12/2/2024
Gold and silver weighed by firmer dollar
OUTSIDE MARKET DEVELOPMENTS: Ukrainian President Zelenski has suggested that he might be willing to cede territory currently in Russian hands – at least temporarily – if his country is accepted into NATO. “If we want to stop the hot phase of the war, we need to take under the NATO umbrella the territory of Ukraine that we have under our control,” Zelensky said.
This seems like a non-starter for Russia as NATO expansion to include Ukraine was seen by many as a pretext for the invasion. The FT reports that the Kremlin requires the end of U.S. aid to Ukraine, the removal of Zelenski, and a discussion between Putin and Trump on “all the issues of the global order at the highest level.”
Putin is warning that Russia could strike “decision-making centers” in Kyiv with ballistic missiles, while the U.S. is sending an additional $725M in military aid to Ukraine. Peace in Ukraine does not seem imminent.
Israel says Hezbollah fired on IDF positions in disputed territory, testing the fragile ceasefire. Hezbollah acknowledged the attack saying it was a “defensive and warning response” to repeated Israeli violations of the ceasefire.
Meanwhile, the HTS rebel group has seized Aleppo, the second-largest city in Syria with little opposition from government forces. It is widely believed that the Russian and Iranian-backed forces of Syrian President Bashar al-Assad will mount a counteroffensive.
President-elect Trump has warned the BRICS countries that he won't tolerate the creation of a new currency to challenge the status of the dollar as the preeminent global reserve currency. He threatened 100% tariffs and loss of access to U.S. markets for failing to heed his warning.
If this latest threat of tariffs has any teeth, the de-dollarization trend could be slowed. However, it highlights the "exorbitant privilege" the U.S. has maintained for decades. The fact that Trump is prepared to defend the dollar may harden the resolve of the BRICS and could draw the attention of other trading partners.
The dollar starts the week on firmer footing, retracing some of last week's losses. Trump's jawboning is likely a factor, as are trimmed expectations for additional rate cuts next year. While a 25 bps rate cut in December is still favored, Fed funds futures suggest a bias toward just one additional 25 bps cut in H1'25.
It's a data-heavy week ending with the November jobs report on Friday. We'll also hear lots of FedSpeak, including from Chairman Powell.
U.S. S&P Global Manufacturing PMI final rose to a six-month high of 49.7 in November versus a flash reading of 48.8 and 48.5 in October.
U.S. Manufacturing ISM jumped 1.9 points to a five-month high of 48.4 in November, above expectations of 47.7, versus 46.5 in October. Prices modered to 50.3 from 54.8 in October.
U.S. Construction Spending rose 0.4% in October, above expectations of +0.2%, versus +0.1% in September. The hurricanes provided a boost to spending.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$8.33 (-0.31%)
5-Day Change: +$12.24 (+0.47%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +29.45
Gold is under modest pressure, weighted by a firmer dollar. Despite four straight higher daily closes to end last week, the yellow metal still posted a 2.4% weekly loss. 
Monday's sharp drop spurred by the Israel-Hezbollah ceasefire was the dominant feature on the chart, but geopolitical tensions remain broadly elevated, providing some underpinnings for the market.
Dollar strength spurred by tough talk from President-elect Trump to the BRICS nations and expectations of a more hawkish Fed is seen as a headwind. Choppy consolidative trading within the $2,789.68/$2,541.42 range into year-end remains likely.
Today's probes above the 20-day moving average at $2,639.20 have been a struggle, leaving the more important 50-day MA protected at $2,669.47. The latter is bolstered by the midpoint of the range at $2,665.55.
Thursday's low at $2,623.08 has contained the downside and the bounce from $2,623.31 fortifies this support level. Last week's low at $2,609.76 marks secondary support.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CST: -0.130 (-0.42%)
5-Day Change: +$0.123 (+0.41%)
YTD Range: $21.945 - $34.853
52-Week Range: $20.704 - $34.853
Weighted Alpha: +27.36
Silver caught a bit of a bid in overseas trading after better-than-expected Chinese manufacturing data provided some demand optimism. However, upticks could not be sustained and the white metal continues to straddle the 100-day and 20-week moving averages.
With price action confined to the lower half of last week's range, the short-term technical bias remains to the downside. Support at $29.736/703 defines a potential double-bottom that perhaps warrants a challenge.
Penetration would shift focus to the rising 200-day moving average at $29.159.
It would take a breach of resistance at $31.417/465 to confirm the double-bottom and set a more favorable tone within the range. Good intervening resistance is noted at $30.853/656 where the 20-day moving average corresponds closely with Friday's high.
Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
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