Blog posts of '2024' 'November'

11/5/2024

Gold and silver mildly corrective to consolidative awaiting election outcome

OUTSIDE MARKET DEVELOPMENTS: It's election day in America and more than 80 million votes have already been cast. The outcome of the Presidential race remains too close to call.

Boeing machinists have agreed to a new employment contract, ending a 7-week strike. The workers will receive a 38% raise over the next four years.

U.S. Secretary of State Anthony Blinken says Hamas has rejected a short-term ceasefire deal proffered by Egypt. Arab mediators contend that Netanyahu's intransigence remains a major roadblock as well.

Iran's supreme leader Ayatollah Ali Khamenei continues to threaten retaliation against both Israel and the U.S. The regime is also warning it may restart its nuclear weapons program which would be very destabilizing to the region.

A 25 bps rate cut is fully priced in for the two-day FOMC meeting that begins tomorrow. Fed funds futures continue to show a chance for a pause in December. The trade will be paying close attention to the guidance, but I think the central bank will stick to the 'data-dependent' mantra.

U.S. Goods & Services Trade Deficit surged to $84.4 bln in September, outside expectations of -$84.1 bln, versus -$70.8 bln in August (was -$70.4 bln). "The September increase in the goods and services deficit reflected an increase in the goods deficit of $14.2 billion to $109.0 billion and an increase in the services surplus of $0.6 billion to $24.6 billion," according to the BEA report.

U.S. S&P Service PMI fell to 55.0 in October, below expectations of 55.3, versus a preliminary read of 55.3. "Particularly welcome news comes from the cooling inflation picture," said Chris Williamson of S&P Global Market Intelligence.

U.S. Services ISM rose to a 27-month high of 56.0 in October, above expectations of 53.5, versus 54.9 in September. Prices moderated to 58.1 from 59.4. The employment gauge rebounded 4.9 points to 53.0.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$5.64 (+0.21%)
5-Day Change: -$34.68 (-1.25%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +41.93

Gold edged to an eight-session low in Asian trading before rebounding into the range. The short-term tone is consolidative to mildly corrective as the market awaits the U.S. election outcome.



Ultimately, the trend in gold remains decidedly bullish. While election results will remove the risk associated with U.S. political uncertainty, the technicals and a host of fundamental factors will continue to drive the uptrend.

Geopolitical risks, debt, easing by some major central banks, growth risks in Europe and China, official sector gold buying, and seasonal demand are all on the bullish side of the ledger. A resilient U.S. economy and stock market, cooling inflation, and recent three-month highs in the dollar pose headwinds.

The latest COT report shows the net speculative long position in gold futures contracted by 17.5k contracts to 278.7k in the week ended 01-Nov. This was likely associated with profit-taking and position squaring ahead of the election.

I'm hopeful that the U.S. election will go smoothly with a winner in the Presidential race declared by late this evening. Without any significant political unrest, we could see gold extend the correction.

I'm watching chart support at $2,715.51/$2,711.17, which is bolstered by the 20-day moving average at $2,711.08 today. Secondary support is at $2,698.15 (50% retracement of the leg up from $2,606.62 to $2,789.68).

Anything that extends the political uncertainty such as a drawn-out period of recounts, legal challenges, and unrest would put the yellow metal back on the bid. Initial resistance is marked by the intraday high at $2,748.87, which protects the more important $2,757.95/$2,762.22 area.

Penetration of the latter would bode well for a retest of the $2,789.68 record high from last week. Beyond that, the previously established $2,810.38 Fibonacci objective attracts.

Silver slipped to a 12-session low in Asian trading but subsequently rebounded to exceed yesterday's high and set up a potential key reversal. Like gold, I call the short-term tone consolidative to mildly corrective ahead of the U.S. election results.



The CFTC COT report for the week ended 01-Nov showed the net speculative long position in silver fell by 6k to 60.4k contracts versus 66.4k in the previous week. The fact that the spec long position remains above 60k contracts despite the 3.8% price decline is encouraging.

CFTC Silver speculative net positions

The dominant trend remains bullish with the white metal just 6% off the 12-year high set 22-Oct at $34.853. However, ongoing concerns about the Chinese economy and worries that a Trump win may lead to more restrictive trade policies that could negatively impact demand for imported silver-centric products like consumer electronics, solar panels, and cars are headwinds.

Further downside potential to $31.995 (61.8% retracement of the leg-up from $30.229 to $34.853) can't be ruled out. Today's Asian low at $32.309 provides an intervening barrier.

A rebound above Friday's high at $33.066 would further ease pressure on the downside and shift focus to the halfway back point of the correction at  $33.581. Penetration of the latter would bode well for renewed short-term tests above $34.


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.

11/4/2024

Gold and silver consolidate ahead of election day

OUTSIDE MARKET DEVELOPMENTS: New eight-foot security fencing has been installed around the White House, U.S. Capitol, the Vice President's residence, and the Treasury Complex as Washington, DC, prepares for potential post-election unrest. Businesses and commercial buildings in the nation's capital have also begun boarding up.

Let's hope these all prove to be unnecessary precautions.

The Des Moines Register poll showed that Kamala Harris has "leapfrogged" Donald Trump to take the lead in historically Republic-leaning Iowa. While the poll was within the margin of error, it has sparked the unwinding of so-called "Trump trades".

The Chinese yuan and Mexico peso rallied as tariff bets were unwound, putting pressure on the dollar. U.S. Treasuries also rallied providing additional weight to the greenback as the trade reduced bets for more aggressive government spending and a less dovish Fed. Stocks are mixed.

In other FX news, the Indian rupee fell to another record low against the dollar amid ongoing equity outflows. The RBI is expected to continue intervening to defend the 84 zone.

China's National Peoples Congress began a week-long meeting to discuss additional stimulus measures. The body is expected to approve China's largest fiscal spending package yet, but many experts believe it won't be enough.

The challenge faced by policymakers has been to revive confidence among Chinese consumers beset by a prolonged property crisis. That goal remains elusive even as those policymakers have continued to reveal new monetary and fiscal measures.

U.S. Factory Orders fell 0.5% in September, in line with expectations, versus a negative revised -0.8% in August (was -0.2%). Inventories fell 0.2%.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$4.68 (+0.17%)
5-Day Change: -$5.27 (-0.19%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +41.75

Gold remains generally well bid and within striking distance of the $2,789.68 record high set on 30-Oct, despite last week's corrective setback. Uncertainty about tomorrow's U.S. election, persistent geopolitical risks, and expectations that the Fed will continue its easing campaign on Thursday are all seen as supportive.



If the election goes smoothly with a winner in the Presidential race declared in a reasonable time frame, and without resulting in political unrest, gold could correct further. However, I'd expect those losses to attract buying interest as focus returns to the geopolitical situation and the overarching easing campaigns of many key central banks.

Throughout this year's rally, the 20-day moving average has been an attraction during corrective phases. The 20-day MA comes in at $2,705.1o today, bolstering chart support at $2,715.51/$2,711.17. Additional support is noted at $2,698.15 (50% retracement of the leg up from $2,606.62 to $2,789.68).

On the other hand, a drawn-out period of recounts, legal challenges, and unrest would keep the yellow metal underpinned with the potential for fresh record highs. A rebound above resistance at $2,757.95/$2,762.22 would bode well for a retest of $2,789.68 and an eventual extension to the previously established $2,810.38 Fibonacci objective.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +0.353 (+1.09%)
5-Day Change: -$1.278 (-3.80%)
YTD Range: $21.945 - $34.853
52-Week Range: $20.704 - $34.853
Weighted Alpha: +44.13

Silver has fallen to a two-week low having failed to sustain earlier upticks. The white metal is trading lower for a fourth consecutive session.



Price action in silver suggests the market doesn't have much faith in what Chinese policymakers are likely to come up with to stoke the flagging economy. Friday's breach of support at $32.700/$32.542 suggested further downside potential to $31.995 (61.8% retracement of the leg-up from $30.229 to $34.853).

A rebound above Friday's high at $33.066 would ease pressure on the downside somewhat and shift focus to the halfway back point of the correction at  $33.591. Penetration of the latter would bode well for renewed short-term tests above $34.


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.

11/1/2024

Gold starts November on defense, but ongoing haven demand should limit the downside

OUTSIDE MARKET DEVELOPMENTS: Iran's Supreme Leader Khamenei has ordered his military to strike back at Israel for last week's retaliatory attack on Iranian military targets by Israel. While the Iranians initially downplayed last Friday's attack, Khamenei has now deemed it too big to ignore.

Iranian officials indicated to the NYT that their next move is unlikely to happen before the U.S. election. They reportedly don't want to do anything that might benefit Donald Trump.

Despite renewed U.S. efforts to negotiate a cease-fire, the retaliatory cycle between Israel and Iran seems destined to continue. The risk of an all-out regional war between the two nations remains elevated.

According to Nikkei Asia reporting, four Toyota group companies cut guidance for the current fiscal year due to concerns about the Chinese economy. "Sluggish sales in China had a major impact," said Denso Executive Vice President Yasushi Matsui. "This will likely continue for a long time."

The potential that the economic woes of the world's second-largest economy will continue for a "long time,"  despite expectations for additional stimulus, will continue to have a significant impact on global markets.

The UN has warned that current demographic trends portend a halving of China's population by 2100. No amount of stimulus the CCP could muster can offset that potential reality. China needs to increase birth rates.

U.S. Nonfarm Payrolls rose 12k in in October, below expectations of +125k, versus a negative revised +223k in September (was +254k). That's the weakest print since December 2020.

The unemployment rate held steady at 4.1%.

August NFPs were revised down to +78k from +159k previously. That makes total back-month revisions  -112k.

Private nonfarm payrolls plummeted to -82k on expectations of +105k. That's the first negative print since December 2020.

Manufacturing jobs fell by 46k, notching a third straight month of declines.

Hourly earnings rose 0.4%, above expectations of +0.3%, versus a negative revised +0.3% in September. The average workweek ticked up to 34.3 hours.

Overall this was a fairly grim jobs report with the recent hurricanes and strikes certainly playing a roll. In a note appended to the jobs report, the BLS warned that the establishment survey is not designed to isolate effects from extreme weather events and therefore "it is not possible to quantify the net effect" on changes in employment, hours, or earnings.

U.S. S&P Manufacturing PMI rose 0.7 points to 48.5 in October from 47.9 in September.

U.S. Manufacturing ISM fell to a 15-month low of 46.5, below expectations of 47.6, versus 47.2 in September. It was the seventh consecutive month in contraction territory and the 23rd time in the last 24 months. Prices paid rebounded 6.5 points to 54.8 from 48.3 in September.

According to one respondent from the transportation equipment sector: “Market demand has significantly decreased in the second half of 2024 and is expected to be soft through the first quarter of 2025. Although inflation has stabilized and returned to historical levels, and interest rates are decreasing, there appears to be a general pessimism in the economy that is driving customers to be more restrictive in their capital expenditures, including investment in commercial vehicles."

U.S. Construction Spending rose 0.1% in September, in line with expectations.

U.S. auto and light-truck sales for October come out this afternoon. 


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$5.61 (+0.20%)
5-Day Change: -$4.54 (-0.17%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +40.07

Gold notched a ninth consecutive higher monthly close in October but begins November on its back foot. The yellow metal appears poised for its first lower weekly close in four. Beware of the reversal week (higher high, lower close).



Today's U.S. economic data are suggestive of heightened growth risks, dimming the prospects for a Fed-orchestrated soft landing. A 25 bps Fed rate cut is fully priced in for next week, but bets on a December hold have been reduced.

Indian festival demand was muted this week due to near-record-high prices. While sales volume was down, the value of those sales was up significantly due to the sharply higher price. Reuters reported that the price of gold in rupees was up nearly 33% since last Diwali.

This evidence of price sensitivity is perhaps raising demand concerns as we move deeper into the Indian wedding season. While still several months away, price sensitivity could also impact Lunar New Year demand in Asia. Call that a potential near-term headwind.

With geopolitical tensions still very high, most central banks in easing mode, and the U.S. election looming, I see downside potential in gold as limited. Good support is noted at $2,715.51/$2,711.17, and the rising 20-day moving average ($2,700.51 today) should correspond with this level early next week.

A rebound above resistance at $2,757.95/$2,762.22 would ease short-term pressure on the downside and favor a retest of Wednesday's record high at $2,789.68. Beyond that, the $2,810.38 Fibonacci objective remains valid.

Silver remains on the defensive having established fresh two-week lows and trading lower for a third straight day. The white metal seems destined to notch a second consecutive lower weekly close.  



Silver is being weighed by ongoing concerns about the Chinese economy and today's evidence of a faltering U.S. economy. A firmer dollar and continued pressure on gold also weigh.

Concerns that Donald Trump will increase trade barriers if he becomes President again are also providing some headwinds. Silver is used in consumer electronics, solar panels, and automobiles that the U.S. imports.

Today's convincing violation of the $32.700/$32.542 support zone suggests further downside potential to $31.995 (61.8% retracement of the leg-up from $30.229 to last week's 12-year high at $34.853).  Secondary support is noted at $31.645 (18-Oct low), which should closely correspond with the 50-day moving average next week.

The midpoint of the recent decline now comes in at $33.617 with today's overseas high at $33.066 providing an intervening barrier. A rebound above the former would favor renewed tests above $34 and another run at the cycle high at $34.853.


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.