Blog posts of '2024' 'September'

9/23/2024

Gold sets new record highs as silver fails to sustain gains above $31

OUTSIDE MARKET DEVELOPMENTS: Israel's war intensified on its northern border after escalated rocket and missile attacks by Hezbollah prompted more Israeli airstrikes inside Lebanon. “It is clearly a very dangerous situation and clearly has a potential of escalating dramatically,” said Israeli President Isaac Herzog.

Israel continues to prosecute the war against both Hamas in the south and Hezbollah in the north, despite international pressure for a ceasefire. "We're going to do everything we can to keep a wider war from breaking out," asserted President Biden. The U.S. is reportedly sending additional troops to the region.

Eurozone HCOB flash manufacturing PMI tumbled to a 9-month low of 44.8 in September, below expectations of 45.7, versus 45.8 in August. Services PMI fell to a 7-month low of 50.5 on expectations of 52.3, from 52.9 in August.

Despite mounting growth risks in Europe, ECB Governing Council member Martins Kazaks believes service price inflation is the bigger worry. “In my opinion, the risk of service price inflation is still more significant at the moment," said Kazaks. Such concerns may push the next ECB rate cut into December.

After the BoJ held steady on rates last week, BoJ Governor Ueda indicated that the central bank is in no hurry to hike again. While Ueda sees the Japanese economy as "moving in line with our forecasts," he believes the outlook for the U.S. economy has become more uncertain.

The yen weakened in response, providing some underpinning for the dollar. However, the dollar index remains generally weak within striking distance of last year's low at 99.58 after the Fed launched its easing campaign last week with an oversized 50 bps cut.

It appears that Congress has reached a short-term funding compromise that will avert a government shutdown until after the election. The outcome of the November elections will certainly pose challenges for passing a budget before the new deadline of 20-Dec.

Chicago Fed President Austin Goolsbee (centrist-hawk/nonvoter) believes rates need to come down significantly over the next year. The market has priced in an additional 50 bps in cuts for the remainder of this year, with the Fed's dot plots projecting a Fed funds rate of 2.9% in H1'26.

The Chicago Fed National Activity Index rebounded to 0.12 in August from a negative revised -0.42 in July. The 3-month moving average remained in negative territory for the 23rd month.

U.S. flash manufacturing PMI fell 0.9 points to 47.0 in September. The preliminary read on services PMI came in at 55.4, down from 55.7 in August. 

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence worries that "intensifying political uncertainty" poses a substantial headwind to the economy. Williamson also notes a "reacceleration of inflation" that could be a hawkish influence on Fed interest rate decisions moving forward.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.29 (-0.01%)
5-Day Change: +$47.93 (+1.86%)
YTD Range: $1,986.16 - $2,633.96
52-Week Range: $1,812.39 - $2,633.96
Weighted Alpha: +42.45

Gold continues to set record highs amid heightened geopolitical tensions, last week's launch of the Fed's easing cycle, and a generally soft dollar. While momentum has waned somewhat, the yellow metal has traded as high as $2,633.96 in the U.S. session.



The next upside target is $2,674.84 based on a Fibonacci projection. Beyond that, the next psychological barrier at $2,700 attracts. The Fed dots project another 185 bps in rate cuts in the cycle, which poses a significant headwind for the dollar and makes $3,000 gold look increasingly appealing.

Short-term setbacks are likely to be viewed as buying opportunities. Initial support is marked by the overseas low at $2,614.86. Secondary supports are at $2,600.00/$2,597.42 and $2,585.74/$2,584.84.

Global ETFs saw 3 tonnes in inflows last week. Solid interest from North American investors – to the tune of 8.1 tonnes – more than offset European and Asian outflows. Net inflows have been recorded in five of the last six weeks.

 

The COT report for last week showed that the speculative net long position surged by 27.6k to 310.1k contracts. That's the biggest long position since 03-Jun 2020.

Silver is back on the defensive after setting a 10-week high at $31.413 on Friday. Today's global PMI readings indicate ongoing weakness in manufacturing that could adversely impact demand for the white metal.



However, more record highs in gold are seen as a supporting factor for silver as investors seek a less expensive alternative to the classic safe haven. A short-term breach of the July high at $31.652 is needed to put the high for the year at $32.379 (21-May) in play.

The net speculative long position in silver futures rose 13.6k to 58.3k contracts on last week's rally according to the CME's COT data. It's the biggest net-long position in nine weeks. 

CFTC Silver speculative net position

The German auto industry is demanding more subsidies to stimulate flagging electric vehicle sales. The auto industry currently uses about 80M ounces of silver annually. However, EVs require nearly 75% more silver than conventional ICE vehicles.

Broader adoption of EVs would be good for the silver market. As of last year, only 3.2% of vehicles on the road were electric. That suggests there's plenty of room for growth, but consumers still prefer their gas-fueled cars.

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.

9/19/2024

Gold and silver on the bid as markets digest Fed easing

OUTSIDE MARKET DEVELOPMENTS: The Fed went big yesterday, initiating its first easing campaign in over four years with a 'crisis-sized' rate cut of 50 bps.  The last rate cuts greater than 25 bps were in 2020 during the COVID crisis and in 2008 during the global financial crisis.

"In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/2 percentage point to 4-3/4 to 5 percent." – FOMC Policy Statement

That hardly seems like a crisis. One might deduce it was an acknowledgment by the Fed that they were behind the curve on easing in the same way they were tardy in raising rates as inflation climbed. Chairman Powell begged to differ...

"We don’t think we’re behind...We think this is timely, but I think you can take this as a sign of our commitment not to get behind.” – Fed Chairman Jerome Powell

I thought cooler heads would prevail, but there was only one in the board room of the Echles Building over the previous two days. Fed Governor Michelle Bowman (centrist/hawk) was the lone dissenter who saw a 25 bps cut as a more appropriate response to the current conditions. It was the first vote against an interest-rate decision in nearly 20 years.

Those more cynical of the central bank's motivation view the oversized cut as a means to juice the flagging economy with just 47 days until election day.

Some worry that the Fed is seeing something that indicates the economy and/or the labor market is in real trouble, but that's not reflected in the economic projections. The median expectation for 2024 GDP was nudged down to 2.0% from 2.1% in June, while 2025, and 2026 remained at 2.0%. The Fed now also sees 2.0% growth in 2027. The longer-run outlook for GDP was left unchanged at 1.8%. Median expectations for unemployment were up modestly over the June projections. 

Focus now shifts to the pace and size of cuts through year-end and into H1'25. Cuts of 25 bps are favored for each of the two remaining FOMC meetings this year. The dots project a Fed funds rate of 3.4% in 2025 and 2.9% in 2026, where it will hold steady.

That implies that 185 bps in cuts are still to come in the newly launched easing cycle. Markets view this as a big-ol' RISK ON signal from the Fed. The DJIA and S&P500 have surged to new record highs. The NASDAQ is up sharply but remains off its record.

There are worries that the Fed is stoking an asset bubble that's not going to end well for investors. ”The danger this time around is the extreme level of complacency and the widespread consensus that the business cycle has been repealed,” writes Economist David Rosenberg.

Be assured that the business cycle is still a thing. And the Fed has only orchestrated one soft landing (1994-1995) in the modern era. The odds are against them.

The BoE opted to hold steady on rates today, as was widely expected. They signaled that further cuts are still in the cards. "It is vital that inflation stays low, so we need to be careful not to cut too fast or by too much," said Bank of England Governor Andrew Bailey.

Norway's Norges Bank held steady as well and indicated they would remain on hold until 2025.

The U.S. Philly Fed Manufacturing Index jumped to 1.7 in September, above expectations of -1.0, versus -7.0 in August. New orders fell to -1.5 from 14.6. Prices paid rose 10 points to 34.0 while prices received increased 10.9 points to 24.6.  The employment component improved, but the workweek contracted.

The U.S. current account deficit widened to -$266.8 bln in Q2, outside expectations of -$260.0 bln, versus a revised -$241.0 bln in Q1. The $25.8 billion widening of "reflected an expanded deficit on goods" according to the BEA.

Initial jobless claims fell 12k to a 17-week low of 219k in the week ended 14-Sep. Continuing jobless claims fell to 1,829K from a revised 1,843k in the previous week.

Leading Indicators fell 0.2% in August, inside expectations of -0.3%, versus -0.6% in July. There hasn't been an increase since February of 2022. The 100.2 print is the lowest since October 2016.

Existing home sales fell 2.5% in August to 3.86M, below expectations of 3.9M, versus an upward revised 3.96M in July. While prices have moderated somewhat as supply and mortgage rates have improved, considerable headwinds for the real estate market persist.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$29.54 (+1.15%)
5-Day Change: +$30.10 (+1.18%)
YTD Range: $1,986.16 - $2,597.42
52-Week Range: $1,812.39 - $2,597.42
Weighted Alpha: +36.14

Gold is back in the bid after a bout of post-FOMC volatility yesterday. While the yellow metal remains within the confines of Wednesday's range, the record high at $2,597.42 is within striking distance.

 

The $2,597.15 measuring objective off the August/early-September consolidation has been satisfied. A move above $2,600 seems likely amid expectations for significant additional easing by the Fed through Q2'26. The next upside targets are $2,619.35 and $2,674.84 based on Fibonacci projections.

With each new record high, the $3,000 psychological objective looks more and more attractive. Suddenly what seemed like a pretty lofty goal is just over $400 (15.44%) away.

A minor intraday low at $2,573.90 defines initial support and protects the more important $2.552.80/$2.549.18 zone, which is highlighted by today's low and yesterday's low. Additional support is marked by previous highs at $2,529.57/$2,525.52, which continues to correspond with the 20-day moving average which is at $2,527.88 today.

The gold market is still pretty overbought and therefore vulnerable to correction. Traders may want to try and shake out some of the weak longs that recently entered the market. However, the trend remains undeniably bullish and setbacks will likely attract more buyers.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +1.090 (+3.63%)
5-Day Change: +$1.323 (+4.43%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +35.89

Silver remains volatile with another broad range today. The white metal has set a fresh nine-week high of $31.249, clearing the way for a short-term challenge of the $31.652 high from 11-Jul.



Yesterday's big rate cut, expectations of even easier policy in the months ahead, and today's Philly Fed beat have emboldened the bull camp. Considerable credence has been returned to the scenario that calls for an eventual retest of the high for the year at $32.379 (21-May).

A word of caution: Silver frequently makes it hard on bulls. Volatility is high right now so it wouldn't be surprising to see some longs square up ahead of the weekend. While the launch of the Fed's easing cycle provides a tailwind for the market, the odds of a soft landing remain long.

Intraday support at $30.711 stands in front of the low for the day at $29.937 and Wednesday's low at $29.850. Good support is offered by rising moving averages at $29.409/364 (100-day & 20-day) and $28.974 (50-day).


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.

9/18/2024

Gold and silver await Fed decision

OUTSIDE MARKET DEVELOPMENTS: Fed funds futures continue to suggest a 50 bps cut when the Fed announces policy this afternoon. That bias seems to ignore the central bank's "data dependency" mantra. Recent data have reflected an economy that remains resilient and therefore warrants a more conservative 25 bps cut.

The policy statement, economic projections, and Powell's presser will be closely scrutinized for clues as to the likely rate path moving forward. The market continues to price in 100 bps in cuts by year-end, implying that at least one of the three remaining FOMC meetings will end with a 50 bps cut. I just don't think it will be this one.

Former St. Louis Fed President Bullard agrees. He said the case for a half-point Fed rate cut is "overblown" in a CNBC interview this morning.

UK CPI held steady at 2.2% y/y in August. However, core CPI accelerated to 3.6% y/y from 3.3% in July on the back of rising services prices. The BoE was already expected to hold steady on rates tomorrow and the inflation data seals the deal.

The BoE made its initial rate cut in August on a controversial 5-4 vote. The rebound in inflation suggests the decision may have been premature. I'm sure this will be mentioned in the board room of the Eccles Building today.

ECB Governing Council Member and Bundesbank President Joachim Nagel urged patients on inflation, noting that services inflation in particular remains "alarmingly high." Nagel warned that borrowing costs "will certainly not go down as quickly and sharply as they went up." While this hints at an ECB hold in October, recent ECBSpeak has been mixed.

U.S. mortgage applications jumped 14.2% in the week ended 13-Sep as 30-year mortgage rates dropped to a 23-month low of 6.15%. While the purchase index rose 5.4%, high rates remain a headwind for the housing market.

U.S. housing starts rose 9.6% to 1.356M in August, above expectations of 1.311M, versus 1.237M in July. That's the best print since April as a strong 15.8% surge in single-family starts offset a 4.2% decline in multi-family starts. Completions increased by 9.2% to 1.788M.

Reports of a potential explosive device near a Trump rally on Long Island further amplifies political tensions in the U.S. This is a developing story.  


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$6.36 (+0.25%)
5-Day Change: +$58.33 (+2.32%)
YTD Range: $1,986.16 - $2,589.13
52-Week Range: $1,812.39 - $2,589.13
Weighted Alpha: +34.76

Gold is narrowly confined within yesterday's range as the trade eagerly awaits today's Fed decision. A cautious 25 bps cut could initially lead to corrective action, but regardless of the size, the Fed's first rate cut in more than four years is a generally bullish event for the yellow metal.



Even if the Fed goes aggressive and cuts by a half-point it would imply smaller cuts in November and December. This may lead to the "sell the fact" event I've warned about in previous commentary this week.

The guidance provided in the statement, the dots, and Powell's presser will set expectations for the two remaining FOMC meetings this year, and into Q1'25.

Downticks on Tuesday were successfully contained by support at $2,559.79/$2,557.21. This level is reinforced by yesterday's low at $2,561.96. Secondary support is noted at $2,529.57/$2,525.52. The 20-day moving average has provided good support on a close basis for more than a month and comes in at $2,523.13.

If gold sells off on the Fed's decision, it may take a dip below $2,500 to entice renewed buying interest. Solid chart support at $2,474.31/08 is bolstered by the 50-day moving average at $2,469.80.

On the upside, fresh record highs above $2,589.13 would clear the way for attainment of the $2,597.15/$2,600.00 objective. A secondary target is marked by Fibonacci resistance at $2,619.35. New highs would also intensify speculation about an eventual move toward $3,000.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.095 (-0.31%)
5-Day Change: +$1.773 (+6.18%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +31.39

Silver has slipped to new lows for the week as traders are perhaps a little less inclined to go long into the FOMC statement. A softer tone in gold and a slightly better dollar weigh.



A retreat below $30 must be considered if the Fed cuts by just a quarter-point. However, such a move would suggest potential for a retreat to the $29 zone where the important moving averages are clustered.

On the other hand, penetration of resistance at $30.963/$31.073 would keep the white metal on track for a challenge of the $31.652 high from 11-Jul. Above the latter, the high for the year at $32.379 (21-May) would attract.

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.

9/17/2024

Gold and silver correct ahead of tomorrow's Fed decision

OUTSIDE MARKET DEVELOPMENTS: German ZEW Economic Sentiment plunged 15.6 points to an 11-month low of 3.6 in September, well below market expectations of 17.0, versus 19.2 in August. The current conditions index dropped to -84.5 on expectations of -80.0, versus -77.3 in August. The current conditions print is the lowest since May 2020.

Two ECB rate cuts have done little to improve the mood in Europe's largest economy. The stalling German economy bodes ill for the rest of the EU. There are worries that Europe is heading for a Japan-like lost decade (or more) of stagnant growth, albeit for different reasons.

Europe has a fertility problem with birthrates well below replacement levels. In Germany, the birthrate fell to 1.36 last year. There is some speculation that birthrates may rebound as the Europeans continue to shake off lingering worries from the COVID crisis but a return to the replacement rate of 2.1 seems unlikely.

Equally significant is the fact that governments in Europe have a spending problem. European Commission data shows that EU general government expenditures are nearly half of GDP. In some individual countries, it's well over 50% of GDP.

As governments grow they require more and more resources, crowding out productive private businesses. The beast must be fed leading to ever higher tax rates. Generous government-funded welfare programs lure workers away and sap productivity.

German Productivity through June 2024

It's worth considering how government decisions to essentially allow unrestrained immigration might be factoring into this reality. The most recent data from Eurostat shows that 5.1 million immigrants entered the EU from non-EU countries in 2022. The Council on Foreign Relations estimates Europe has absorbed 29 million migrants in the past decade and growth risks abound nonetheless.

The U.S. is on a similar trajectory both in terms of demographics and growth of government. Without a course correction, America could face its own lost decades.

And speaking of troubling trends: The International Institute for Democracy and Electoral Assistance reports that the global state of democracy continues to erode, even in high-performing countries in Europe and the Americas. "We now live in an era of radical uncertainty, in which multiple, compounding challenges threaten the patterns of stability and growth on which we have come to rely," the organization warned.

The Fed will seek to address immediate growth risks with its first rate cut in four years at the end of the two-day FOMC meeting that begins today. Fed funds futures continue to favor a 50 bps cut, but there still seems to be a fair amount of debate on the size of the cut.

U.S. retail sales rose 0.1% in August, above expectations of -0.2%, versus +0.4% in July. Ex-auto also rose 0.1% on expectations of +0.2%, versus +0.4%.

U.S. industrial production rose 0.8% in August, above market expectations of +0.4%, versus a negative revised -0.9% in July (was -0.6%). Cap use rose to 78% from 77.4% in July.

U.S. business inventories grew by 0.4% in July in line with expectations, versus +0.3% in June. Sales rose by a solid 1.1% reflecting broad-based strength.

The NAHB Housing Market Index ticked up two points to 41 in September but remains well off the July high of 56 and the 2020 record high of 90.

Much of the incoming U.S. data continues to reflect a resilient economy, pushing the DJIA and S&P500 to record highs. This keeps me leaning toward a cautious 25 bps cut as the Fed's first move.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$10.07 (-0.39%)
5-Day Change: +$46.98 (+1.87%)
YTD Range: $1,986.16 - $2,589.13
52-Week Range: $1,812.39 - $2,5789.13
Weighted Alpha: +34.29

Gold has turned corrective as the dollar firmed intraday and traders square positions ahead of tomorrow's pivotal Fed decision. The yellow metal is off nearly 1% from yesterday's record high at $2,589.13.



While Fed funds futures continue to imply a 50 bps rate cut tomorrow, today's data reflect a resilient economy that may warrant a less aggressive 25 bps cut. If the policy move is 25 bps, gold could face more significant corrective action initially, perhaps back below $2500. However, investors are likely to view such a dip as yet another buying opportunity.

Gold is pressuring support at the $2,559.79/$2,557.21 level. Below that, a minor chart point at $2,529.57 and congestion around $2,500 are noted.

On the upside, the previously established measing objective at $2,597.15/$2,600.00 is now protected by Monday's high at $2,589.13. I've got another Fibonacci objective at $2,619.35.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.035 (-0.11%)
5-Day Change: +$2.255 (+7.94%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +32.63

Silver made another run at the $31 level early in today's U.S. session but upticks stalled at $30.963, leaving yesterday's high at $31.073 well protected. At this point, I don't expect to see the 31-handle again until after the FOMC policy statement tomorrow.



A short-term move back above $31 is likely contingent on a 50 bps rate cut. If the Fed only cuts by 25, I see the white metal retreating to at least the $30 zone as the market reassesses, but the potential would be back to the important moving averages which are clustered around $29.

The bull camp should be heartened by today's generally positive U.S. economic data. However, persistent growth risks in Europe and China are a significant offset in terms of global optimism.

A short to near-term breach of $31.073 would keep the white metal on the path for a challenge of the $31.652 high from 11-Jul. Penetration of the latter would further bolster the scenario that calls for a test of the high for the year at $32.379.


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.

9/16/2024

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 latter, $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
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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.