced growth risks, weakness in gold and a firm dollar provide headwinds.



Given the recent price action, selling above $33 and buying below $32 could be an attractive strategy early in the new week. I'll continue to watch gold for cues; with an expectation that silver will outperform gold on downticks and underperform on upticks.

The 20- and 50-day MAs at $32.730/752 mark resistance once again. However, it's going to be tough to start tilting more aggressively bullish until mutiple tiers of resistance above the market are taken out. The key levels are the high for the year at $34.543 and the 22-year high from October at $34.853.

On the downside, Thursday's low at $31.701 protects the more important $31.338/114 zone, where the 200-day MA corresponds with an important retracement level.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com

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.

Gold rebounds on revived risk aversion, softer dollar

OUTSIDE MARKET DEVELOPMENTS: Market sentiment has swung back toward risk aversion as the euphoria associated with the UK trade deal and tempered tensions with China is wearing off. Markets are craving further progress on the trade front.

Ukrainian President Zelenskyy is in Turkey, ostensibly for direct peace talks with Russia. However, the Kremlin has confirmed that President Putin will not be there. President Trump had suggested his attendance was contingent on Putin being there. It appears these will be much lower-level talks than many had hoped for, dimming the prospects for a deal.

Trade optimism earlier in the week pushed the dollar index to a five-week high near 102. The greenback got some additional underpinning from a Bloomberg report that said U.S. officials were not pursuing a weaker dollar as part of trade negotiations.

U.S. PPI for April stunned with a 0.5% drop, the first negative print in 18 months and the largest in five years. This, combined with the rolloff of the +0.5% print from last April, results in a full percentage point drop in annualized PPI from a revised 3.4% in March to 2.4%. Core PPI tumbled to 3.1% y/y from a revised 4.0%.

Combined with weaker-than-expected CPI in April, there is mounting evidence that inflation risks are no longer a credible excuse to not cut rates. I expect President Trump to say something to that effect today.

So far, the reaction in Fed funds futures has been tepid. The market has priced in 50 bps of easing by year-end, with the first cut likely to come in September. Powell speaks today on the ongoing monetary policy framework review.

Retail Sales rose 0.1% in April on expectations of UNCH, versus a positiive revised +1.7% in March ( was +1.4%). Ex-auto +0.1%, below expectations of +0.3%, versus a revised +0.8% in March (was +0.5%).

PPI -0.5% in April, below expectations of +0.2%, versus an upward revised UNCH in March (was -0.4%); 2.4% y/y, down from an upward revised 3.4% in March (was 2.7%). Core -0.4%, below expectations of +0.3%, versus an upwardly revised +0.4% in March (was -0.1%); 3.1% y/y, versus a revised 4.0% in March (was 3.3%).

Initial Jobless Claims were steady at 229k in the week ended 10-May, above expectations of 226k, versus a revised 229k in the previous week (was 228k). Continuing claims rose 9k to 1,881k in the 03-May week, versus a revised 1,872k in the previous week (was 1,879k).

Philly Fed Index rebounded 22.4 points to -4.0 in May, above expectations of -10.0, versus -26.4 in April.  Prices paid continued to march higher, reaching a 35-month high of 59.8.

Empire State Index fell 1.1 points to -9.2 in May, inside expectations of -10.0, versus -8.8 in April. "Firms continued to expect conditions to worsen in the months ahead," according to the NY Fed.

Industrial Production was UNCH in April, below expectations of +0.2%, versus -0.3% in March. Cap use edged down to 77.7% from 77.8% in March.

Business Inventories rose 0.1% in March on expectations of +0.2%, versus +0.2% in February.

NAHB Housing Market Index fell 6 points to 34 in May, below expectations of 40, versus 40 in April. That ties Nov'23 as the lowest reading since Dec'22. 


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$0.74 (-0.02%)
5-Day Change: -$127.92 (-3.87%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,287.64 - $3,495.89
Weighted Alpha: +34.00

Gold is recovering from a five-week low of $3,127.12 that was set in Asian trading. The yellow metal is being buoyed by a tilt toward risk-off due to a lack of additional progress on trade, and dimmed hopes for a Russia-Ukraine peace deal.



A slightly easier dollar is helping underpin the yellow metal. However, the dollar index is still higher on the week, and a close above 100.69 would confirm a fourth straight higher weekly close. Dollar strength poses a headwind for gold because it makes the precious metal more expensive for foreign buyers.

Gold overran my secondary support zone at $3,165.84/$3,157.86, and the breach of the 50-day moving average is troubling for the bull camp. While it looks like we'll close back above the 50-day today, the downside remains vulnerable.

The $3,200 zone is support once again with today's low at $3,127.12 providing another barrier ahead of the next tier of Fibonacci support at $3,076.12. Below the latter, the $3,000 zone would be vulnerable to tests.

I do continue to view losses as corrective within the long-term uptrend. Incremenum's annual In Gold We Trust report, released today, agrees.

The much-anticipated report entitled The Big Long posits that a secular bull market is forming and that we are "entering the second half of the golden decade." The Incrementum gold price model targets $4,800 by 2030, and that could be as high as $8,900 in an inflationary scenario.

Incrementum notes that cumulative ETF and central bank demand in Q1 was 470 tonnes, the second highest level since 2010. They also cited the rising influence of emerging Asian markets.

A climb back above $3,300 is needed to ease pressure on the downside and favor renewed tests above $3,400. I still see potential for fresh record highs above $3,500 before the end of H1.

Silver reached a five-week low of $31.701 before renewed buying interest surfaced. The white metal is being helped by the rebound in gold and an easier dollar.



While the probe below the 100-day moving average has not been sustained, it presents additional downside risk to $31.309/114, where the 200-day MA corresponds with an important retracement level. The $32 zone and today's low at $31.701 provided intervening supports.

Persistent failures to hold on to gains above $33 in recent weeks leave upside potential somewhat suspect. That concern is bolstered if the dollar continues to rally.

A close this week back above the 20- and 50-day MAs at $32.733/756 would ease pressure on the downside somewhat, but it would still be tough to get overly bullish given the substantial resistance levels above. Further consolidation would be likely at that point.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com

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.

Gold slides to 5-week lows as fear trades continue to get unwound

OUTSIDE MARKET DEVELOPMENTS: Canada has suspended almost all of the retaliatory tariffs imposed on U.S. goods, according to a Bloomberg article. Reduced trade worries, along with easing geopolitical risks, have contributed to a global sense of relief, boosting market sentiment and risk appetite this week.

On the geopolitical front, the ceasefire between India and Pakistan is holding, and the countries have exchanged prisoners. “Just days ago, my administration successfully brokered a historic ceasefire to stop the escalating violence between India and Pakistan, and I used trade to a large extent to do it,” President Trump said in Riyadh.

Direct peace talks between Russia and Ukraine are slated to take place in Turkey beginning Thursday. Whether Putin and Trump will attend remains unknown. "(Putin) would like me to be there, and that's a possibility... I don't know that he would be there if I'm not there. We're going to find out," Trump said.

MBA Mortgage Applications rose 1.1% in the week ending 9-May, versus an 11% surge in the previous week. The 30-year mortgage rate edged up to 6.86% from 6.84%.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$15.28 (-0.47%)
5-Day Change: -$185.54 (-5.51%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,287.64 - $3,495.89
Weighted Alpha: +34.06

Gold has come under additional pressure, dropping to a five-week low. The yellow metal continues to be pressured by the unwinding of fear trades triggered by President Trump's tariffs, and some optimism about the upcoming peace talks between Russia and Ukraine.



The breach of support at $3,209.84/$3,204.91 (Monday's low/01-May low) leaves gold vulnerable to additional losses toward $3,165.84/$3,157.86, where an important Fibonacci level corresponds with the 50-day moving average. So far, a minor chart point at $3,175.09 (11-Apr low) has contained the downside.

I initially suggested a symmetrical triangle was likely to form, but today's fresh corrective lows now have me thinking bull flag or descending wedge. These patterns would also be considered continuation patterns within the longer-term uptrend, but suggest we will have to endure a deeper correction.

If $3,209.84/$3,204.91 gives way, the next significant tiers of support are at $3,076.12 (Fibonacci) and $3,000. The 100-day moving average is at $2,972.83 today, but should rise to bolster the $3,000 zone by next week.

Former support at $3,204.91/$3,209.84 now marks first resistance. Minor intraday highs at $3,237.98/40.26 provide an additional barrier ahead of today's overseas and yesterday's highs at $3,256.01/62.11.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$0.744 (-2.27%)
5-Day Change: -$0.222 (-0.68%)
YTD Range: $28.565 - $34.543
52-Week Range: $26.524 - $34.853
Weighted Alpha: +4.01

Silver is back under pressure within the range after failing once again to sustain gains above $33 on Tuesday. The white metal is being weighed by weakness in gold and a modestly firmer dollar.



If traders don't have the wherewithal to take silver higher even amid revived trade and economic optimism, it is suggestive of heightened downside risk. The white metal could remain in the recent range and await fresh news, or it could trade lower to shake out weak longs and seek additional buying interest.

The latter becomes more likely if support at $31.969/923 (Monday's low/100-day MA) gives way. At that point, a breach of the $31.762 low from 01-May would also be likely, shifting focus to $31.281/114, where the 200-day MA corresponds closely with 50% retracement of the rally from $28.565 07-Apr low) to $33.622 (25-Apr high).

Minor intraday resistances at $32.400 and $32.589 protect the 20- and 50-day moving averages at $32.724/757. The overseas high at $32.961 is an additional barrier ahead of $33.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com

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.

Good morning. The precious metals are mixed in early U.S. trading.

U.S. calendar features MBA Mortgage Applications, EIA Data.

FedSpeak due from Jefferson & Daly.

Gold consolidates Monday's losses, awaiting fresh inputs on trade, geopolitics, and economy

OUTSIDE MARKET DEVELOPMENTS: Risk appetite remains elevated as trade optimism continues to ease fears of a trade war and tariff-driven global recession. The U.S. and China agreed to roll back tariffs for 90 days while a broader trade deal was negotiated, boosting confidence that deals with other key trading partners will also be reached.

The market is eager to see that additional progress. While we continue to hear that more deals will be forthcoming, Treasury Secretary Bessent cautioned that a deal with the EU may take some time.

Speaking on Bloomberg, Bessent said that the EU has a “collective action problem,” which is hampering trade negotiations. “I think the US and Europe may be a bit slower,” he said.

Reduced growth risks caused Fed rate cut expectations for June to fall off the table this week. Fed funds futures put the chances of a 25 bps cut at just 8.4%, down from 30.5% a week ago and 64.4% a month ago. The market now only expects 52 bps of easing by year-end, with the first 25 bps cut not fully priced in until October. 

The trade was worried that tariffs enacted in April would result in an upside inflation distortion, but CPI unexpectedly cooled. Headline CPI fell to 2.3% y/y, the lowest print since February 2021. Core CPI was unchanged at 2.8%.

There's still plenty of uncertainty surrounding trade and the economy, and the Fed has been clear that it's in no hurry to adjust rates. However, cooling inflation gives the doves some fodder for conversation at the next FOMC meeting.

You may recall that core PCE inflation – the Fed's preferred measure – fell to 2.6% y/y in March, tying June as the lowest reading since March 2021. Median expectations for April are 2.8%, but I suspect that if we see the CPI results replicated in PPI and import/export prices, PCE inflation expectations will be trimmed.

On Monday, Treasury announced a $258.4 bln budget surplus for April, a $48.9 bln increase (+23.3%) versus last April. Surpluses in April are not uncommon due to incoming tax receipts, but this surplus was the second-largest on record.

A surge in customs receipts (tariffs) contributed $15.6 bln to total receipts. That's an increase of $9 bln f(136%) from a year ago.

NFIB Small Business Optimism Index declined by 1.6 points to 95.8 in April, versus 97.4 in March. The Uncertainty Index fell 4 points to 92 but remained well above the historical average of 68. “Uncertainty continues to be a major impediment for small business owners in operating their business in April, affecting everything from hiring plans to investment decisions,” said NFIB Chief Economist Bill Dunkelberg.

CPI rose 0.2% in April, below expectations of +0.3%, versus -0.1% in March; 2.3% y/y, down from 2.4% in March. Core rose 0.2% on expectations of +0.3%, versus +0.1% in March; 2.8% y/y, unchanged from March.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$18.78 (+0.58%)
5-Day Change: -$186.58 (-5.44%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,287.64 - $3,495.89
Weighted Alpha: +37.93

Gold is consolidating Monday's losses, trading at the low end of yesterday's range. The absence of fresh news on the trade front and an easier dollar are providing the yellow metal with some modest buoyancy.



The major stock indexes have recouped the losses since President Trump's initial "Liberation Day" tariff announcements. Gold, on the other hand, remains comfortably above the $3,114.61 open from 02-Apr, suggesting there's more to gold's strength than just its safe-haven status.

However, additional good news on trade and/or further dialing back of geoplitical tensions would perpetuate the unwinding of risk-aversion positioning. That could prompt a retest of support at $3,209.84/$3,204.91 (Monday's low/01-May low) for gold.

A drop below $3,200 would suggest additional downside potential to Fibonacci support at $3,165.84 (61.8% retrace of the leg-up from $2,961.83 to the record high at $3,495.89). The rising 50-day moving average is currently at $3,152.64, adding some significance to this secondary support area.

While I remain confident in the underlying uptrend, it's very difficult to determine where the buyers will step back in during a correction. At this point, the downside still seems to be vulnerable to further tests.

The halfway back point of yesterday's decline at $3,267.46 has successfully capped the upside thus far. The overseas high at $3,262.11 bolsters this level. A minor chart point at $3,280.91 protects the more important $3,320.44/$3,325.08 area, where the 20-day MA corresponds closely with yesterday's high.

Silver probed back above $33 in overseas trading, but once again, these gains could not be sustained. The white metal made another run at the upside in early U.S. trading, but the intraday rally has faltered ahead of $33 thus far.



Today's high at $33.197 bolsters last week's highs at $33.231/239 as a key short-term resistance. The 20- and 50-day moving averages come in at $32.752/765 today and remain significant on a close basis.

The bull camp can feel somewhat encouraged by the sustained drop below 100 in the gold/silver ratio. However, a breach of support in the ratio at 97.574 (23-Apr low) is still needed to really boost confidence for a run at key highs in silver at $33.662 (25-Apr high), the high for the year at $34.543, and the 22-year high from October at $34.853.

Today's intraday low at $32.546 and a minor chart point at $32.271 protect Monday's low at $31.969. The latter stands in front of the key 01-May low at $31.762.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com

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.

Gold retreats to the $3,200 zone on trade optimism, easing of geopolitical tensions

OUTSIDE MARKET DEVELOPMENTS: Weekend trade talks between the U.S. and China bore fruit with both countries agreeing to reduce tariffs for 90 days as negotiations continue. In a joint statement, the parties  recognized the "importance of a sustainable, long-term, and mutually beneficial economic and trade relationship."

The U.S. will temporarily lower its tariffs on Chinese imports from 145% to 30%, and China will reduce its levies on American goods from 125% to 10%. China also agreed to "adopt all necessary administrative measures to suspend or remove the non-tariff countermeasures taken against the United States since April 2," according to the statement.

The progress made in Switzerland significantly dials back trade tensions, stokes risk appetite, and saps gold's haven bid. U.S. shares are up sharply. Make no mistake though, there's still plenty of uncertainty out there, and markets want to see further progress toward trade deals with China and other key trading partners.

The dollar index surged to a five-week high as trade deal hopes bolstered economic optimism. A week after the Fed announced that it would indeed remain on hold, rate cut hopes have been further diminished.

A fragile ceasefire is holding between India and Pakistan, although each has accused the other of violations. 
"The underlying issues remain, and every six months, one year, two years, three years, something like this happens and then you are back at the brink of war in a nuclear environment," acknowledged Pakistan's National Security Advisor.

President Trump is taking credit for the ceasefire. "We stopped a nuclear conflict, I think it could have been a bad nuclear war, millions of people could have been killed, so I'm very proud of that," he said.

Trump used trade as the carrot. "We're going to do a lot of trade with Pakistan, we're going to do a lot of trade with India," he pledged. Some in India (and probably Pakistan as well) are reportedly not happy with the outcome. The situation remains tense.

President Putin of Russia proposed direct peace talks with Ukraine in Turkey. “Russia is ready to negotiate without any preconditions,” said Putin.

"I have openly expressed my readiness to meet. I will be in Türkiye," responded President Zelenskyy of Ukraine. Zelenskyy also requested that President Trump attend that meeting.

Hamas has released American/Israeli hostage Edan Alexander. "This comes as part of the mediators’ efforts to reach a ceasefire, open the border crossings, and allow the entry of aid and relief for our people in the Gaza Strip," Hamas said in a statement.

Key U.S. inflation and retail sales data for April come out this week. There may be some tariff-related distortions, so it's not clear where the actual prints will fall in relation to median expectations. Any significant misses may be discounted by the trade, particularly in light of the uptick in trade optimism.

Treasury Budget for April comes out this afternoon. The market is expecting $256.0 bln.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$115.89 (-3.48%)
5-Day Change: -$95.66 (-2.87%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,287.64 - $3,495.89
Weighted Alpha: +37.54

Gold came under heavy selling pressure at the Asian open on news that the U.S. and China had reached at least an interim trade agreement. A firmer dollar and easing geopolitical tensions applied additional pressure to the yellow metal.



I wouldn't go so far as to say that peace is breaking out everywhere (including in the trade war), but risk-on sentiment has shifted attention away from the safe-haven appeal of gold, back to risk assets. The DJIA is up more than 1,000 points today.

Last week saw net outflows in global gold ETFs for the first time in 15 weeks. The net outflow was just 4.4 tonnes as buying in Asia offset more than a third of North American and European selling.

Net speculative long positions in futures fell 0.8k to 162.5k contracts in the week ended 9-May, versus 163.2k in the previous week, according to the latest COT report. It was the third straight weekly decline and the lowest net long positioning in over a year.

The 01-May low at $3,204.91 has successfully contained the downside thus far, keeping the range intact. My favored scenario continues to call for consolidation within the $3,495.89/$3,204.91 range.

In Friday's comment, I suggested there would be opportunities on both sides of the market. While I was not expecting the lower boundary to be challenged the very next session, today's price action is not inconsistent with recent volatility.

Further progress on trade and mitigation of geopolitical risks would leave gold vulnerable to additional tests of the $3,200 zone. Penetration would shift focus to Fibonacci support at $3,165.84. The 50-day moving average is currently at $3,145.86 and should rise to bolster the Fibonacci level by midweek.

The high from earlier U.S. trading at $3,245.22 marks initial resistance. The halfway back point of today's decline comes in at $3,267.46, and there's a minor chart point at $3,280.91. More important resistance is marked by the 20-day MA and today's Asian high at $3,318.86/$3,325.08.

Penetration of the latter is needed to clear the way for a move back into the upper half of the range above $3,350.40. The $3,431.46/63 highs from last week are seen as a formidable barrier ahead of the key $3,500 zone.  


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$0.744 (-2.27%)
5-Day Change: +$0.129 (+0.40%)
YTD Range: $28.565 - $34.543
52-Week Range: $26.524 - $34.853
Weighted Alpha: +5.68

Silver slumped back to the $32 zone, weighed by the sharp drop in gold and a stronger dollar. While still lower on the day, the white metal is more than 50¢ off the intraday low, buoyed by optimism on trade.



As long as the trade sees progress on the trade front, I expect silver to outperform. The gold/silver ratio is testing back below 100 with potential for a challenge of support at 97.574 (23-Apr low).

Net speculative long positions in silver futures fell just 0.6k to 49.3k contracts in the week ended 9-May, versus 49.9k in the previous week, according to the latest COT report. Spec long positioning remains fairly stable despite the recent volatility.

Important support marked by the 01-May low at $31.762 was left unmolested. While further tests of the downside can not be ruled out, this support zone has been reinforced.

The recent inability of silver to sustain gains above $33 remains a concern, and the next test above this level may have to come without the help of gold. Once again, I'm watching the convergence of the 20- and 50-day moving averages at $32.719/745 on a close basis.

A close above this level would bode well for a test of the European high at $32.972. Above $33, last week's highs at $33.231/239 will be back in play.

Other significant tiers of resistance are noted at $33.662 (25-Apr high), the high for the year at $34.543, and the 22-year high from October at $34.853. It would take a breach of the latter to truly consider the longer-term uptrend off the $11.703 from March 2020 to be back underway.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com

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.