Gold eases from another record high as market awaits tomorrow's tariff announcements
OUTSIDE MARKET DEVELOPMENTS: Market angst remains elevated amid worries that President Trump will announce levies that are broader than the targeted reciprocal tariffs previously threatened. Trump says Wednesday is America's "Liberation Day," but many view sweeping tariffs as a significant escalation of a developing trade war.
There is still lingering hope that U.S. trade partners will make concessions to avoid or minimize tariffs. However, headlines about planned retaliations abound.
Risk appetite has rebounded modestly as mounting growth risks lift rate cut expectations. Even though inflation risks are also rising, Fed funds futures are now pricing in just over 75 bps in easing by December.
Prospects for Fed easing and safe-haven demand for Treasuries are weighing on yields more broadly, which is capping the upside in the dollar. The dollar index is consolidating just off five-month lows set on 18-Mar at 103.20.
Manufacturing PMI for March was revised up to 50.2 from a preliminary print of 49.8, versus 52.7 in February. That leaves the indicator in expansion territory for a third straight month. Input prices rose to a 31-month high of 66.0 from 62.1 in February.
Manufacturing ISM fell to a four-month low of 49.0 in March, below expectations of 50.2, versus 50.3 in February. Prices paid surged 7.0 points to a 33-month high of 69.4 from 62.4 in February. Employment slid -2.9 points to 44.7, the lowest since September.
JOLTS Job Openings declined 194k to 7,568k in February, below expectations of 7,630k, versus an upward revised 7,762k in January ( was 7,740k).
Construction Spending rose 0.7% in February, better than the +0.2% the market was expecting, versus a revised -0.5% in January (was -0.2%).
RCM/TIPP Economic Optimism Index fell 1.4% to a six-month low of 49.1 in April, below expectations of 50.1, versus 49.8 in March. "As consumer confidence declines even a little, it's not unreasonable to wonder if the source of reduced confidence can be found in Washington, D.C," said John Tamny, the editor of RealClearMarkets.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$9.25 (+0.30%)
5-Day Change: +$106.85 (+3.54%)
YTD Range: $2,607.16 - $3,3,147.41
52-Week Range: $2,248.01 - $3,147.41
Weighted Alpha: +38.41
Gold reached a record high of $3,147.41 in overseas trading to begin Q2, driven by persistent haven demand. However, the yellow metal backed off from that new high on profit taking ahead of tomorrow's expected tariff announcements.
Despite today's setback, the fundamentals remain broadly supportive for gold. In fact, it's a bit of a perfect storm.
The threat of a trade war is stoking fears of a recession and prompting a rotation out of stocks to safe havens. Rate cut expectations are on the rise and weighing on the dollar, even as concerns about inflation are ratcheting higher.
The war in Gaza is back underway, while hopes for a ceasefire in Ukraine have dimmed.
An FT article notes that "investors have poured more than $19.2bn into gold-backed exchange traded funds during the first quarter." That's the biggest inflow since the pandemic.
“Uncertainty is one of the main factors that has led to a renewed interest in gold,” said Krishan Gopaul, senior analyst at the World Gold Council. If there is one thing we seem to have in spades since the beginning of the year, it's uncertainty.
If President Trump backs off from tariffs again, or U.S. trading partners make concessions, we could see a multi-session correction in gold. However, pullbacks are still likely to be viewed as buying opportunities as the aforementioned uncertainty persists.
A minor chart point mentioned is yesterday's commentary at $3,105.29 marks first support and protects the $3,100.00 level. More important supports are defined by Monday's low at $3,078.93 and Friday's low at $3,054.50. The 20-day MA now bolsters the $3,003.62/$3,000.00 zone.
Today's high at $3,147.41 was just shy of the $3,149.84 Fibonacci objective, reinforcing this level as good resistance. An eventual breach of this level would target $3,200 initially, but would lend additional credence to the scenario that suggests potential to $3,500.
Silver is trading lower for a third consecutive session as mounting trade and growth risks stoke worries about demand destruction. While the retreat in gold is seen as corrective, it does apply some additional weight to the white metal. The same can be said for copper's drop from last week's record high.
Minor chart support at $33.521 (26-Mar low) is bolstered by the 20-day moving average at $33.431 today. A breach of the latter would leave the low from 21-Mar at $32.767 vulnerable to a test. Below that, the 50-day MA comes in at $32.423.
A climb back above $34 is needed to revive confidence in the anticipated challenge of the multi-decade high at $34.853. Last week's high at $34.543 now defines a solid intervening upside barrier.
Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com
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.
