Blog posts of '2024' 'September'

9/16/2024

Gold sets more record highs, silver trades above $31 

OUTSIDE MARKET DEVELOPMENTS: Market focus is squarely on the FOMC meeting this week. Policy will be announced on Wednesday along with the Fed's latest economic projections.

Bets for a more aggressive rate cut have increased since last week's Wall Street Journal article by Nick Timiraos indicated some policymakers were "nervous" about keeping rates too high for too long. FedSpeak has tilted more dovish recently as well.

The potential for a 50 bps cut stands at 61% to start the new week. That's up from 50% on Friday, 30% a week ago, and 25% a month ago. I continue to believe the Fed will start its easing campaign with a 25 bps cut.

President Biden and UK PM Starmer met on Friday at the White House to discuss authorizing Ukraine to use long-range weapons systems to strike deep inside Russia. Vladamir Putin warned that providing such permission would be tantamount to a declaration of war. "This will mean that NATO countries, the U.S. and European countries are at war with Russia," said Putin.

After the meeting, a national security spokesperson for the Biden administration said there had been no change in the U.S. position on strikes within Russia. It is not clear at this time whether that is also the position of the UK government. However, just the fact that there were high-level talks about allowing Ukraine to use these systems to strike deep within Russia dials up the tension in the region considerably.

The U.S. and UK have expressed deep concern that North Korea and Iran are providing weapons and ammunition to Russia for use against Ukraine.

Houthi rebels in Yemen fired a long-range missile at Israel on Sunday. The rebels claim it was an advanced hypersonic missile. If that's true, the weapon would likely have been provided by Iran.

“This morning, the Houthis launched a surface-to-surface missile from Yemen into our territory. They should have known by now that we charge a heavy price for any attempt to harm us,” said Israeli Prime Minister Benjamin Netanyahu. A retaliatory strike by Israel against the rebels seems likely.

Another assassination attempt on former President Trump has also heightened U.S. political tensions. The would-be assassin never got any shots off at the Republican nominee for President. It was the second attempt on Mr. Trump's life in as many months and occurred just 50 days out from election day.

The September Empire State Index surged to a 29-month high of 11.5, well above expectations of -4.5, versus -4.7 in August. New orders climbed, and shipments grew significantly according to the NY Fed.

Arguably this is another indication that the economy remains resilient despite the current tight monetary policy conditions. A 50 bps cut does not seem warranted.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.34 (-0.01%)
5-Day Change: +$75.65 (+3.02%)
YTD Range: $1,986.16 - $2,589.13
52-Week Range: $1,812.39 - $2,589.13
Weighted Alpha: +35.56

Gold reached a new record high at $2,589.13 in overseas trading before retreating into the range. The yellow metal is being supported by more dovish rate cut expectations for this week and the corresponding weakness in the dollar. Heightened geopolitical and political tensions are also providing some lift. 



The $2,597.15/$2,600.00 objective has come within striking distance. Beyond that, there's a Fibonacci level at $2,619.35.

A sustained push above $2,600 seems unlikely ahead of the Fed's policy decision on Wednesday given the worsening overbought condition. As noted in commentary last week, there is some risk of a 'sell the fact' event on Wednesday. That risk is heightened if the Fed "disappoints" with a 25 bps cut now that expectations have swung in favor of a larger cut.

Nonetheless, short-term setbacks are likely to be viewed as buying opportunities. Initial support at $2,581/78 protects the more important $2,559.79/$2,557.21 level. Below the later, $2,529.57 and congestion around $2,500 are noted.

ETF inflows were back on the rise last week after a brief pause in the first week of September. Net inflows totaled 11.6 tonnes, with North America accounting for 9.2 tonnes.

The COT report showed that net speculative long positions decreased to a 4-week low of 282.5k contracts in the week ended 13-Sep. That's a decline of 5.1k from 287.3k contracts in the previous week.

Gold analyst Jan Nieuwenhuijs has found trade statistics that he claims reveal that "the Saudi central bank has been covertly buying 160 tonnes of gold in Switzerland since early 2022, contributing to the current gold bull market." Nieuwenhuijs notes that some official buying is very transparent while other central banks prefer to operate covertly.

According to Nieuwenhuijs the PBoC is also a covert buyer, to the tune of 1,600 tonnes since the war in Ukraine began. He believes SAMA and the PBoC "must be confident in what direction the gold market is headed."

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.179 (+0.58%)
5-Day Change: +$2.384 (+8.41%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +33.05

Silver has traded with a 31-handle for the first time since 17-Jul, The rise in expectations for a more aggressive Fed rate cut, a weaker dollar, an impressive Empire State Index beat and new record highs in gold all conspire to support the white metal.



Upside potential is now seen to the $31.652 high from 11-Jul, but the worsening overbought condition may be a limiting factor in the short term. Risk that the Fed opts for a more cautious 25 bps rate cut this time around could also result in significant retracement of the recent gains. Beware the volatility.

While a measure of caution is warranted here, recent gains have returned considerable confidence to the longer-term bullish scenario. Suddenly the white metal is back within $2 of the 11-year high set in May at $32.379.

The latest COT report saw net speculative long positions dip 1.4k to 44.7k contracts last week, the lowest since March. Traders likely lightening exposure ahead of last week's inflation data and were reluctant to add positions with the Fed decision looming.

CFTC Silver speculative net position

The low for the day at $30.658 marks initial support. Former resistance at $30.164 down to $30 is the more important level to watch, followed by Friday's low at $29.869.

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.

9/13/2024

Gold extends to more record highs as silver trades with a 30-handle for the first time in 8-weeks

OUTSIDE MARKET DEVELOPMENTS: North Korea released photos of  Kim Jong Un touring a secret uranium enrichment facility. Kim said that Pyongyang needs to "exponentially increase" its nuclear weapons stockpile for "self-defense and the capability for a preemptive attack."

Just the mention of a potential nuclear first strike raises the risk factor in the region and globally. There is speculation that North Korea may be planning to run its first nuclear tests since 2017.

The timing of these provocative actions, just 52 days out from the U.S. presidential election, may be designed to send a message to the next U.S. administration. That message seems to be that the DPRK remains a destabilizing force in Asia and a foreign policy challenge for America.

On Thursday, a Wall Street Journal article by the influential Nick Timiraos suggested that a larger 50 bps Fed rate cut was not off the table. The probability of such a cut had tumbled into the teens after Thursday's inflation data but began climbing later in the session, ending at 28%. This morning the probability is at 43%.

Timiraos acknowledged that the Fed preferred to move in 25 bps increments but some policymakers are reportedly "nervous" about keeping rates too high for too long amid signs of mounting growth risks. The market continues to price in 100 bps of cuts by year-end, suggesting at least one of the three remaining FOMC meetings this year will have to end with a 50 bps cut. I continue to believe it won't be the first one.

News that the interest payment on the $35.3 trillion national debt cracked the $1 trillion barrier for the first time may provide additional incentive for the Fed to bring rates down. The government has paid $1.049 trillion to service the debt so far this year, up 30% from the same period last year. This is clearly unsustainable.

U.S. trade prices for August came in weaker than expected providing further evidence that inflationary pressures are moderating. The export price index fell by 0.7%, while import prices dropped 0.3%.

Preliminary Michigan sentiment for September rose to 69.0, versus 67.9 in August. Sentiment continues to improve from July's 8-month low at 66.4. The 1-year inflation index continued to fall, reaching a 45-month low of 2.7%.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$7.98 (+0.31%)
5-Day Change: +$72.83 (+2.92%)
YTD Range: $1,986.16 - $2,581.46
52-Week Range: $1,812.39 - $2,5781.46
Weighted Alpha: +35.39

Gold continues its march higher on Friday after initially pushing to record levels in U.S. trading on Thursday. The yellow metal is up more than 3% this week and will post its first higher weekly close in three. Gold is up nearly 25% YTD.



The yellow metal is being buoyed by revived expectations that the Fed will launch its easing campaign next week, with a 50 bps cut. New lows for the week in the dollar index are providing an additional boost to gold today.

Given the magnitude of this week's rise and the developing overbought condition, there is potential to see some profit-taking ahead of the weekend. However, short-term setbacks are likely to be viewed as buying opportunities in anticipation of a test of $2,597.15/$2,600.00. Beyond that, the next Fibonacci level I'm watching is $2,619.35.

This week's gains have reignited talk about $3000 gold. I'm quoted in a recent Reuters article on that topic.

Besides falling interest rates, Joseph Cavatoni at the World Gold Council suggests uncertainty surrounding the upcoming U.S. election as another source of demand as investors seek to hedge event risk.

Intraday supports around $2,570.00 and at $2,564.67/26 protect the session low at $2,557.21. 

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.121 (+0.41%)
5-Day Change: +$2.268 (+8.12%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +32.52

Silver has surged to 8-week highs above $30.164, helped by record highs in gold and a weaker dollar. The white metal is up nearly 10% this week, the biggest weekly rise since mid-May.



The breach of a minor chart point mentioned in yesterday's comment at $30.584 (18-Jul high) lends credence to the scenario that calls for additional short-term gains to $31.00 and the July high at $31.652. While the May high at $32.379 looks increasingly attractive with each uptick, the volatility we've seen since that high was set warrants continued caution.

The previous highs at $30.164/082 mark first support. Secondary support is defined by the overseas low at $29.869.


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 in early U.S. trading.

U.S. calendar features Import/Export Price Indexes, Michigan Sentiment (Prelim).

9/12/2024

Gold and silver surge following today's PPI and claims data

OUTSIDE MARKET DEVELOPMENTS: U.S. PPI rose 0.2% in August, in line with expectations, versus +0.1% in July. The annualized rate of producer inflation fell to 1.7%, versus 2.2% in July.

Core PPI came in at +0.3% on expectations of +0.2%, versus UNCH in July; +2.4% y/y, unchanged from July.

Initial jobless claims rose 2k to 230k in the week ended 07-Sep, which was in line with expectations, versus a revised +228k in the previous week. Continuing jobless claims increased by 5k in the last week of August to 1,850k from a revised 1,845k the previous week. 

With the important inflation data in the rearview mirror, the market is confident that the Fed will ease by just 25 bps next week. Fed funds futures put the probability at 87% this morning. That's a tick higher than yesterday, but 27 percentage points higher than last week and 37 points higher versus 12-Aug.

August import/export prices come out tomorrow but are less important. Median expectations for both are -0.1%.

The ECB cut rates by 25 bps as was widely expected. The central bank noted, "Recent inflation data have come in broadly as expected." 

However, the ECB upped its 2024 forecast for core inflation to 2.9% but then expects a drop to 2.3% in 2025 and 2.0% in 2026. The central bank trimmed its growth projections to 0.8% for 2024, 1.3% for 2025, and 1.5% for 2026. The downward revisions were attributed to expectations of " weaker contribution from domestic demand over the next few quarters."


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$1.44 (+0.06%)
5-Day Change: +$5.33 (+0.21%)
YTD Range: $1,986.16 - $2,548.477
52-Week Range: $1,812.39 - $2,548.47
Weighted Alpha: +31.90

Gold has surged to new all-time following this morning's PPI release. The market now feels confident that a 25 bps Fed cut is in the offing for next week and that all the potential surprises are behind us. The yellow metal has exceeded my long-standing Fibonacci objective at $2,539.77, trading as high as $2,548.47 thus far.



The next upside target is the measuring objective at $2,597.15/$2,600.00. It may take until next week to get there as the market is already becoming a bit overextended. Also, be aware of a potential "sell the fact" event once the Fed announces policy on Wednesday.

Former resistance at $2,529.57/$2,527.97 now defines first support. Secondary support is the overseas low at $2,511.35 and there's congestion around the $2,500.00 level.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.417 (+1.47%)
5-Day Change: +$0.012 (+0.04%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +24.41

Silver surged to 2-week highs above $29 after the release of this morning's inflation and claims data. Everything was in line with expectations and the market now seems clear that the Fed will announce a 25 bps rate cut next week.



Upside momentum is strong this morning and the white metal seems on track for tests back above $30. A word of caution though, rallies have been consistently failing in recent weeks.

A minor chart point at $29.635 (29-Aug high) has been tested and penetration would clear the way for a challenge of the late August highs at $30.082/164. A breach of the latter would target $30.584 initially, with potential to the July high at $31.652.

Former resistance t $29.125 now offers support. Minor intraday support is noted at $28.731, which protects today's low at $28.557.

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 in early U.S. trading.

U.S. calendar features PPI (+0.2% expected), Initial Jobless Claims, Treasury Budget.

9/11/2024

Gold and silver fade after CPI print further erodes chances for 50 bps Fed cut

OUTSIDE MARKET DEVELOPMENTS: U.S. CPI rose 0.2% in August, in line with expectations, versus +0.2% in July. The annualized rate of consumer inflation slid to 2.5% from 2.9% in July.

Core CPI came in at +0.3%, above expectations of +0.2%, versus +0.2% in July. Core consumer inflation held steady at 3.2% y/y.

Markets have been waiting for confirmation that inflation is still heading in the right direction and that the Fed should now focus on supporting the labor market via easier monetary policy. Today's data favors that rotation and prospects for a larger 50 bps rate cut have fallen to 21%. That's down from 34% yesterday, 44% a week ago, and 51% a month ago.

We'll get August PPI data tomorrow. The market is expecting a 0.2% m/m rise. Import/export prices come out on Friday.

BoJ policymaker Junko Nakagawa suggested a rate hike is still on the table a day after a Bloomberg article reported the central bank sees little need to raise rates again next week. The yen surged in reaction, pushing the USD-JPY rate to a new low for the year of 140.72.

The ECB is widely expected to trim rates by 25 bps tomorrow. Eurozone Q2 GDP was revised down to -0.2% q/q, versus a preliminary print of +0.3%. Government spending continues to rise as fixed investment tumbles.

This prompted former ECB chief Mario Draghi to warn that steps must be taken to correct this, or Europe will face a "slow agony." A 25 bps rate cut won't be enough. Draghi is advocating for up to €800bn a year in investment to pull the EU back from the brink.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$5.30 (+0.21%)
5-Day Change: +$27.74 (+1.11%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +31.90

Gold set a new 2-week high at $2,527.18 following the benign CPI print, but has since retreated into the range, leaving the record high from 20-Aug at $2,529.57 intact. Focus now shifts to tomorrow's PPI data.



Dimmed prospects for a larger 50 bps rate cut are keeping the dollar underpinned, providing a bit of a headwind for the yellow metal. The dollar index eked out a new high for the week, despite today's strength in the yen.

Choppy consolidative trading within the range is likely to continue at least through tomorrow's PPI report. The market seems to want to be 100% sure that inflation is in check before committing to a direction.

There is at least one near-certainty: The Fed will launch its easing campaign next week, most likely with a 25 bps cut. The trade will be very interested in the forward guidance and will start speculating about the size of cuts in November and December.

Initial support is a zone from $2,507.93 (20-day SMA) down to yesterday's low at $2,500.63. Secondary support at $2,487.11/06 protects the short-term range lows at $2,474.31/08.

On the upside, the $2,539.77 and $2,597.15/$2,600.00 objectives remain valid, contingent on a move to new all-time highs.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.417 (+1.47%)
5-Day Change: +$0.627 (+2.23%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +24.25

Silver traded as high as $28.842 in post-CPI trading before fading into the range once again. Resistances marked by the 20-, 50-, and 100-day moving averages at $28.930, $29.010, and 29.188 were left intact, leaving last week's high at $29.125 well protected.



Yesterday's low at $28.08 defines first support, protecting the recent lows at $27.791/732. Below the latter, I'm watching $27.505 and $27.237.


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 mostly higher in early U.S. trading.

U.S. calendar features MBA Mortgage Applications rose 1.4%, CPI (+0.2% expected), EIA Data.

9/10/2024

Gold and silver remain rangebound ahead of inflation data later this week

OUTSIDE MARKET DEVELOPMENTS: Fed funds futures are steady today with prospects for a 50 bps rate cut holding at 27%. The market awaits tomorrow's CPI report and Thursday's PPI data, which will bring us within a week of the FOMC policy announcement. A 25 bps rate cut is the most likely outcome.

The ECB will announce policy on Wednesday this week. A 25 bps cut is widely expected as worries about persistently slow growth override lingering inflation risks.

Germany – Europe's largest economy – contracted by 0.1% in Q2 and is threatening to slip back into recession. Annualized growth this year is a scant 0.2%.

Former ECB President Mario Draghi is pitching a new coordinated industrial policy for Europe to boost competitiveness and lift the EU out of its doldrums. Draghi recognizes that productivity is "very weak" and a significant investment of up to €800bn a year will be needed to keep the Continent from falling further behind the U.S. and China.

According to a Bloomberg article, the BoJ reportedly sees little need to raise rates again next week. Officials are still monitoring lingering market volatility in the wake of the July hike and are keen to see how markets react to the anticipated first easing move by the Fed in more than four years.

U.S. NIFB small business optimism tumbled 2.5 points to 91.2 in August, versus 93.7 in July. Fewer firms are planning to hire as those expecting a better economy plunged to -13% from -7% in July. The uncertainty index rose 2 points to 92, the highest since October 2020.

Fed Vice Chair Michael Barr (centrist) is slated to speak on Basel III later this morning. 


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$1.03 (+0.04%)
5-Day Change: +$14.33 (+0.57%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +30.84

Gold is pushing higher but remains confined to Friday's range for a second session. Consolidative trading is likely to prevail ahead of U.S. inflation data later this week.



The yellow metal continues to hold the 20-day moving average on a close basis, which is encouraging for the bull camp. The all-time high at $2,529.57 (20-Aug high) defines the upper boundary of the range.

A move to new record highs would reestablish the uptrend and confirm potential to the $2,539.77 Fibonacci objective. Beyond that, the $2,597.15/$2,600.00 zone.

Initial support is at $2,501.33/$2,500.63, where the 20-day SMA corresponds closely with today's overseas low. More substantial support at $2,487.11/06 protects the short-term range lows at $2,474.31/08.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.117 (+0.41%)
5-Day Change: +$0.395 (+1.41%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +22.12

Silver edged higher within Friday's range into early U.S. trading. Just over 50% of the decline from $29.125 (5-Sep high) to $27.732 (6-Sep low) was retraced, but the white metal came under renewed pressure and has since fallen to fresh intraday lows.

  
A minor chart point is noted at $28.079 which stands in front of the recent lows at $27.791/732.

Choppy trading within the range is likely to prevail through Thursday's PPI release. Market expectations for both CPI and PPI are +0.2%. It would take something significantly hotter than expectations to get the market to believe the Fed will hold steady next week. 

A short-term close back above the 20-, 50-, and 100-day moving average complex is needed to return a measure of credence to the underlying uptrend and call for another run at $30. Those are out of reach today at $28.884, $29.052, and $29.174 respectively.

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.

9/9/2024

Gold and silver consolidate ahead of this week's inflation data

OUTSIDE MARKET DEVELOPMENTS: Friday's jobs report reinforced that the labor market is cooling. August payrolls undershot expectations by 20k jobs, and back-month revision totaled -86k.

The downtick in the jobless rate to 4.2% suggested that the slowdown in the labor market remains orderly thus far. “While the labor market has clearly cooled, based on the evidence I see, I do not believe the economy is in a recession or necessarily headed for one soon,” said Fed Governor Chris Waller on Friday. Hopes for a soft landing spring eternal.

FedSpeak last week indicated that the focus has shifted to the "full employment“ side of the central bank's dual mandate. Fed funds futures were volatile on Friday, but ultimately swung in favor of a smaller 25 bps rate cut when the Fed announces policy on 18-Sep. 

The probability of a 25 bps cut has fallen to 25%. That's down from 30% last week, and 51% a month ago. Fed funds futures imply 112 bps in cuts by year-end.

While the Fed's focus may be on the weakening labor market, inflation data out this week will have the market's attention.  Median expectations for August CPI (out on Wednesday) stand at +0.2%. Thursday's PPI report is expected to come in at +0.2% as well.

U.S. wholesale sales surged 1.1% in July, well above expectations of +0.2%, versus an upward revised -0.3% (was -0.6%). It's the best monthly sales jump since February. Inventories rose 0.2%, just off the advance print of +0.3%, versus +0.2% in June.

We'll see July consumer credit later today. The market is anticipating a monthly increase of $10.2 bln, versus an $8.9 bln rise in June. 

Over the weekend, The Wall Street Journal reported that there are "about 590 million active cards in circulation in the first quarter of this year, 40 million more than in 2019." America's total credit card balance reached a record-high $1.142 trillion in the second quarter.

With an average interest rate on credit cards north of 27%, this level of debt is an ever-growing millstone around the neck of the U.S. consumer and the economy. Even with home prices and stocks at/near record highs, the Fed is behooved to start bringing rates down or consumption is going to collapse.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$2.74 (-0.11%)
5-Day Change: -$0.61 (-0.02%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +30.25

Gold is straddling the $2500 level as traders look ahead to this week's inflation data. The market is expecting fairly benign readings for both CPI and PPI, which should solidify beliefs that the Fed will begin its easing campaign with a cautious 25 bps cut.



Consolidative trading is likely to prevail early this week as the market awaits the inflation data. The range is well defined by the all-time high at $2,529.57 (20-Aug) and the lows since then at $2,474.31/08. The 20-day moving average has been serving as support on a close basis and comes in at $2,498.84 today.

ETF inflows were unchanged last week amid some lingering uncertainty as to Fed intentions. Modest North American inflows were offset by European outflows.

The COT report shows that net spec positions moderated slightly to 287.6k contracts, versus 294.5k contracts in the previous week. The market is still quite long, at levels not seen since Q1'20. That does create some downside risk, but the long specs have proven themselves to be sticky up here.

CFTC Gold speculative net positions

With the underlying trend bullish, and recent activity deemed corrective/consolidative, buying strategies remain favored. A short-term breach of $2,529.57 would clear the way for tests of $2,539.77 (Fibonacci) and  $2,597.15/$2,600.00 (measuring).


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.194 (+0.69%)
5-Day Change: -$0.419 (-1.47%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +20.29

Silver is trading higher on the day, buoyed by the strong wholesale sales print. However, price action has been confined to the lower half of Friday's range.



The inability of silver to sustain rallies in recent weeks is reflective of persistent concerns about growth and doubts that the Fed will successfully orchestrate a soft landing. Where the 20-day moving average has been providing support in the gold market, the 20-day serves as resistance on a close basis for silver.

Short-term conditions are likely to remain choppy with a modest downside bias ahead of this week's inflation data. The comparative strength of the gold market may provide some underpinning with the gold/silver ratio above 90.

Net speculative long positions in silver futures fell to 46.1k last week, versus 52.2k in the previous week. The specs have been reducing long exposure since mid-July. Current positioning is the lowest since the week ended 16-Aug. A little over a week later, silver was testing above $30.

CFTC Silver speculative net positions

A climb back above the midpoint of last week's retreat at $28.429, would be somewhat encouraging. The 20-day SMA comes in at $28.863 today. A breach of Thursday's high at $29.125 is needed to return focus to the August highs above $30.

Intraday support at $28.079/00 protects the recent lows at $27.791732. The latter now appears to be a formidable downside barrier.



Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
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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.