6/07/2024
Gold tumbles on news that the PBoC didn't buy any gold in May
OUTSIDE MARKET DEVELOPMENTS: Official data from the People's Bank of China (PBoC) revealed that the central bank had not added any gold to official reserves in May as the yellow metal was making record highs. This apparently ended a buying spree that had lasted 18 consecutive months.
May U.S. nonfarm payrolls significantly beat expectations with a print of +272k. Median expectations were +195k, but there had been whispers of a weaker number based on soft jobs market data that came out earlier in the week. Back-month revisions totalled -15k.
The unemployment rate ticked up to 4.0%, largely due to a 250k drop in the labor force. Hourly earnings rose 0.4%, above expectations of +0.3%, versus +0.2% in April. The average workweek held steady at 34.3 hours.
These generally robust data downgraded rate cut hopes for July and September, putting additional pressure on the precious metals. Fed funds futures continue to suggest that the first Fed rate cut is most likely to come in November.
With the BoC and the ECB having cut rates this week, and hopes for a 'sooner rather than later' Fed cut dashed for the time being, the dollar index rebounded to new highs for the week. Prevailing interest rate differentials should help to underpin the greenback and pose a headwind for the precious metals.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -41.61 (-1.75%)
5-Day Change: -5.23 (-0.22%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34
Gold fell sharply in overseas trading as the market was surprised to learn that the PBoC had not bought any gold in May. This understandably rattled the gold market and the weekly gains that had accumulated through early Asian trading were quickly erased.
Of course, the PBoC is rather opaque when it comes to policy matters, including its gold holdings. Is the central bank really on pause? Was May just a one-off aberration? Are they still accumulating gold by other means? There will be much speculation on all these questions in the week ahead.
Net central bank gold purchases had picked up in April, but China was the second-biggest buyer behind Turkey. Without China in the mix, we could see net central bank sales of gold for the first time in a year.
The better-than-expected U.S. jobs report added further weight to gold, as Fed rate cut hopes dimmed and the dollar rose. The yellow metal tumbled to a new low for the week. Not only do we have an outside trading day, but an outside trading week as well.
If gold closes lower today, which seems likely, it will be the third consecutive lower weekly close since the record high of $2,449.34 was established on 20-May. None of this is terribly encouraging from a technical perspective, but keep in mind that gold is only off 5.7% from its all-time high. I still see the losses as corrective in nature.
Focus returns to chart support at $2,307.65 down to $2,300.00. More important support is defined by the May low at $2,281.97. Should this level give way, a more protracted corrective phase becomes more likely.
First resistance is marked by a minor intraday pre-jobs-data high at $2,337.28. The halfway back point of today's range at $ 2,348.40 is a more significant technical level.
One potential bright spot today was news that global ETFs registered inflows in May for the first time in 12 months. I say "potential" because one month does not a trend make.
European and Asian buyers provided the boost, while outflows from North America and other regions were relatively small.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.986 (-3.15%)
5-Day Change: -0.573 (-1.88%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Silver is displaying a bearish outside day and appears poised to register a weekly loss. At the time of this writing, Monday's low at $29.413 was being challenged, but was intact.
A new low for the week would further erode the short-term technical picture, shifting focus to a retracement level at $29.214 (50% retracement of the rally from $26.049 to the $32.379 high). The 61.8% retracement level comes in at $28.467. Losses since the 21-May 11-year high are just over 9%.
The halfway back point of today's range thus far is $30.469 which corresponds closely with a minor intraday chart point. A minor intervening barrier is noted at $29.710.
It's been a wild roller coaster ride in the white metal this week. Such is the nature of the silver market. Nonetheless, I continue to see the underlying trend as bullish.
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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
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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.
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6/05/2024
The metals await additional data for Fed rate cut timing cues
OUTSIDE MARKET DEVELOPMENTS: The market is expecting a print of +175k for this morning's ADP survey number, and will hope to glean some insight into Friday's payrolls report. JOLTS job openings fell in April to the lowest level since February 2021. Signs of weakness in the labor market would likely pull forward Fed rate cut expectations.
Traders will also be watching Services ISM and PMI to see if the weakness revealed in the manufacturing sector earlier in the week is also evident in the services sector. The ISM prices component is expected to moderate somewhat.
Additional signs of a slowing economy and cracks in the heretofore resilient labor market would ramp the likelihood of a Fed rate cut, but the prospects of anything happening at the June 12 FOMC meeting remain remote. While the timing of that first cut is data-dependent, Fed funds futures currently indicate the Fed won't start easing until November.
The Bank of Canada is expected to cut rates by 25 bps today. The ECB is likely to follow suit tomorrow.
With the first Fed rate cut still thought to be some ways down the road, widening interest rate differentials should provide some underpinning for the dollar. The dollar index hit a near-two-month low on Monday before rebounding modestly.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$6.78 (+0.29%)
5-Day Change: -$3.98 (-0.77%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34
Gold is higher in early U.S. trading on Wednesday with price action confined to the previous day's range. The weakness seen on Tuesday was successfully contained by Monday's low at $2,315.47.
The secondary tier of support is $2,307.65 down to $2,300.00, which is likely to keep the May low at $2,281.97 at bay. While the underlying trend in gold remains decidedly bullish if $2,281.97 gives way, a more protracted corrective phase would be indicated.
Consolidative trading may prevail until Friday's nonfarm payrolls report. The market is expecting a payrolls increase of 195k and the unemployment rate to hold steady at 3.9%.
Deviations from market expectations could set at least the near-term tone for gold. A beat would likely weigh on the yellow metal as the rate cut likelihood would remain in the Nov-Dec timeframe. A significant miss on the other hand would pull rate-cut expectations closer to the present, perhaps even July.
On the upside, chart resistance at $2,361.54/81 is needed to return confidence to the longer-term uptrend. Intervening chart resistance has developed at $2,352.32/$2,357.11.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.102 (+0.35%)
5-Day Change: -$2.348 (-7.35%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Silver tumbled to a 3-week low of $29.413 on Tuesday. Price action today has thus far been confined to the low end of yesterday's range.
The short-term oversold condition may be a limiting factor on the downside ahead of Friday's jobs data, but the technical bias remains to the downside. Penetration of $29.413 would clear the way for additional losses to a retracement level support at $29.214.
The fundamentals for silver remain broadly supportive. The push to more-than-11-year highs above $30 several weeks ago was a significant technical event as well.
Chinese silver imports may surge in the coming weeks due to a significant premium being paid in Shanghai to satisfy strong industrial demand. “A wave of imports into China is going to drain the free float away from the West even further,” said Daniel Ghali, senior commodity strategist at TD Securities Inc. in a recent mining.com article.
Silver needs to reclaim the $30-handle to ease short-term pressure on the downside. However, $31 is the more important level to watch with respect to returning credence to the underlying uptrend. The highs from earlier this week at $30.733/825 now define a solid intervening chart barrier.
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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.
6/04/2024
A significant slowdown in PBoC gold buying in April weighs
OUTSIDE MARKET DEVELOPMENTS: Today's U.S. calendar features April factory orders. Median expectations are for a 0.6% rise, down slightly from a revised +0.7% in March. The market has already displayed some concern about growth risks in light of recent data, so a miss on factory orders could further reinvigorate rate-cut bets.
For now, those growth risks are pressuring stocks and yields.
The ECB may cut rates as soon as this week's meeting (June 6). ECB President LaGarde has signaled a "strong likelihood" of a 25 bps cut. The ECB's Stournaras said early last month that the central bank now sees "three interest rate cuts in 2024 as the most likely scenario."
Analysts at Heraeus speculate that a weaker euro could spark European investment in gold as a devaluation hedge. European outflows from gold ETFs have been pretty consistent this year. It would be encouraging to see that trend reversed.
News that the PBoC added less than 2 tonnes of gold to reserves in April is weighing on the yellow metal. Aside from that, The World Gold Council's latest report was largely upbeat, showing an eleventh consecutive month of net purchases and a rebound from March.
Oil and copper losses may be weighing on the broader commodities complex amid demand worries. At the same time, a drop in oil prices just as the summer driving season begins reduces inflation pressures and bodes well for the Fed rate cut scenario.
The market will be paying close attention to the jobs data on Friday to see if the labor market remains resilient.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$21.56 (-0.917%)
5-Day Change: -33.42 (-1.42%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34
Gold formed a simple reversal day on Monday (lower low, higher close), but was unable to sustain the gains. Price action remains confined to yesterday's range (inside day).
Monday's low at $2,315.47 has not been challenged, leaving the more important $2,307.65/$2,300.00 zone protected. While the short-term corrective tone remains bearish, I don't believe the May low at $2,281.97 is in jeopardy, at least not before Friday's jobs report. Look for some base-building price action over the next several sessions.
I'd still like to see good chart resistance at $2,361.54/81 exceeded to return a measure of confidence to the underlying uptrend. Yesterday's high at $2,351.75 along with last Friday's high at $2,357.11 now provide intervening barriers.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$1.01 (-3.29%)
5-Day Change: -$2.365 (-7.37%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Silver tumbled in overnight trading, retracing all of Monday's rebound and setting a new cycle low at $29.699. These were the first trades below $30 in more than 2-weeks.
Short-term focus remains squarely on the downside, with the next level of support at $29.214, which is marked by the halfway back point of the leg-up from $26.049 (May 2 low) to the recent cycle high at $32.379 (May 21 high).
I'd like to see silver trade convincingly back above $31 to return some confidence to the uptrend. Suddenly that level is quite a ways away with the overseas high at $30.825 marking intervening resistance.
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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.
6/03/2024
Weaker U.S. manufacturing data revives hopes for a Fed rate cut this year
OUTSIDE MARKET DEVELOPMENTS: U.S. manufacturing ISM and construction spending missed expectations this morning. Interest rates and the dollar tumbled in reaction, providing some supportive buying in the precious metals.
These indications of a slowing U.S. economy revived expectations that the Fed may still cut rates this year. Last week we saw the Fed's preferred measure of inflation holding steady at 2.7% y/y, which lends additional credence to the rate cut scenario.
However, recent FedSpeak has leaned more hawkish. Even today, Minneapolis Fed President Kashkari said the central bank is on hold for an "extended period."
Last week's Personal Income report for April came in largely as expected, with the Fed's preferred measure of inflation holding steady at 2.7% y/y
Manufacturing news out of China was more encouraging. The Caixin PMI reading for May came in at 51.7, indicating China's manufacturing sector grew at its fastest pace in two years.
Focus later this week will be on Wednesday's U.S. services PMI and ISM, as well as Friday's nonfarm payrolls report. Median expectations are for an increase of 195k jobs in May. The jobless rate is expected to hold steady at 3.9%.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$3.83
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34
Gold ended May with a gain of 1.8%, despite the retreat from the $2,449.34 record high set on May 20. It was the fourth consecutive monthly gain. Through the end of May, the yellow metal is up 14.3% YTD.
While the near-term tone is corrective as the first trading week of June commences, the underlying trend remains bullish. While the yellow metal completed a 61.8% retracement of the latest leg-up in the rally in overseas trading today, the extent of the correction off the all-time high has been just 5.5% thus far.
There's decent chart support at $2,307.65 down to $2,300.00. Today's intraday low at $2,315.47 now marks a good intervening barrier. At this point, I consider more important support marked by the May low at $2,281.97 to be well protected.
A higher close today, above $2,327.82 would be encouraging. A trade above Friday's high at $2,357.11 and a higher close would be better yet for the bulls. A rise above good chart resistance at $2,361.54/81 would return additional confidence to the underlying uptrend.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.019
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Silver posted a solid 15.7% gain in May, its third consecutive higher monthly close. That's pretty impressive, given that silver ended the month nearly $2 off the more-than 10-year high that was set on May 21 at $32.379.
While important chart support at $30.077/079 was violated in overseas trading, downside follow-through was minimal. The sell-off in the dollar following data misses helped push the white metal back into positive territory for the day. As of this writing, silver is up more than 50¢ above the $29.908 intraday low.
A convincing push back above $31.00/08 is needed to return confidence to the underlying bullish trend. Until then, the short-term bias remains to the downisde.
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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.
