Blog posts of '2024' 'September'

9/6/2024

Gold and silver initially rallied on NFP miss, but subsequently retreated

OUTSIDE MARKET DEVELOPMENTS: U.S. nonfarm payrolls rose 142k in August, below expectations of +162k, versus a negative revised +89k in July (was +114k). June was revised lower by 61k from 179k to 118k.

The unemployment rate ticked down to 4.2% in line with expectations, versus 4.3% in July.

Hourly earnings rose 0.4% on expectations of +0.3%, versus a 0.2% rise in July.

The average workweek ticked up to 34.3 hours in line with expectations, versus 4.2% in July.

The 20k miss on the August payrolls print wasn't as bad as some of the whispers. However, -86k in back-month revisions to the previous two months strengthened – at least initially – the probability of a 50 bps rate cut on 18-Sep.

The likelihood of a 50 bps cut jumped to 59% immediately after the jobs report but those odds plunged in subsequent trading. As of this writing, the chances are just 25%, 5 percentage points lower than last week.

"[I]t is now appropriate to dial down the degree of restrictiveness in the stance of policy," said New York Fed President John Willams (centrist). However, Williams claims not to have a personal opinion on the appropriate size of a September rate cut, repeating the Fed's 'data dependence' mantra.

“The balance of risks has shifted toward the employment side of our dual mandate,” said Fed Governor Chris Waller (hawk). He noted that recent jobs data "no longer requires patience, it requires action." Waller said he was "open-minded about the size and pace of rate cuts," but seemed to hint at a preference for a slower pace of rate cuts.

I continue to believe the Fed's first step on the easing path will be a cautious one. In commentary earlier this week, I suggested a sub-100k August payrolls print might get me to change my view. While July was revised down below 100k, August was just moderately below expectations.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$2.45 (+0.10%)
5-Day Change: +$7.86 (+0.31%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +31.81

Gold jumped to a new high for the week after nonfarm payrolls missed expectations prompting more aggressive rate-cut bets and a drop in the dollar. However, gains stalled ahead of the record high at $2,529.57 and the yellow metal retreated into the range.



Despite today's volatility, gold still appears poised to register a higher weekly close. If confirmed with a close above $2,503.45, it would be the fourth higher weekly close in six.

Tests of the downside this week were successfully contained by the 20-day moving average on a close basis. I find that to be technically encouraging.

Price action since the record high was established on 20-Aug has been only mildly corrective; dropping just 2.2% from high to low. Arguably the tone for the past two weeks has been more consolidative than anything.

The underlying trend remains decisively bullish. The yellow metal is up more than 20% year to date and has closed higher every month except January. Gold is up nearly 30% since 06-Sep'23.

A short-term move to new all-time highs will favor a test of the $2,539.77 Fibonacci objective. Beyond that, potential is to the $2,597.15/$2,600.00 zone.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.021 (+0.07%)
5-Day Change: -$0.360 (-1.25%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +23.08

Silver modest upticks after the jobs report stalled ahead of yesterday's high at $29.125 leading to a sharp sell-off to new 3-week low. The white metal is now down more than $1 on the day and trading below $28.



Silver is poised for a second consecutive lower weekly close. This market sucks you in with encouraging signals and then spits you right back out again.

The resilience displayed by gold should provide some underpinning to the market, but that's not readily apparent at this point. Suddenly the $27.303 Fibonacci level (78.6% retrace of the August rally) is back in play.

I don't think it will get there today as this move is already pretty overdone. I wouldn't be surprised to see at least some short-covering into the close.

There are still 12 days until the FOMC announces policy. A lot can happen between now and then. Look for silver to remain volatile as traders on each side of the 25 bps or 50 bps debate continue to duke it out.

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.

9/5/2024

Gold and silver retrace recent losses and await jobs data

OUTSIDE MARKET DEVELOPMENTS: Heightened growth risks continue to weigh on global stocks. Most of the major overseas indices were lower once again today. U.S. shares are called lower today.

The ADP Employment Survey showed private payrolls rose by just 99k in August, well below market expectations of 148k, versus a negative revised 111k in July (was 122k). This is the weakest print since Jan 2021 and adds to whispers of a potential nonfarm payrolls miss tomorrow.

Challenger Layoffs surged 50k to 75.9k in August, a 193% increase over July. That's the highest August print in 15 years. 

Initial jobless claims fell 5k in the week ended 31-Aug to 227k, below expectations of 232k, versus a revised 232k in the previous week. Continuing claims dipped 22k to 1,838k, versus a downward revised 1,860k in the previous week.

U.S. Q2 productivity was revised up to +2.5% on expectations of +2.4%, versus +2.3% preliminary read. Unit Labor Costs were slashed to +0.4%, below expectations of +0.8%, versus +0.9% preliminary read.

U.S. S&P Global Services PMI was revised up to 55.7 from a preliminary read of 55.2. It was the 19th consecutive month above 50, and the highest print since March 2022.

U.S. Services ISM rose to 51.5 in August, above expectations of 51.0, versus 51.4 in July. Prices rose to 57.3 from 57.0 in July. Employment fell 0.9 points to 50.2 retracing some of the strong 5-point gain seen in July.   

While the services sector continues to show strength, signs from the labor market are raising concerns about the economy. Traders have boosted expectations for a 50 bps Fed rate cut this month to 45%. That's up from 34% a week ago, but down significantly from 85% a month ago.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$22.26 (+0.89%)
5-Day Change: -$3.30 (-0.13%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +32.31

Gold has rebounded to new highs for the week, buoyed by an uptick in bets that the Fed will be more aggressive in cutting rates this month and a weaker dollar. The record high at $2,529.57 (20-Aug high) is suddenly back within striking distance.



I don't see gold setting new highs before tomorrow's nonfarm payrolls report. However, if payrolls miss expectations, 50 bps rate cut bets would increase, the dollar will weaken further, and gold will be back on track for attainment of previously established objectives at $2,539.77 (Fibonacci) and  $2,597.15/$2,600.00 (measuring objective).

While the low from 22-Aug at $2,474.31 was slightly exceeded yesterday, I'm going to call this level technically intact. I'm also encouraged by gold's inability to sustain tests below the 20-day moving average on a close basis.

Global gold ETFs saw inflows of 14.3 tonnes last week as the yellow metal was consolidating just off its record high. North American investors accounted for the vast majority of that interest (11.6 tonnes).

Gold ETFs notched a fourth monthly net inflow in August. Inflows totaled 28.5 tonnes for the month with North American investors responsible for 17.2 tonnes of buying interest.

UBS Global Research claimed in August that the uptrend in gold has legs and could continue for the next couple of years. The report went on to say that "Gold models are unable to explain the bulk of gold’s rally," even though aggressive official sector (central bank) buying is heavily featured.

Jan Nieuwenhuijs of the Gold Observer believes the PBoC hasn't paused its gold buying at all. Covert PBoC gold buying is hidden in plain sight in global customs data according to Nieuwenhuijs. It's a great piece of research that goes a long way toward explaining what UBS models can not.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.542 (+1.92%)
5-Day Change: -$0.693 (-2.36%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +24.42

Silver has rebounded smartly to test back above $29 as choppy trading prevails ahead of Friday's payrolls report. New highs for the week have been established and more than 50% of the pullback from last week's high at $30.164 has been retraced.



The 50- and 100-day moving averages come in at $29.123 and $29.160 today and have successfully capped the upside thus far. The market now awaits the jobs data.

If job growth is weaker than expected, silver should follow gold higher on heightened expectations of a 50 bps rate cut on 18-Sep and a weaker dollar. Secondary resistance is noted at $29,583/635.

A short-term breach of last week's highs at $30.082/164 would put the yellow metal back on the path for a challenge of the July high at $31.652 and eventually the 11-year highs from May at $32.379.

A beat on the jobs front would likely send the precious metals back down into their ranges as rate-cut bets are pared. A decisive swing back in favor of a 25 bps Fed rate cut would support the dollar.

Minor intraday support is noted in silver at $28.655, which protects the lows from Wednesday and Tuesday at $27.791/779. 


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.

9/4/2024

Gold and silver recover somewhat on more aggressive Fed bets

OUTSIDE MARKET DEVELOPMENTS: U.S. stocks dropped sharply on Tuesday after signs of economic weakness sapped risk appetite. The DJIA ended the session with a 1.5% loss, the S&P500 fell 2.1%, and the tech-heavy Nasdaq tumbled 3.3% weighed by heavy selling of NVIDIA shares.

Global stocks took their queue from Wall Street with the major indexes recording losses: Nikkei 225 -4.2%, DAX -0.8%, CAC 40 -0.8%, FTSE 100 -0.8%. U.S. equities began Wednesday's session under pressure, but rising bets for more aggressive Fed easing are providing some market relief.

Risk-off is the theme to begin the month of September. In two weeks the Fed will announce policy and we'll see their latest economic projections. Between now and then key incoming data points that could materially impact policy are August payrolls (Friday), August CPI (11-Sep), August PPI (12-Sep), and Retail Sales (18-Sep).  

JOLTS nonfarm job openings fell 237k to 7,673k in July, the lowest print since January 2021. Layoffs rose 202k to 1,762k, the highest since March 2023. Hires rebounded 273k to 5,521k following a 407k plunge to 5,248k in June.

Incoming jobs data continue to suggest weakness in the labor market and may be a harbinger for a payrolls miss on Friday. The median estimate for August nonfarm payrolls stands at +162k, an improvement on the +114k reported in July. Nonetheless, a sub-160k payrolls print would likely result in Fed funds futures favoring a 50 bps cut.

Barring a dramatic payrolls miss (sub-100k), I still believe the Fed will initially be cautious as they embark on their first easing cycle since the pandemic. The last easing cycle actually began on 01-Aug 2019 and culminated with two large emergency cuts in March of 2020 as the COVID crisis ensued.

The Bank of Canada lowered its policy rate today by 25 bps to 4.25%. The move was widely expected.

U.S. factory orders rebounded 5.0% in July on expectations of +4.9%, versus -3.3% in June. It was the biggest monthly jump since July 2020. Most of the strength remains attributable to the transportation sector. Ex-trans a much more modest 0.4% gain was recorded.

Auto and light truck sales come out later today. Market expectations are 1.9M and 9.7M respectively.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$3.76 (-0.15%)
5-Day Change: -$15.32 (-0.61%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +30.22

Gold began the session on the defensive, edging to a two-week low of $2,474.08. However, the yellow metal rebounded as weak job openings data boosted bets for a 50 bps Fed rate cut, and weakened the dollar.



Earlier losses saw a slight breach of support at  $2,474.08 (22-Aug low), but gold is now trading back above the 20-day moving average. I suspect the range is now defined until the jobs data come out on Friday. Choppy consolidative trading should prevail until then, although a close back above $2500 would hearten the bull camp.

Key resistance is well-defined by the highs from the previous two weeks at $2,527.97/$2,529.57. A breach of this level is needed to return credence to previously established objectives at $2,539.77 (Fibonacci) and  $2,597.15/$2,600.00 (measuring objective).

The World Gold Council reports that, despite record-high prices, net central bank gold purchases more than doubled to 37 tonnes in July. The top three buyers in July were Poland, Uzbekistan, and India.

Official gold buying for reserve diversification is expected to remain an ongoing source of demand. Additions of gold to reserves are primarily coming at the expense of dollar holdings.

Goldman Sachs noted emerging market central bank buying as just one reason investors should buy gold. "Our preferred near-term long is gold. It remains our preferred hedge against geopolitical and financial risks, with added support from imminent Fed rate cuts and ongoing EM central bank buying," according to Goldman Sachs analysts.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.010 (-0.04%)
5-Day Change: -$1.068 (-3.67%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +20.48

Silver is consolidating within yesterday's range as soft U.S. economic data boosts the probability of an aggressive move by the Fed in two weeks. The rebound in factory orders led by the transportation sector, which is a heavy user of silver, may have given the bears some pause.



However, the magnitude of the losses seen since last week's failed tests above $30 has me thinking that the low is not yet in. The market certainly had become oversold, which helped prevent follow-through losses today.

With more than half of the August rally already retraced, further attacks on the downside can not be ruled out. Yesterday's low at  $27.779 now provides an intervening barrier ahead of the next Fibonacci level at $27.303 (61.8%).

A climb back above $29 would ease pressure on the downside and perhaps re-embolden the bull camp. However, choppy trade with a bias to the downside is likely ahead of Friday's jobs data.

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.

9/3/2024

Gold and silver remain defensive as focus shifts to Friday's jobs data

OUTSIDE MARKET DEVELOPMENTS: The bodies of six more Israeli hostages were discovered in Gaza over the weekend, including Israeli-American Hersh Goldberg-Polin. Israelis took to the streets demanding that the Netanyahu government reach a cease-fire deal and secure the release of the remaining hostages.

Negotiating with terrorists never seems to work out in the long run. Despite the intense internal and international pressure, the latest hostage deaths likely steel the resolve of Netanyahu to achieve “total victory” over Hamas.

NATO member Turkey has formally applied to join the BRICS economic block in a bid to boost its global influence. According to Bloomberg, Turkish President Recep Tayyip Erdogan recognizes that "the geopolitical center of gravity is shifting away from developed economies."

The BRICS group is growing; recently adding Iran, the United Arab Emirates, Ethiopia, and Egypt. Saudi Arabia has been asked to join, while Malaysia, Thailand, the Philippines, Vietnam, and Azerbaijan are considering joining.

With America's global economic influence eroding, the BRICS – most notably China – are eager to fill the void. This shift plays into the de-dollarization theme.

Prospects for a 50 bps Fed rate cut had been hovering around 30% but were boosted by signs of economic weakness in today's data:

U.S. manufacturing PMI was adjusted lower to a final August print of 47.9, the lowest since June of 2023. That's down from a preliminary print of 48.0 and 49.6 in July.

“A further downward lurch in the PMI points to the manufacturing sector acting as an increased drag on the economy midway through the third quarter. Forward looking indicators suggest this drag could intensify in the coming months," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

While August manufacturing ISM rose to 47.2, the print was below expectations of 47.8. The indicator is less than a point off the 3-year low of 46.4. Prices paid rose 1.1 points to 54.0, versus 52.9 in July. New orders tumbled 2.8 points to a 15-month low of 44.6.

Construction spending fell 0.3% in July, below expectations of +0.1%, versus an upward revised UNCH in June. Back month revisions offset the headline number netting a modestly positive report.

Focus this week is squarely on U.S. jobs data, out on Friday. The market is estimating payrolls to rise by 162k and the jobless rate to tick down to 4.2%. Weaker-than-expected jobs growth would boost bets for a 50 bps rate cut.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$2.22 (-0.09%)
5-Day Change: -$44.36 (-1.76%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +29.55

Gold is trading lower for a third session after failing to extend to new record highs last week. A firmer dollar is weighing on the yellow metal as market focus moves to Friday's nonfarm payrolls report for August.



Gold is currently testing below the 20-day moving average at $2,483.77, leaving the low from 22-Aug at $2,474.31 vulnerable to a test. The close that day at $2,484.57 is the lowest close since 15-Aug. Chart points at $2,451.50 (16-Aug low) and $2,435.86 (15-Aug low) offer additional support.

The latest COT report shows spec long positioning rose 3.1k last week to 294.4k contracts. That's the biggest long position since the week ended 13-Mar of 2020.

Given the long positioning, it's not surprising to see some position-squaring ahead of this week's jobs report. Those jobs data have significant implications for the Fed policy decision that is just 15 days out.

A close back above $2,500 would ease pressure on the downside somewhat. While the underlying trend remains bullish, corrective/consolidative action is likely to prevail until Friday.

Last week's high at $2,527.97 reinforces the record high from the previous week at $2,529.57. Beyond that, established objectives at $2,539.77 (Fibonacci) and  $2,597.15/$2,600.00 (measuring objective) remain valid.




SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.234 (-0.82%)
5-Day Change: -$2.097 (-7.00%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +19.34

Silver has extended to the downside, weighed by weak manufacturing data and a firmer dollar. The white metal is decisively back below the 20-day moving average and more than 50% of the August rally has been retraced.



Silver has disappointed yet again, failing to sustain last week's probes above $30. A sustained breach of this level would have had silver on track for a challenge of the high for the year $32.370 (21-May).

Those tests above $30 drew some new longs into the futures market last week. The COT report showed net long positions increased by 2.9k to 52.2k contracts, a 6-week high. Alas, those longs seem to be weak.

The next supports I'm watching are minor chart points at $27.505 and $27.425. These levels protect the more important $27.303/237 zone.

Monday's low at $28.352 and today's intraday high at $28.558 define initial resistances. A climb back above $29.00 is needed to ease pressure on the downside, but that seems unlikely before Friday's jobs report.


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.