Blog posts of '2024' 'June'

6/21/2024

Gold and silver tumble intraday on solid U.S. PMI readings

OUTSIDE MARKET DEVELOPMENTS: Weak PMI data in Europe and the UK have weighed on the euro and pound respectively. The euro is threatening the 7-week low set against the dollar last week at 1.0667 on bets that further ECB rate cuts are in store to temper rising growth risks.

While the BoE held steady earlier in the week, a rate cut is widely believed to be in the offing. Sterling slid to a 5-week low of 1.2631 versus the dollar.

The gist of FedSpeak this week has been that while we're moving in the right direction, getting inflation back to the 2% target will take some time, and patience is required. This messaging combined with more dovish stances overseas is underpinning the dollar. The dollar index jumped to a fresh 7-week high, buoyed by weakness in the euro and pound.

The markets however continue to like the idea of two rate cuts this year. Fed funds future still put the probability of a Sep cut at around 60%. Former St. Louis Fed President Bullard said he sees two rate cuts this year. During his time on the FOMC, Bullard was one of its more hawkish members.

U.S. S&P flash manufacturing PMI rose to 51.7 for Jun on expectations of 51.0, versus 51.3 in May. The services PMI print was 55.1, above expectations of 54.0, versus 54.8 in May. These data offset some of the signs of weakness seen yesterday and will likely temper Sep rate cut expectations.

Leading indicators (-0.4% expected) and the Dallas Fed Index come out later this morning. 


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +4.03 (+0.17%)
5-Day Change: +33.81 (+1.45%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34

Gold was sustaining yesterday's gains into early U.S. trading, but rotated lower on the day following better-than-expected U.S. PMI data. A second consecutive higher weekly close is suddenly in jeopardy. The yellow metal must end the session above $2,333.05 to preserve the higher weekly close.



It looks like some of the bets on two rate hikes that were put on yesterday are now getting unwound. A breach of yesterday's low at $2,328.18 would create an outside day and would be troubling from a technical perspective.

The fact that the 07-Jun low at $2,287.64 has held for two weeks was encouraging for the bull camp. The magnitude of retracement seen through overseas trading bolstered the notion that the corrective low was in place. However, price action today suggests the bears still have some sway in the short term.

That doesn't necessarily mean new cycle lows, but possibly more consolidative trading within the range set on 07-Jun. Where we end today's session and early action next week will tell us a lot.

Perhaps not surprisingly there were 12 tonnes of North American outflows from gold-backed ETFs last week. This happened in the wake of the near-$100 sell-off of 07-Jun. Inflows from Europe were 7 tonnes amid rising economic and political concerns. The net change for the week was -4.6 tonnes.



Czech National Bank Governor Michl wants to grow the central bank's gold holdings from its current 40 tonnes to 100 tonnes over the next 5 years. This desire is consistent with the well-defined trend of robust central bank gold-buying that is expected to continue.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.281 (-0.91%)
5-Day Change: +0.961 (+3.25%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379

Silver tumbled on the solid PMI data, following gold lower. Nearly all of yesterday's gains have been retraced and the $29.716 low has been pressured. It seems like a strong U.S. manufacturing sector would be good news for silver, as the white metal derives most of its demand from industrial applications, primarily electronics.



Like gold, if yesterday's low is exceeded an outside day will be confirmed. An outside day with a lower close is a rather negative chart formation. Nonetheless, barring a complete rout, silver looks like it will still notch a second consecutive higher weekly close.

Today's close will be telling from a technical perspective.

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.

6/20/2024

The precious metals surged to 2-week highs despite dollar strength

OUTSIDE MARKET DEVELOPMENTS: The Bank of England held steady on rates by a vote of 7-2. That's one more dissenter than at the May MPC meeting, suggesting the BoE is moving cautiously toward that first rate cut. For now, the bank rate remains at 5.25%.

The policy summary noted, "The restrictive stance of monetary policy is weighing on activity in the real economy, is leading to a looser labour market and is bearing down on inflationary pressures. Key indicators of inflation persistence have continued to moderate, although they remain elevated."

The Swiss National Bank surprised with their second rate cut. The policy rate now stands at 1.25%. "[U]nderlying inflationary pressure has decreased again compared to the previous quarter" according to the statement.

Norges Bank also announced policy today. They left the policy rate unchanged at 4.5% which was widely expected. 

U.S. initial jobless claims fell 5k to 238k in the week ended 15-Jun on expectations of 233k. That's down from a 10-month high of 243k in the previous week. Continuing claims jumped 15k to a 5-month high of 1,828k.

U.S. Housing Starts tumbled 5.5% to 1.277M in May, well below market expectations of 1.382M, versus a negatively revised 1.352M in Apr.

The Philly Fed Index dropped to a 5-month low of 1.3 in Jun, well below market expectations of 4.0, versus 4.5 in May. That's down significantly from the 2-year high of 15.4 seen in Apr. The ISM-adjusted index rose modestly from April's 4-month low of 47.2 to 47.6.

Despite the generally disappointing U.S. data, Treasury yields are rising today, providing a lift for the dollar. Minneapolis Fed President Kashkari made note of the resilience of the U.S. economy and said it may take a year or two to bring inflation down to the 2% target. Kashkari is a moderate hawk and I would categorize that statement as moderately hawkish, consistent with 'higher-for-longer' messaging.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +11.36 (+0.49%)
5-Day Change: +35.84 (+1.56%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34

Gold jumped to 2-week highs in overseas trading and extended those gains early in the US. session. Generally soft U.S. data have bolstered expectations that the Fed is on the verge of pivoting. While today's SNB cut and the BoE's 'dovish-hold' seem friendly to that line of thinking, FedSpeak continues to slant hawkish.



More than 61.8% of the near-$100 plunge on 07-Jun has now been retraced. The next retracement level is at $2,365.66 (78.6%). Beyond that, focus shifts back to the 07-Jun high at $2,386.90.

Israel has warned of the potential for "all-out war" in Lebanon following threats from Hezbollah. Israel's Foreign Minister said earlier in the week that "operational plans for an offensive in Lebanon were approved and validated."

The prospects for a widening conflict in the region are driving safe-haven interest in gold. Hezbollah also threatened Cyprus, warning that allowing Israel to use Cypriot airports and bases would be dealt with as "part of the war."

A Global Trade Research Initiative (GTRI) report revealed that India agreed to import 200 metric tonnes of gold annually from the UAE with a 1% tariff concession as part of a trade agreement signed in 2022. This drove a 147.6% surge in gold imports from $3 bln in FY23 to $7.6 bln in FY24.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.498(+1.67%)
5-Day Change: +1.388 (+4.79%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379

Silver surged back above $30 in overseas trading, taking out resistance at $30.169 (last week's high). Gains mounted in early U.S. trading after soft economic data heightened prospects for a sooner-than-later Fed rate cut.



More than 61.8% of the decline off the 07-Jun high at $31.516 to the 13-Jun low at $28.719 has now been retraced. Short-term focus is now on the 78.6% retracement level at $30.917. Above that, $31.516 is back in play.

Former resistance at $30.169 now marks initial support. This level is reinforced by the U.S. session low at $30.104.

The aforementioned GTRI report showed a 60x increase in silver imports from the UAE from $29.2M in FY23 to $1.74 bln in FY24. Not surprisingly, Indian importers like the 8% duty on UAE silver far better than the 15% duty on imports from other nations.

In fact, the tariff differential makes UAE silver cheaper even though they are not a producer. The UAE is a processor of silver, importing large bars and converting them to grain (shot) for export.

India is now concerned about lost tariff revenue and the arbitrage opportunity of their own making.


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.

Good morning. The precious metals are higher midsession in Europe.

U.S. markets are closed in observance of the Juneteenth Holiday.

U.S. calendar features MBA Mortgage Applications, NAHB Housing Mkt Index.

6/18/2024

Gold caught a bid following weak retail sales data as U.S. yields and the dollar fell

OUTSIDE MARKET DEVELOPMENTS: FedSpeak on Monday generally affirmed the likelihood of a single rate cut this year. Philly Fed President Harker warned that no cuts or two cuts were also possibilities, depending on incoming data.

There's more FedSpeak on the calendar for today from Cook, Barkin, Collins, Logan, Kugler, Musalem, and Goolsbee.

Fed funds futures show that the market continues to lean toward two cuts, the first in September and then again in November. This scenario was reinforced today by weak U.S. retail sales data.

U.S. retail sales rose 0.1% in May, below expectations of +0.3%, versus a negatively revised -0.2% in Apr. Ex-auto fell 0.1% on expectations of +0.2%, versus a negatively revised -0.1% in Apr.

U.S. yields and the dollar fell in reaction, providing some intraday support for the precious metals.

U.S. industrial production for May comes out later this morning. Median expectations are +0.4%. Capacity utilization increased to 78.7% in May, just above expectations of 78.6%, versus a negatively revised 78.2% in Apr.

U.S. business inventories for Apr are expected to come in at +0.3%.

The RBA held steady on policy in line with expectations. Governor Bullock expressed some uncertainty in the presser amid simultaneous growth and price risks. "Earlier on when we were raising rates it was quite obvious what we had to do. It's not so obvious now," she said.
 
The PBoC held steady on policy earlier in the week. This was also widely expected as the Chinese central bank is constrained by a weak yuan.

GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$10.63 (-0.46%)
5-Day Change: -3.35 (-0.14%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34

Gold started the U.S. session on the defensive having set a new low for the week overseas, but price action remains confined to Friday's range. The yellow metal caught a bid following the weak retail sales data as U.S. yields and the dollar fell.



Softness in the consumer sector can ease price pressures but is a harbinger of mounting growth risks. As the Fed is data-dependent, it will be interesting to hear the tenor of today's FedSpeak. Fed funds futures now put the odds of a 25 bps rate cut in Sep at 60%. That's up from 56.7% yesterday and 46.8% a week ago.

Nearby supports and resistances remain unchanged from yesterday.

I'm watching the low from 13-Jun at $2.296.92 on the downside to keep the more important $2,289.43/$2,287.64 lows at bay.

On the upside, the overseas high at $2,325.23 protects Friday's high at $2,334.92 and last week's high at $2,339.48.

The World Gold Council's latest Central Bank Gold Survey revealed that 29% of survey respondents said they "intend to increase their gold reserves in the next twelve months." That's the highest level the WGC has observed since the survey began in 2018. The survey also shows that 81% of respondents believe global central bank gold holdings will increase over the next 12 months.



This certainly takes some of the sting out of the news from 07-Jun that China's PBoC had bought no gold in May. It is likely that they only paused their buying. The survey results reinforce my expectation that global central banks will continue to expand their gold reserves amid "an increasingly complex geopolitical and financial environment."

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.332 (-1.13%)
5-Day Change: -0.082 (-0.28%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379

Silver has formed an outside day, exceeding both yesterday's high and low. The $29 zone has attracted buying interest in recent weeks.



Today's retail sales miss prompted an intraday rebound as the dollar retreated. However, weaker demand for consumer electronics and cars could be seen as a negative for silver.

At this point, last week's low of $28.719 remains protected by Friday's low of $28.887. Fresh highs today would be encouraging, shifting focus to last week's high at $30.169.

BofA remains bullish on silver, targeting $35 within the next 2 years. They see the global economy "turning the corner," which will not only increase industrial demand for the white metal but pull investors into 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.

6/17/2024

The precious metals start the week easier after notching higher closes last week

OUTSIDE MARKET DEVELOPMENTS: Consolidative trading prevails for the precious metals as the market awaits a host of FedSpeak this week. Minneapolis Fed President Kashkari said over the weekend that a single rate cut this year was a “reasonable prediction.”

Additional FedSpeak is due from Williams, Harker, and Cook today. The calendar is chock-full of Fed speakers this week. I suspect the message will be largely consistent: One rate cut this year, probably in November, but it's all data-dependent.

Policy decisions are on tap this week for the BoE, SNB, RBA, PBoC, and Bank Indonesia. While the global bias is toward easing, timing remains dependent on perceived progress toward taming inflation and maintaining jobs growth.

U.S. calendar highlights include May retail sales (+0.3% expected) and IP (+0.4% expected) on Tuesday. Flash PMIs come out on Friday. Initial jobless claims will also be closely watched on Thursday, given the 10-month high of 242k seen in the last report. 

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -12.56 (-0.54%)
5-Day Change: +8.41 (+0.36%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34

Gold ended higher last week, breaking a string of three consecutive lower weekly closes. Price action was choppy, but confined to the previous week's range, leaving the $2,287.64 low from 07-Jun intact.



The yellow metal begins this week on its back foot and still appears vulnerable to further tests of the downside with the dollar holding firm. Gold may be forming a base here, or staging for another leg down. The low from 13-Jun at $2.296.92 protects more important support marked by the  $2,289.43/$2,287.64 lows.

First resistance is marked by Friday's high at $2,334.92, which stands in front of last week's high at $2,339.48. Penetation of the latter would highlight $2348.98 initially, but such a move would make the 07-Jun high at $2,386.90 look attractive.

RBI data revealed that India's forex reserves reached a record $655.8 bln in the week ended 07-Jun. Gold reserves rose by $481 million to $57 bln.

The sharp sell-off on 07-Jun was triggered by news that China's central bank hadn't bought any gold in May. Central bank gold buying is expected to remain a major source of demand, even if the PBoC has paused its buying.

The latest COT report for the week ended 14-Jun shows that net spec positions in gold dipped to 233.9k, versus 237.3k in the previous week. 


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.322 (-1.09%)
5-Day Change: -0.473 (-1.59%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379

Silver closed higher last week, but not before setting a 4-week low at $28.719. The lower low and higher close result in a simple reversal on the weekly chart, but the white metal is defensive early in the new week. Price action remains confined to Friday's range thus far.



Recent losses are still seen as corrective within the longer-term uptrend. While dips below $29 have generated some buying interest, momentum on the upside has failed to impress, suggesting that the low is not in yet.

Geopolitical tensions surrounding China's EV exports may be damping demand amid worries of a trade war. Additionally, the recent lurch right in the EU parliament may temper aggressive low-carbon benchmarks in Europe, which currently include banning ICE vehicle sales by 2035.

A less aggressive push toward EV and solar adoption could somewhat lessen the demand for silver, but I doubt it will materially alleviate the current supply deficit. This could however be a positive for platinum and palladium, which are used in the catalytic converters of ICE vehicles to reduce emissions.

U.S. Mint data show that demand for silver coins remained robust in May. A total of 1.75Moz of silver coins were sold in May, a rise of 9.7% y/y. Year-to-date sales now stand at 12.6Moz. +52% versus this time last year.

The latest COT report for the week ended 14-Jun shows that net spec positions in silver dipped to 51.7k, versus 56.4k in the previous week. 


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.

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

U.S. calendar features Empire State Index. FedSpeak due from Williams, Harker, & Cook.

6/14/2024

Gold is poised for its first higher weekly close in four

OUTSIDE MARKET DEVELOPMENTS: French stocks are leading European markets lower amid mounting political uncertainty. The CAC index is down more than 2% today and is now trading lower on the year.

Concerns are rising that French President Macron's gamble to call snap elections will propel the National Rally (RN) party to a majority in France's National Assembly. The RN saw strong gains in the recent EU Parliament election. If the RN takes control of the French government, some worry that they will launch unsustainable fiscal spending.

Risk aversion in Europe is on the rise, which is helping both the dollar and gold. 

The BoJ held steady on rates, as was widely expected. They also indicated that they would reduce bond buying over the next 1 to 2 years. Details of that plan are expected to be revealed in July.

Favorable U.S. inflation data seems to be offsetting the reduction of Fed rate cut expectations to some degree. Yesterday's PPI report saw the largest decline since October. Both import and export price indexes for May declined more than expected this morning, -0.4% and -0.6% respectively.

While the Fed now projects just a single rate cut this year, down from a projection of three from the March FOMC meeting, policy remains data-dependent. Fed funds futures continue to show November as the most likely meeting for that cut.

However, further signs that inflation is moving back toward the Fed's 2% target, and/or indications of weakness in the labor market will see an increase in bets for a rate cut in September. The probability of a Sep rate cut currently stands at 61.1%.

The World Bank raised its 2024 global growth outlook to 2.6%, up from a 2.4% projection in January. This upgrade comes largely due to the resilience of the U.S. economy. “U.S. growth is exceptional,’’ said Ayhan Kose, the World Bank’s deputy chief economist.

"Exceptional" seems a bit dramatic given the tumble in Q1 GDP to 1.3%, versus 3.4% in Q4-23. However, growth is expected to accelerate to 2.5% in Q2.

GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +25.98 (+1.13%)
5-Day Change: +$38.10 (+1.66%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34

Gold continues to trade in a choppy manner in the lower half of last Friday's big $99 range. A close above $2,293.71 (07-Jun close) seems likely at this point, which would confirm the first higher weekly close in 4 weeks.



There were solid inflows of 12.1 tonnes into gold ETFs last week. North America and Europe led the charge with +4.4 tonnes each. The appetite of European investors for gold remains strong, spurred by political and economic uncertainty that has led to risk aversion. The sharply lower price at the end of last week likely contributed.



The underlying fundamentals in the gold market remain broadly supportive, and the longer-term trend is still decidedly bullish with the yellow metal less than 5% off the record high of $2,449.34 that was set less than a month ago.

A number of analysts have reiterated their bullish outlooks and suggested buying the dip. However, it is not a foregone conclusion that the corrective low is in place.

A higher weekly close today would be encouraging. A breach of Wednesday's high at $2,339.48 would be better yet. Secondary resistance is marked by the 61.8% retracement level of last Friday's plunge at $2348.98.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.291 (+1.00%)
5-Day Change: +$0.046 (+0.16%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379

Silver is trading higher on the day, but generally consolidative at the low end of yesterday's range. While gold has been able to hold last Friday's low, the white metal extended losses on Thursday to set a fresh 4-week low at $28.719. 



Silver needs to close above $29.172 to record a higher weekly close. However, a convincing move back above $30 and a breach of Wednesday's high at $30.169 is needed to ease short-term pressure on the downside.

However, at this point, a challenge of support at $28.467 (61.8% retracement of the leg-up from $26.049 to $32.379) can not be ruled out. The overseas low at $28.887 offers an intervening barrier ahead of Thursday's low at $28.719. 

Prospects for stronger economic growth in H2 should help underpin silver, as it derives the majority of demand from industrial applications. A resumption of the uptrend in gold should also help, as silver offers a less expensive alternative to the yellow metal as a means of portfolio diversification.


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.