7/23/2024
Gold rebounds modestly while silver remains defensive
OUTSIDE MARKET DEVELOPMENTS: Democrats have rallied behind Kamala Harris as their presumptive nominee. She has reportedly secured the support of enough delegates to clinch that nomination, but it's still nearly 4 weeks until the DNC and I would categorize the situation as fluid. The fact that Harris raised a record-setting $81 million yesterday is further evidence of coalescing support.
There has been speculation that President Biden's health is deteriorating rapidly, stoking concerns that he won't be able to complete his term. Political uncertainty remains high.
Secret Service Director Kimberly Cheatle has resigned after yesterday's relentless grilling before Congress.
Recent U.S. political turmoil has had little impact on the greenback. The dollar index edged to a 7-session high in overseas trading but remains just about the midpoint of this year's range.
ECB Vice President Luis de Guindos hinted at a September rate cut as inflationary pressures continue to moderate. ECB projections see inflation falling to their 2.0% target in Q4. The euro slid to an 8-session low providing some lift for the dollar.
The Richmond Fed Index tumbled to a 4-year low of -17 in June, versus -10 in May. Prices paid moderated to 3.00%, down from 3.58% in May. Prices received fell to 1.31% from 2.35%. Cooling prices and an uptick in contraction risks arguably lend credence to Sep rate cut expectations.
The Philly Fed Services Index plunged to -19.1 in July. That's a 4-year low right after hitting a 2-year high of 2.9 in June. Weakness in business activity was broad-based. Employment fell to -4.9. Prices paid rose 30.4 from 24.4. "Everything is so broken," quipped Zerohedge on X.
U.S. existing home sales fell 5.4% to 3.890M in June, below expectations of 3.990M, versus 4.110M in May. The sales trend remains right around the 13-year low from 2010 as mortgage rates continue to pose a considerable headwind.
The median sale price rose 2.33% to a record high $426,900. That price is above new home prices for the first time since COVID and the price differential is at a new record.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$11.28 (+0.47%)
5-Day Change: -$61.27 (-2.48%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +25.16
Gold has rebounded modestly from the last four sessions of losses. While upside momentum has not been terribly impressive, bulls can be encouraged by the fact that the yellow metal has held above the 20-day moving average.
Support marked by the halfway back point of the most recent leg-up at $2,384.64 was approached yesterday but remains intact. This level is now reinforced by yesterday's low at $2,385.50.
So far today, price action has been contained by yesterday's range. A breach of yesterday's high at $2,411.65 would encourage the bulls and likely shake out some of the shorts. Secondary resistance is at $2,433.56 which is defined by the 50% retracement level of the decline off last week's record high at $2,481.63.
India slashed import duties on gold and silver today to 6% from 15% ostensibly to help reduce smuggling. The move is likely to boost retail demand in India, which is the second-largest consumer of gold behind China. Jewelry demand in particular has been stymied by record-high prices.
The move is not without cost as it will likely cause India's trade deficit to widen and put additional pressure on the rupee. The rupee fell to a record low against the dollar of 83.69 after stocks slid on a proposed hike to capital gain taxes.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.053 (-0.18%)
5-Day Change: -$2.191 (-7.01%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +23.41
Silver remains defensive, having set a new 4-week low at $28.723 in overseas trading. However, the previous corrective low from 26-Jun at $28.618 remains intact thus far.
Silver hasn't recorded 5 consecutive lower closes since December, so I'm cautiously optimistic that the existing oversold condition will generate a little short covering today. But even if the white metal manages to close above $29.122 the downside remains vulnerable.
I'd like to see silver climb back above $30 to ease pressure on the downside. The 20- and 50-day moving averages at $30.103 and $30.212 respectively are arguably the more important short-term levels to be watching.
If support at $28.618 gives way, the 100-day moving average at $28.358 would be vulnerable to a test. Below the latter, $28.00 and $27.404 would be in play.
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.
7/22/2024
Gold and silver remain defensive for fourth consecutive session
OUTSIDE MARKET DEVELOPMENTS: President Biden announced on Sunday that he would not seek reelection. This comes less than a month before the DNC and just over 100 days ahead of the general election.
Biden endorsed Vice President Kamala Harris and she is considered the front-runner for the top of the Democratic Party ticket. However, a fair amount of uncertainty remains as Ms. Harris is not particularly popular. The Democratic National Committee Chair Jaime Harrison promised "a transparent and orderly process to move forward.”
China's PBoC cut its 7-day reverse repo rate by 10 bps to 1.7%. It was the first reduction in nearly a year and came as a bit of a surprise. In addition, 10 bps cuts were made by Chinese banks to their 5-year and 1-year prime loan rates. The yuan dropped in reaction.
The moves comes on the heels of weaker-than-expected Q2 economic data last week. China is trying to stimulate the economy and get back on track to achieve its 2024 growth target of 5%. That may be a challenge without more direct stimulus.
Today's U.S. economic calendar is light with just the Chicago Fed National Activity Index. The index fell to 0.05 in June, versus a revised 0.23 in May. According to the report, "Three of the four broad categories of indicators used to construct the index decreased from May, and three categories made negative contributions in June."
Focus this week falls on Friday's PCE data for June, most notably the chain price index. The Fed's favored measure of inflation is expected to come in unchanged which would further heighten expectations for a September rate cut. The FOMC meets next week, with steady policy expected for July.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$6.38 (+0.27%)
5-Day Change: -$26.63 (-1.10%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +24.28
Gold rose modestly in Asian trading on the Biden news but gains could not be sustained. Some short-term technical damage was done to the chart last week when new record highs were followed by a lower daily close and a lower weekly close.
With minor chart support at $2,394.20 (12-Jul low) now negated, the halfway back point of the most recent leg-up at $2,384.64 is vulnerable to a test. Below that, $2,371.16 (11-Jul low) protects the 61.8% retracement level at $2,361.74.
At this point, losses are still considered to be corrective. Gold hasn't seen four consecutive lower closes since February. A close above $2,400.39 today would prevent that. A move back above today's overseas high at $2,411.65 would offer some encouragement to the bull camp.
Gold ETFs saw their fifth consecutive weekly net inflows last week, led by North American and European interest. Net inflows were 11.1 tonnes (~$913M). Global AUM rose to $243 bln.
Gold ETF flows by region
The latest COMEX long positioning data as of 16-Jul saw gold interest jump to 897.39 tonnes. Market sentiment based on the COT remains broadly supportive.
Comex Net Long Positioning
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.168 (+0.55%)
5-Day Change: -$1.824 (-5.95%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +22.12
Silver remains on the defensive, trading lower for a fourth consecutive session. The white metal hasn't seen four consecutive lower daily closes since January.
While it seems unlikely silver will close higher today (above $29.215), the oversold condition has thus far prevented a true test of important support at $28.618 (26-Jun low). With this level intact, the medium and longer-term trends are still neutral to favorable.
A rebound above $30 is needed to lend some encouragement to the bull camp. The overseas high at $29.420 and Friday's high at $29.835 offer intervening barriers.
The COT report for silver shows net speculative long positions as of 16-Jul were steady at 61.1k contracts versus the previous week. While that's somewhat encouraging, based on last week's price action I suspect next week's COT data will reflect a deterioration of sentiment.
CFTC Silver Speculative Net Positions
If support at $28.818 gives way, it will likely trigger some stops with initial potential to challenge the 100-day moving average at $28.302. Below the latter, $28.00 and $27.404 would be the levels to watch.
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.
7/19/2024
Gold and silver lower on the week as yields and the dollar correct
OUTSIDE MARKET DEVELOPMENTS: Donald Trump accepted the Republican Party's presidential nomination last night in Milwaukee. Trump talked about last weekend's assassination attempt and his speech had a softer tone that resonated with some voters.
The former president promised to secure the border, defeat inflation, and boost fossil fuel production. Trump also pledged to protect U.S. manufacturing jobs by imposing tariffs on trading partners. He hit all the talking points, but the speech was short on policy details.
Trump also warned that "our planet is teetering on the edge of World War III," pointing to the war in Ukraine, the Israel/Hamas conflict, and tensions with China regarding Taiwan. He implied that his strong leadership could calm global tensions.
Meanwhile, it seems increasingly likely that President Biden will step aside and not seek reelection. The burning question is will his unpopular VP Kamala Harris be elevated to the top of the ticket, or will Democrats try to bring in someone else?
China's economy slowed to a 4.7% annualized pace in Q2, down from 5.3% in Q1. This was below expectations and weighed heavily on commodities.
The ongoing property crisis is adversely impacting household wealth and confidence, causing consumers to reduce spending. Chinese leaders have gathered to discuss reforms and modernization plans that could give the sluggish economy a boost.
The U.S. economic calendar is empty today, save for FedSpeak from Williams (centrist) and Bostic (dove).
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$32.53 (-1.33%)
5-Day Change: -$15.33 (-0.64%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +24.58
Gold came under more intense corrective pressure in overseas trading on Friday as U.S. yields and the dollar rebounded. The yellow metal is at risk of a lower weekly close after setting a record high at $2,481.63 on Wednesday. 
A close above $2,411.66 is needed to avert a reversal on the weekly chart. However, sub-$2400 intraday prices could attract buying interest ahead of the weekend.
Initial support is marked by the 12-Jul low at $2,394.20, which should help keep the 50% retracement level of the most recent leg-up at $2,384.64 protected. Today's downside extension also leaves gold oversold intraday.
The market has priced in a September rate cut, so I suspect the rebound in yields and the greenback are corrective in nature. Even after yesterday's strong Philly Fed data, Fed funds futures continue to put the probability of a Sep cut at 98%.
I think investors will continue to view setbacks in the range as buying opportunities. FedSpeak from Williams and Bostic could provide some underpinnings for the market. Next week, focus will be on the latest PCE inflation reading out on Friday.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.649 (-2.18%)
5-Day Change: -$1.664 (-5.40%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +23.06
Silver extended losses on Friday to trade below $29. The white metal is poised for a second consecutive lower weekly close.
Concerns about the Chinese economy have contributed to three consecutive daily declines in silver. However,
given the oversold condition that has developed, important support at $28.618 (26-Jun low) looks to be well protected.
In accepting the Republican presidential nomination last night, Donald Trump pledged to roll back the Biden administration's efforts to combat climate change. He also said he would strive for U.S. energy independence by increasing domestic oil and gas production.
Less federal funds for alternative energy sources such as solar, could dampen industrial demand for silver.
A rebound above $30 would ease short-term pressure on the downside. Price action since May has the makings of a continuation pattern within the dominant uptrend.
I'm leaning toward a symmetrical triangle if the $28.618 low holds. If that's the case, look for further choppy consolidation within the defined range culminating with an eventual upside breakout.
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.
7/18/2024
Gold consolidates within yesterday's range, as silver trades defensively
OUTSIDE MARKET DEVELOPMENTS: The ECB held steady on rates today, in line with expectations. The policy statement noted that "domestic price pressures are still high, services inflation is elevated and headline inflation is likely to remain above the target well into next year."
The ECB is prepared to keep policy sufficiently restrictive to "ensure that inflation returns to its 2% medium-term target in a timely manner." They went on to say that the Governing Council is not pre-committing to a particular rate path, but will remain data-dependent.
Even if the Fed cuts in September, interest rate differentials will continue to favor the dollar for some time. In more normal times, I might see dollar strength as a headwind for the precious metals. However, geopolitical risks, rising debt-to-GDP ratios, and central bank demand have the potential to continue overriding the historic inverse correlation between gold and the dollar.
Once the Fed does start easing it will give other central banks, including the ECB, more room for cuts. Even in this scenario, dollar yields would remain comparatively attractive.
President Biden is facing reinvigorated calls to step aside. Biden has come down with COVID a day after saying that being diagnosed with a “medical condition” could prompt him to drop out of the race. If that were to happen, an unpopular Vice President Harris would likely move to the top of the Democratic Party ticket.
Former President Trump's popularity surged after he displayed courage and resolve following last weekend's failed assassination attempt but it remains to be seen whether he can carry that momentum through election day. There is still plenty of uncertainty surrounding the U.S. election in November, but this week markets seem to be pricing in a Trump advantage.
U.S. initial jobless claims surged 20k to an 11-month high of 243k in the week ended 13-Jul, above expectations of 230k, versus a revised 223k in the previous week. Continuing claims also jumped 20k to a 31-month high of 1,867k. The uptrend in claims since April creates some downside risk for the next payrolls report.
U.S. Philly Fed Index jumped to 13.9 in July, well above expectations of 2.9, vs 1.3 in June. This is the highest reading since the 15.5 print in April. The 6-month outlook index surged to 38.7, versus 13.8 in June. A strong reading on future employment tempers the bad claims data somewhat.
Leading indicators fell 0.2% in June, inside expectations of -0.3%, versus a revised -0.4% in May.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$5.79(+0.24%)
5-Day Change: +$50.37 (+2.09%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +29.55
Gold is consolidating within yesterday's range with focus still very much on the upside. The yellow metal set a new record high in overseas trading on Wednesday at $2,481.63.
While yesterday's lower close after a new high is perhaps a little troubling for the short term – as is the comparative weakness in silver – the dominant trend remains unquestionably bullish. I'm looking to a Fibonacci objective at $2,511.11 next. Beyond that, $2,530.19 attracts.
First support is marked by yesterday's low at $2,452.34 which is bolstered by the previous record high at $2,449.34.
Focus remains on Fed rate cut expectations. Today's claims data suggest the labor market may be cooling, which should add weight to calls for the central bank will begin easing in September.
Tempered demand in Asia may lead to some short-term volatility as investors and jewelry buyers acclimate to the latest round of record highs. We could see some selling out of Asia but I suspect setbacks will continue to be met with buying interest.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.168 (+0.55%)
5-Day Change: -$1.030 (-3.28%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +30.70
Silver remains defensive in the wake of yesterday's retreat to 2-week lows. It would seem that the silver market is a little less optimistic about growth prospects.
I also suggested yesterday that Trump pledges to "drill baby drill" if he is elected may indicate that aggressive green initiatives and emissions standards could get walked back early in a Trump administration. This could have a detrimental impact on silver demand.
Mounting concerns that the Chinese economy is slowing are certainly a factor as well. Adding to those worries is the fact that the Trump/Vance ticket is very hawkish on trade, perhaps especially with regard to China.
My initial support area at $30.573/509 was taken out yesterday, leaving $30.15/00 vulnerable to a challenge. A dip below $30 would shift focus to $29.777.
A rebound above $30.509/584 is needed to ease short-term pressure on the downside and clear the way for renewed tests above $31. Such a move would return focus to last week's high at $31.652.
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.
7/17/2024
Gold sets record highs as expectations mount that Fed easing will commence in Sep
OUTSIDE MARKET DEVELOPMENTS: The 10-year yield is trading at levels not seen since March, dragging the dollar lower and providing a tailwind for the precious metals. The dollar index has traded as low as 103.66 today, a level last seen on 21-Mar.
Signs of softer inflation and dovish Fedspeak this week have heightened the prospect of a September rate hike. Fed funds futures put the likelihood at 98%. There is also a strong probability for a second cut in November and a third in December. Chances that the target rate could be as low as 4.50-4.75% by year-end currently stand at 50.3%.
We'll hear FedSpeak from Barkin and Waller today. Both tend to lean hawkish so they may take the opportunity to temper some of the recent enthusiasm.
Broader markets continue to be buoyed by rising expectations that Donald Trump will win the presidential election in November. The theory is that tax cuts and deregulation will boost economic growth in the short term, even as the longer-term fiscal picture continues to deteriorate.
U.S. housing starts rose 3% in June to 1.353M. Permits rose to 1.446M and completions rose to 1.71M. However, Q2 starts were down 15.7% in Q2, following an 18.7% decline in Q1. High mortgage rates have been a millstone around the housing market's neck, but perhaps there's some hope that rates are coming down.
U.S. industrial production came in at +0.6%, above expectations of +-.3%, versus +0.9% in May. Capacity utilization jumped to 78.8% on expectations of 78.4%.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.76 (-0.03%)
5-Day Change: +$102.44 (+4.32%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +30.17
Gold reached a new all-time high of $2,481.63 in overseas trading on rising optimism that the Fed will begin easing in September. Lower yields and 4-month lows in the dollar index are helping to boost the yellow metal.
Heightened geopolitical risks, ETF inflows, and ongoing central bank demand are all contributing to gold's buoyancy. In a Reuters article this morning, Alex Ebkarian, chief operating officer at Allegiance Gold projected gold to reach $2,600-$2,700 in the second half of the year.
The World Gold Council reports that the Reserve Bank of India (RBI) acquired 9.3 tonnes of gold in June, well above the recent monthly average of 5.6 tonnes. Total H1 buying was 37.1 tonnes, the highest in over 10 years. Gold now comprises 8.7% of the RBIs total foreign reserves, up from 7.4% a year ago.
RBI’s monthly net purchases and reserves, tonnes*
Source: RBI, World Gold Council
*Data as of 28 June 2024
India is still seeing steady ETF inflows and gold imports remain steady. However, record-high prices are expected to sap jewelry demand which is a huge component in the overall demand picture.
My next technical objective on the upside is $2,511.11 based on a Fibonacci projection. Today's earlier low at $2,463.69 marks initial support ahead of the previous record high at $2,449.34.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.341 (-1.09%)
5-Day Change: +$0.198 (+0.64%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +34.35
Silver is consolidating with price action largely contained by yesterday's range. A more serious challenge of the upside has been thwarted thus far despite fresh record highs in gold.
Prospects for a Trump win in November may be leading some investors to scale back their expectations of aggressive green initiatives and zero-emission deadlines. That may have a material impact on demand as silver is featured in much of this technology, particularly solar.
Nonetheless, I would argue that the supply/demand dynamics continue to favor the upside. A lower interest rate environment would also help stoke broad-based demand for electronics, cars, housing, and more.
A breach of last week's high at $31.652 is needed to clear the way for renewed tests above $32 and a challenge of the cycle high from May at $32.379.
I'm watching support marked by Friday's low at $30.509. This level is reinforced by the lows from earlier this week at 30.573/572.
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.
