Blog posts tagged with 'palladium'

11/18/2024

Gold and silver bounce on revived geopolitical risks, softer dollar

OUTSIDE MARKET DEVELOPMENTS: President Biden has given Ukraine permission to use U.S. long-range missiles to strike military targets within Russia. Vladimir Putin had previously warned that such an attack would mean the U.S. and Russia are at war.

“Today, there is a lot of talk in the media about us receiving a permit for respective actions. Hits are not made with words. Such things don’t need announcements. Missiles will speak for themselves,” said Ukrainian President Zelensky.

After 1000 days of war, the Russian military is depleted – to the point of using North Korean troops on the frontline – and it seems unlikely they would seek direct conflict with the U.S. and NATO. However, Putin has already threatened to use nuclear weapons.

This is a rather significant escalation. After nearly two weeks of post-election repositioning, there has been a realization that geopolitical risks persist.

Israel conducted a targeted strike in Beirut on Sunday that killed a key Hezbollah spokesman. The terrorist group responded by firing more than one hundred rockets into Northern Israel.

China's Xi Jinping spoke with President Biden on the sidelines of the APEC conference in Lima, Peru. "China is ready to work with the new U.S. administration, to maintain communication, expand the cooperation and manage differences, so as to drive forward a steady transition of the China-U.S relationship for the benefit of the two peoples," said Xi.

The two leaders also agreed it was better for human beings rather than AI to control their nuclear arsenals. That's reassuring!

U.S. NAHB Housing Market Index rose three points to a seven-month high of 46 in November from 43 in October.  The future sales component was the driving force, defying the rebound in mortgage rates that began in October.

TIC Data for September comes out this afternoon.

Chicago Fed President Austin Austan Goolsbee warned that clearing in the $28 trillion US Treasury market has become much more concentrated in recent years. He views this as a risk.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$31.90 (+1.24%)
5-Day Change: -$15.28 (-0.58%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +28.32

Gold rebounded nearly 2% as market focus returned to geopolitical risks. The yellow metal appears poised for its first higher daily close in seven sessions, helped by a setback in the dollar.



The move back above $2,600 is encouraging following last week's bounce off the 100-day moving average. However, additional gains are needed to return confidence to the longer-term uptrend.

Initial resistances are at $2,614.77 (13-Nov high) and $2,625.32 (12-Nov high). More important levels to watch this week are $2,636.26 (38.2% retrace), $2,653,93 (50-day MA), and $2,655.65 (50% retrace).

Penetration of the latter would signal that the corrective low is in place. At that point, I expect choppy consolidative trading to prevail into year-end.

If tensions between Russia, the U.S., and NATO flare, the uptrend could certainly re-exert itself more quickly. A rebound above $2,700 would put the record high from 30-Oct at $2,789.68 back in play.

Initial support is marked by a minor intraday chart point at $2,582.71, which protects today's Asian low at $2,563.06 and Friday's low at $2,556.18. More important supports are noted at $2,548.47 (100-day MA) and $2,541.42 (14-Nov low).

There were 23.7 tonnes of net outflows from global ETFs last week. European investors were the leading sellers at -18.2 tonnes. It was the biggest net weekly outflow in more than a year. Interestingly, in the first full post-election trading week, there were 0.8 tonnes of inflows from U.S. investors.

Last week's COT report revealed net speculative long positions in gold futures contracted by 18.8k to 236.5k contracts. It was the third straight weekly drop and the lowest since the 14-Jun week.

Silver rebounded to a five-session high above $31, boosted by a higher gold price, a weaker dollar, and revived geopolitical risks. The white metal is up nearly 3% intraday.



The net speculative long position in silver futures declined by 5.7k to 47.6k last week according to the latest CFTC COT report. It was the third consecutive weekly decline and the lowest reading in nine weeks.

CFTC Silver speculative net positions

Silver still needs to regain the $32 level to ease pressure on the downside and to suggest that the low is in. Intervening resistance is noted at $31.664/691, where the 50-day MA corresponds closely with the 38.2% retracement level of the three-week decline.

On the downside, former resistances at $31.021/000 and $30.773 now offer support. Today's overseas low and the low from Friday at $30.260/200 now protect the cycle low at $29.736 (14-Nov low).


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.

11/15/2024

Gold and silver rebound modestly but appear poised for a third straight weekly loss

I'm in Baltimore for the Whitman Winter Expo. I'm going to make today's commentary short and sweet so I can get to the show.

OUTSIDE MARKET DEVELOPMENTS: U.S. Retail Sales rose 0.4% in October, above expectations of +0.3%, versus a positive revised +0.8% in September (was +0.4%). Ex-auto rose 0.1% on expectations of +0.4%, versus an upward revised +1.0% in September (was +0.5%)

U.S. Empire State Index surged 43.1 points to a 38-month high of 31.2 in November, well above expectations of -0.9, versus -11.0 in October. 

U.S. Import Price Index +0.3% in October, above expectations of  -0.1%, versus -0.4% in September. Ex-petro was +0.2%.

U.S. Export Price Index +0.8 in October, well above expectations of  -0.1%, versus a revised -0.6% in September.

Industrial Production and Business Inventories come out later this morning. FedSpeak is due from Collins and Williams.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$5.30 (+0.21%)
5-Day Change: -$114.38 (-4.26%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +27.34

Gold is trading modestly higher, looking to end its five-day losing streak, but will still notch a third consecutive lower weekly close. 



The yellow metal remains confined to yesterday's range thus far, but we could see some additional short-covering into the weekend as traders ring up profits on this week's more than 4% plunge.

A breach of yesterday's high at $2,580.58 could spark a move back to $2,600.00. However, at this point, I'm inclined to view upticks as corrective within the short-term downtrend.

Bears are likely to view a bounce as a selling opportunity. There may also still be some longs in the market contemplating a belated capitulation at a higher price.

That being said, I like the rebound off the 100-day moving average that we saw yesterday. It's just premature to suggest the low is in.

A further retracement back above $2,636.26 and more importantly $2,665.55 would return a measure of credence to the uptrend. However, I'm not expecting new record highs until Q1'25 at this point. Choppy range trading is likely to prevail for the remainder of 2024.

On the downside, fresh cycle lows below $2,541.42 would shift focus to the next level of significant support at $2,482.74, which marks a 38.2% retracement of this year's rally.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +0.244 (+0.80%)
5-Day Change: -$0.578 (-1.85%)
YTD Range: $21.945 - $34.853
52-Week Range: $20.704 - $34.853
Weighted Alpha: +27.57

Silver managed a higher daily close yesterday and there's been some modest upside follow-through today. Nonetheless, the white metal appears destined for a third straight lower weekly close.



Silver needs to regain the $32 level to ease pressure on the downside and to suggest that the low is in. Intervening resistances are noted at $31.021 (13-Nov high) and $31.618 (50-day MA).

A breach of yesterday's low at $29.736 would allow for a true test of the $29.706 Fibonacci level. Below the latter, $29.00 and the 200-day moving average at 28.727 would be the attraction.


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.

11/14/2024

Gold and silver bounce from two-month lows but the short-term trend remains bearish

I'm in Baltimore for the Whitman Winter Expo. I'm going to make today's commentary short and sweet so I can get to the show.

If you're at the show, look for a handsome guy in a grey Zaner polo and a black Tornado ball cap, and be sure to say hello!

OUTSIDE MARKET DEVELOPMENTS: U.S. PPI rose 0.2% in October, in line with expectations, versus unch in Sep; +2.4% y/y, up from +1.8% in September. Core +0.3%, also in line, versus +0.2% in September; +3.1% y/y, versus +2.8% in September.

The month-on-month gains in PPI were in line with expectations, but hotter-than-expected annualized rates of producer inflation bolster the narrative of a less-dovish Fed.

The market continues to favor a 25 bps rate cut in December, but chances for a December hold have edged up to 24.3% from 17.5% yesterday.

I think the Fed is going to hold its cards close to the vest until the Trump administration and the new Congress are in place and actually try to enact some of the policies that have been bandied about throughout the campaign and post-election. Until then, the Fed will follow through on its vow to focus on the incoming data.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$19.31 (-0.75%)
5-Day Change: -$152.09 (-5.62%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +26.28

Gold continues to be pressured by post-election risk-on repositioning. The yellow metal has traded lower for five straight sessions, eight of the last eleven.



However, today's post-PPI rebound off the 100-day moving average is at least modestly encouraging for the bulls, particularly in light of the oversold condition that worsened with the overseas drop to new two-month lows.

While the short-term trend is bearish, I still see it as corrective within the longer-term uptrend. The magnitude of the correction since the all-time high is just under 9%. Strategists at JP Morgan see the post-election sell-off as "a stumble not a sea change."

At this point, I'm inclined to agree but it's premature to suggest the low is in. Bears are likely to view a bounce as a selling opportunity and undoubtedly there are still longs in the market contemplating bailing.

Fresh lows from here would shift focus to the next level of significant support at $2,482.74, which is 38.2% retracement of this year's rally.

There are still plenty of bullish fundamentals in support of the long-term uptrend, but for now, the market's focus is squarely on the seismic shift in the U.S. political landscape.

Optimism about the U.S. economy and stocks is attracting foreign investment flows that have driven the dollar to 13-month highs. The inverse correlation between gold and the dollar has re-exerted itself and has proven to be a major headwind over the past week.

In the near term, I see gold finding a bottom somewhere between the present low and $2,482.74 and then choppy range trading is likely to prevail into year-end.

Silver fell to a two-month low below $30 in overseas trading. However, the white metal has subsequently rebounded and is trading higher on the day.



The $29.705 Fibonacci level (61.8% retracement of the leg up from $26.524 to $34.853) was confirmed as a downside target with last night's convincing breach of the 100-day moving average. While $29.705 was approached it successfully contained the downside.

A close today back above the 100-day ($30.344) would be mildly encouraging, but really $32 must be regained before I would have any confidence that the low is in.


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.

11/13/2024

Gold and silver remain defensive

OUTSIDE MARKET DEVELOPMENTS: Markets continue to process the U.S. election outcome. The trade implications of the second Trump Presidency seem to be the biggest area of concern.

On the campaign trail, President-elect Trump claimed that he didn't need Congress to enact his trade policies. Many beg to differ. While his hardline on trade could just be a negotiating tactic, U.S. trade partners are understandably worried.

Bundesbank President Joachim Nagel worries that Trump tariffs could have a -1% impact on German GDP. With Europe's largest economy already stagnant that could lead to a recession. "If the new tariffs actually materialise, we could even slip into negative territory," said Nagel.

Shares of Japanese automakers have been hit hard over the past week. Japan's auto exports to the U.S. are more than three times as large as its domestic market. 

The IMF forecasts Japan's GDP to be just +0.3% this year, and +1.1% in 2025. Japan's export-driven economy would be hard-hit by tariffs.

Trump appears to really have it in for China, threatening them with tariffs of 60% to 100%. However, China holds a trump card in the form of more than $800 bln in U.S. debt. Retaliation could turn the bond market ugly in a hurry.

With more than $1 trillion in U.S. debt, Japan certainly has the means to retaliate as well.

Reduced trade could also hasten de-dollarization and lead to weaker demand for Treasuries. That being said, our trading partners want and need access to U.S. consumers. There's plenty of room for negotiation in most instances.

Increasing optimism about the U.S. economy and the wealth effect of high-flying stocks could set the stage for the best Christmas buying season in years. Many Americans may be planning purchases of imported goods such as electronics before tariffs are applied.

My 18-year-old who has been kicking tires for several weeks is keen to get a car bought "before prices go up." I love that he's thinking about such things... 

U.S. MBA Mortgage Applications rose 0.5% in the week ended 08-Nov, versus -10.8% in the previous week. Purchases were up 1.9%, while refis fell 1.5%. New 17-week highs in the 30-year mortgage rate pose a headwind.

U.S. CPI +0.2% in October, in line with expectations, versus +0.2% in September; +2.6% y/y, up from 2.4% in September. Core CPI rose 0.3% on expectations of the same, versus +0.3% in Sep; +3.3% y/y, unchanged from September.

I call today's inflation reading fairly benign. Despite the slightly hotter annualized headline CPI print, the odds for a December Fed hold fell today to 17.7% from 41.3% yesterday.

Treasury Budget for October comes out this afternoon. Median expectations are -$242.5 bln. 

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$12.37 (+0.48%)
5-Day Change: -$51.04 (-1.92%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +29.99

Gold started the U.S. session with a bit of a bid, as prices not seen in September and an oversold condition prompted some bargain hunting and perhaps some short covering.  However, upticks could not be sustained and the yellow metal has subsequently fallen to fresh eight-week lows.



Yesterday's breach of chart/trendline support at $2,606.62/$2,604.16 (10-Oct) leaves the downside vulnerable to the next tier of support at $2,549.18 (18-Sep low). The rising 100-day moving average comes in modestly lower at $2,540.84 today.

Despite Fed funds futures showing more favorable odds for another 25 bps rate cut in December, the dollar remains on the bid. The dollar index extended to 12-month highs and continues to weigh on gold.

Losses since the $2,789.68 record high was set on 30-Oct have exceeded $200 (7.5%). The short-term trend remains down, but I still see it as corrective within the longer-term uptrend.

Today's earlier high at $2,614.77 marks first resistance. Yesterday's high at $2,625.32 and the 50-day moving average at $2,649.75 protect the halfway back point of the decline at $2,684.54.

The IMF is being urged to sell 4% of its gold holdings to replenish its Catastrophe Containment Relief Trust (CCRT) and help poor countries deal with climate-related catastrophes. The IMF currently has 90 Moz of gold so a 4% sale would equate with 3.62 Moz.

Such a sale strikes me as unlikely and is probably not contributing meaningfully to today's losses in gold. The IMF hasn't sold gold since the tail-end of the global financial crisis in 2009/10.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +0.164 (+0.53%)
5-Day Change: -$0.289 (-0.93%)
YTD Range: $21.945 - $34.853
52-Week Range: $20.704 - $34.853
Weighted Alpha: +28.49

Silver ticked briefly back above the $31 level in early U.S. trading, but these gains could not be sustained as the dollar went back on the bid and gold fell to eight-week lows. While silver is back trading lower on the day, yesterday's low at $30.228 remains protected thus far.



If silver does set new cycle lows below $30.229/228 it would shift focus to $29.705 (61.8% retracement of the leg up from 26.524 to $34.853). A minor intervening chart point is noted at $29.850.

Today's intraday high at $31.021 marks initial resistance. More substantial resistance is noted at $31.503/536 where Monday's high corresponds closely with the 50-day moving average. The halfway-back point of the decline thus far is well protected at $32.540.


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.

11/12/2024

Gold still weighed by risk-on flows and dollar strength

OUTSIDE MARKET DEVELOPMENTS: It appears that the Republican Party has secured control of the House of Representatives. The 270ToWin site shows the GOP with 219 seats, one seat beyond the 218 majority threshold, with six races yet to call. The AP has yet to call a number of close races and their count remains at 214-205.

Trump is expected to push Russia and Ukraine toward a negotiated peace deal, but Ukraine is loath to give up any of its territory. While Trump is a staunch supporter of Israel, he indicated at the GOP convention that if elected he wanted Israel to wrap up operations before inauguration day. He has also demanded Hamas release the remaining hostages by 20-Jan or it will pay “​​a very big price.”

Perhaps there is some optimism about these foreign policy tactics built into the so-called "Trump trade." If the war in Ukraine and Israel's war with Iran and its proxies are wound down, it would be a major coup for the new President. However, new geopolitical hotspots are likely to flare.

The President-elect has been busy over the past week filling cabinet posts. China hawk Mike Walz has been tapped as National Security Advisor. Marco Rubio, another Israel-friendly foreign policy hawk, is widely expected to be named Secretary of State.

Amid Trump's frequent talk of tariffs trade tensions with China are already on the rise and are perhaps being amplified by the Middle Kingdom's existing economic woes. Tensions with Mexico are ramping up as well, on trade and anticipated pressure to staunch the flow of illegal immigrants to the U.S.

The FOMC studiously avoided commenting on the election last week and FedSpeak thus far today has been mum on that topic. As I said right after the election, the Fed is unlikely to alter monetary policy based on campaign rhetoric. When that rhetoric transitions to policy, that's another story.

The market has priced in about a 35% chance of a December hold by the Fed. That could creep up if forward-looking indicators continue to reflect economic optimism.

Case in point: 

U.S. RCM/TIPP Economic Optimism Index surged 13.4% to a 39-month high of 53.2 in November, versus 46.9 in October. That print is 8.3% above the historic average of 49.1.

"The index had been in negative territory for 38 consecutive months, starting in September 2021, and broke out decisively in November after President Donald Trump's historic return as the 47th President," said Real Clear Markets. 

U.S. NFIB Small Business Optimism Index rose 2.2 points to 93.7 in October, above expectations of 92.0, versus 91.5 in September. While nine of ten components rose, it was the 34th consecutive month below the 50-year average of 98.

The NFIB's uncertainty Index humped to a record high of 110 ahead of the election. “With the election over, small business owners will begin to feel less uncertain about future business conditions,” said NFIB Chief Economist Bill Dunkelberg.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$21.89 (-0.84%)
5-Day Change: -$143.42 (-5.23%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +29.45

Gold remains under pressure, reaching an eight-week low of $2,591.64 as the "Trump trade" continues to broadly impact global markets. The traditional inverse relationship between the yellow metal and the dollar seems to have re-exerted itself with gains in the greenback pushing gold lower.

 

Market worries that Trump policies may restoke inflation and cause the Fed to become less dovish are contributing to the dollar's gains. Additionally, optimism about the U.S. economy has sparked increased foreign flows into U.S. shares. Dollars are needed to make those stock purchases.

The World Gold Council saw a GOP win as increasing the opportunity costs for holding gold. That seems to be how things are shaking out in the immediate aftermath of the election.
  

That being said, the WGC views this as a "near-term phenomenon" and expects market focus to shift back to the following "more fundamental concerns":

• A world where protectionism is likely going to be more acute and current conflicts see no signs of abatement
• Equity markets are heavily concentrated and richly valued during the end of a business cycle
• Cryptocurrencies continue to be a marginal consideration and not a replacement for gold
• Western investors have, outside of futures, not added much gold this year and so there is unlikely a slew of sellers in the wings.

The Trump administration is perceived to be crypto-friendly, which has led to strong gains in BitCoin, Ethereum, and others. In the alternative asset realm, I suspect the rotation out of gold to crypto is not insignificant. Whether that's a sticky rotation or just a trade remains to be seen.

Gold's breach of important chart/trendline support at $2,606.62/$2,604.16 (10-Oct) leaves the downside vulnerable. The next significant support zone I'm watching is defined by the 18-Sep low at $2,549.18 and the rising 100-day moving average which is at $2,538.02 today.

The magnitude of the fall from the 30-Oct record high at $2,789.68 to today's low is just over 7%, still within the parameters of a correction. That cuts into the YTD gains significantly, but the yellow metal is still up more than 25% in 2024.

With the market increasingly oversold there is scope for a short-term bounce. Initial resistance is marked by today's Asian high at $2,625.32. Above that, additional resistances are noted at $2,648.04 (50-day MA), $2,685.11 (yesterday's high), and $2,690.66 (halfway-back point of the decline).

Silver extended losses to trade briefly below the 100-day moving average, but has since bounced modestly to trade higher in the day. Weak gold, a strong dollar, and ongoing concerns about Chinese economic weakness continue to pose headwinds for the white metal. 



Enthusiasm about a potentially more robust U.S. economy may be counterbalancing the worries about China, at least to some degree. However, I think it's still going to be a while before the post-election dust settles.

A more convincing violation of support at $30.229 (9-Oct low) would shift focus to $29.705 (61.8% retracement of the leg up from 26.524 to $34.853). A minor intervening chart point is noted at $29.850.

Former support at $30.903/921 marks initial resistance. More substantial resistance is defined by yesterday's high at $31.503, which corresponds closely with the 50-day moving average. The halfway-back point of the decline thus far is well protected at $32.540.


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.

11/11/2024

Gold and silver remain under significant post-election pressure

OUTSIDE MARKET DEVELOPMENTS: Today is Veterans Day in the U.S. and Remembrance Day in Canada. Bond markets and central banks are closed in both countries. Stock and commodities markets are open.

Thank you to those who served.

The U.S. Republican Party edged closer to a majority in the House of Representatives over the weekend. The GOP needs four of the remaining 18 uncalled races to break their way to secure majorities in both Houses of Congress.

Full control of Congress will make it easier for the Trump administration to enact its policy agenda. Markets are optimistic with the prospect of lower taxes and less regulation leading to risk-on flows into shares at the expense of safe-haven assets like gold.

The market is however concerned Trump's policies, particularly his trade policies, will increase inflationary pressures. This may prompt the Fed to become less dovish…and potentially even hawkish.

The Fed cut rates by 25 bps last week, in line with expectations. The central bank steered clear of commenting on the election results in the policy statement. “In the near term, the election will have no effects on our policy decisions," said Fed Chairman Powell in the post-meeting presser.

Powell did acknowledge that there is a "fair amount of uncertainty" and the Fed doesn't think “it's a good time to be doing a lot of forward guidance.”  Fed funds futures still reflect expectations for another cut in December, but the outlook for future cuts has been trimmed.

A less-dovish Fed outlook, still dovish ECBSpeak, and hints of a more cautiously hawkish BoJ provide lift for the dollar. The dollar index reached a four-month high of 105.71.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$21.61 (-0.80%)
5-Day Change: -$121.35 (-4.43%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +30.48

Gold has extended to the downside to begin the new week, reaching a four-week low of $2,613.53. The yellow metal continues to be weighed by post-election risk-on flows.



Strong gains in stocks, dollar strength, and a less-dovish Fed outlook all conspire against gold at the moment. However, I believe these losses are corrective and the long-term uptrend remains intact.

Not surprisingly, there were 8.6 tonnes of net outflows from global ETFs last week. It was the biggest net outflow since the 26-Apr week. North American investors were the biggest sellers at -10.0 tonnes.

Spec longs in the futures market beat a retreat last week as well. The COT report showed that the net speculative long position was reduced by 23.4k to 255.3k contracts, versus 278.7k in the previous week.

CFTC Gold speculative net positions

A corrective/consolidative phase is likely as the market continues to hash out the implications of the election results. I am now less optimistic about new record highs before year-end.

Once the post-election dust settles, market focus will return to geopolitical tensions, concerns about the Chinese and European economies, central bank easing elsewhere in the world, soaring global debt levels, ongoing central bank gold buying, and the political uncertainty in Germany and Japan.

And if inflation is revived as many fear, gold is still the classic hedge. A number of bullish fundamentals remain aligned in gold's favor.

The next significant support level I'm watching is the October low at $2,606.62 (10-Oct). It corresponds closely with a trendline drawn off of the low for the year at $1,986.16.

With gold quite oversold on a short-term basis, we could see the bears ring up some profits and the bulls start testing the water ahead of this level. The 14-day RSI hasn't reached oversold territory, but it is the lowest it's been since February. Gold hasn't been oversold on the daily chart since October of 2023, a testament to the strength of the uptrend.

On the upside, I'm watching the 50-day moving average on a close basis as an important indicator. The 50-day MA is at $2,645.79 today and is bolstered by resistance marked by the 7-Nov low at $2,648.46.

However, a convincing move back above $2700.00 is needed to suggest the low for the range has been established. The halfway-back point of the correction thus far is at $2,701.16.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +0.025 (+0.08%)
5-Day Change: -$1.976 (-6.09%)
YTD Range: $21.945 - $34.853
52-Week Range: $20.704 - $34.853
Weighted Alpha: +26.13

Silver has followed gold lower, reaching a five-week low of $30.447. Many of the same factors that have hit gold are also impacting silver.



While there is heightened optimism about the U.S. economy, the trade continues to be disappointed by Beijing's efforts to stimulate the world's second-largest economy. Last week was no exception and over the weekend China's inflation data for October reflected heightened deflation risks.
 
Last week's CFTC COT report showed the net speculative long position fell 7.1k to 53.3k contracts, versus 60.4k in the previous week. It was the biggest weekly drop in net spec longs since the week ended 26-Jul. 

CFTC Silver speculative net positions

Good support is noted at $30.293/229, where the 100-day moving average corresponds closely with the low for last month (9-Oct low). While the market may try to run stops below this important level, the short-term oversold condition may make a sustained penetration difficult.

However, if $30.293/229 does give way, focus would shift to $29.705 (61.8% retracement of the leg up from 26.524 to $34.853).

Former support at $30.921 now defines initial resistance. More substantial resistance is marked by today's high and the still-rising 50-day moving average is at $31.431/503. The halfway-back point of the decline thus far is well protected at $32.650.


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.