Zaner Daily Precious Metals Commentary
Wednesday, February 19, 2025
Gold retreats from a fresh record high. Silver fails to sustain gains above $33 again.
OUTSIDE MARKET DEVELOPMENTS: U.S. and Russian delegations met in Riyadh to discuss ending the war in Ukraine. Ending sanctions on Russia was reportedly discussed as part of a peace deal. Kyev and Europe are angry that they do not have seats at the table.
"They've had a seat for three years and a long time before that. This could have been settled very easily," said President Trump. Suggesting Ukraine carries some of the blame for the conflict is a sharp departure from the unequivocal support from the previous administration.
Tensions between the U.S. and Europe are on the rise due to Trump's unilateral action on Ukraine and threats to withdraw from NATO. Vice President Vance also berated European leaders in Munich last week, emphasizing the erosion of free speech rights. "What I worry about is the threat from within — the retreat of Europe from some of its most fundamental values, values shared with the United States of America," he said.
While China is likely cheered by the discord, one of the goals of Trump's foreign policy is to fracture the tighter bond that developed between Russia and China in recent years. However, Trump's method of making blustering statements before walking back to more moderate positions has strained long-standing alliances.
After shifting focus to matching reciprocal tariffs last week, President Trump floated 25% tariffs on cars, chips, and pharmaceuticals on Tuesday. The constantly changing landscape is keeping trade tensions elevated.
FOMC minutes from the January meeting come out later today. I expect the minutes to be consistent with recent FedSpeak, including Chair Powell's testimony before Congress: The Fed has more work to do on inflation and is hence in no hurry to cut rates further.
Fed funds futures continue to suggest there will only be one 25 bps rate cut this year. That move isn't fully priced in until September.
MBA Mortgage Applications fell 6.6% in the week ended 14-Feb, versus +2.3% in the previous week. Purchases notched a fourth straight weekly decline. Refinancings slumped after two weekly gains. 30-year mortgage rates edged lower to 6.93% from 6.95%.
Housing Starts tumbled 9.8% to 1.366M in January, below expectations of 1.394M, versus an upward revised 1.515M in December (was 1.499M). Permits rose a scant 0.07%, but completions jumped 7.6%. Affordability remains a headwind amid high mortgage rates and building material cost uncertainties.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$0.32 (-0.01%)
5-Day Change: +$24.12 (+0.83%)
YTD Range: $2,607.16 - $2,946.39
52-Week Range: $2,015.17 - $2,9446.39
Weighted Alpha: +42.29
Gold edged to a new all-time high in overseas trading, buoyed by persistently high trade angst, heightened geopolitical tensions, and a soft dollar. It was the first new record high in six sessions.
Albeit modest, the recent setback relieved the overbought condition somewhat, allowing for the latest round of gains. However, upside follow-through has been limited thus far and I suppose we can't rule out a potential double top just yet. I'm also keeping an eye on a potential bearish RSI divergence.
That being said, today's breach of the $2,943.10 Fibonacci level (161.8% retracement of the decline from $2,789.68 to $2,541.42) bodes well for attainment of the long-standing $3,000 objective. Above the latter, the next Fibonacci level comes in at $3,037.94 (200% retrace).
Goldman Sachs has raised its year-end target to $3,100, citing central bank buying as a key driver. They mentioned $3,300 has a more bullish target if economic and trade uncertainty escalates.
Gold shipments from Singapore to the U.S. surged 27% in December, the highest level in nearly three years. This is further confirming evidence of the massive flows of gold from global centers to the U.S. since the November election.
Yesterday's low at $2,894.21 marks initial support. More significant support is found at $2,880.05/$2,878.68.
Downticks are likely to continue to attract buying interest.
OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$0.026 (+0.08%)
5-Day Change: +$0.404 (+1.25%)
YTD Range: $28.946 - $33.340
52-Week Range: $22.282 - $34.853
Weighted Alpha: +36.35
Silver probed briefly back above $33 helped by another new record high in gold and a soft dollar. However, gains could not be sustained, leaving last week's four-month high at $33.340 well protected.
A breach of chart/Fibonacci resistance at $33.340/$33.554 is needed to perpetuate the two-month uptrend and confirm potential back to last year's high at $34.853. I'd settle for a close above $33 to bolster my confidence.
Trade uncertainty continues to stoke global inflation and growth worries, weighing on demand prospects for silver.
Today's Asian low at $32.562 has been slightly exceeded. A breach of the midpoint of this week's range at $32.537 would suggest additional downside potential back to $32.414/400.
More important supports are marked by Tuesday's low at $32.102 and Monday's low at $32.004. A retreat below $32.00 would put the 20-day moving average at $31.702 in play.
Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
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