6/24/2024
Gold and silver pare last week's losses with a focus on incoming data and the Fed
OUTSIDE MARKET DEVELOPMENTS: Focus this week will be on May personal income and PCE data out on Friday. Median expectations favor a 0.4% increase in income and a 0.3% rise in spending. Most importantly, consensus on the price index is unch.
Fed funds futures continue to show that the market believes there is about a 60% chance that the Fed will cut rates at the September FOMC meeting. This defies the dot plot from the June meeting and recent FedSpeak that has tended toward "higher-for-longer."
We'll hear more FedSpeak this week from Waller, Daly Bowman, Cook, and Barkin.
Last week's PMI beats reflect the resiliency of the U.S. economy, which is underpinning the dollar. While there have been some negligible signs of cracks in the labor market, above-target inflation remains the Fed's primary concern.
The first of two presidential debates between Joe Biden and Donald Trump will happen on Thursday. Polling continues to show that the race is very tight, so the performances of the candidates could have a material impact on the outcome.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$4.41 (+0.19%)
5-Day Change: +$6.92 (+0.30%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34
Gold ended last week with a loss of 0.5% after gains acquired earlier in the week evaporated on Friday. The yellow metal was weighed by diminished expectations of two rate cuts this year on the heels of better-than-expected PMI data.
Friday's price action prevented a second consecutive higher weekly close, raising some concerns within the bull camp. However, important support marked by the 07-Jun low at $2,287.64 remains well protected. Intervening barriers are noted at $2,317.85 (Friday's low), $2,307.45 (18-Jun low), and $2,296.92 (13-Jun low).
Indian gold demand subsided following the Akshaya Tritiya festival in May according to the World Gold Council. While buying bested expectations during the festival, it quickly waned due largely to near-record prices.
Overall, the Indian gold market appears robust with the WGC acknowledging strong RBI interest, rising ETF inflows, and a steady uptrend in gold imports. The RBI has added 30.6 tonnes of gold to reserves YTD, bringing total holdings to a record high of 834.2 tonnes.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.052 (+0.18%)
5-Day Change: +$0.151 (+0.51%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Silver is trading modestly higher on the day, retracing some of the sharp losses seen on Friday. Like gold, the white metal succumbed at the end of last week to selling pressures stemming from the PMI beats. Silver ended last week down a scant 0.1%.
However, the signal that the U.S. manufacturing sector remains strong is arguably a positive for silver. Industrial demand was 55% of overall demand in 2023, according to The Silver Institute.
Total silver demand rose 7% last year to 1,154 Moz. Total industrial demand was 654.4 Moz, led by the electrical and electronics sector. Total supply was 1,011 Moz resulting in a structural deficit of 184 Moz.
The Silver Institute projects a 2% rise in demand this year, with a 1% dip in supply. That would result in a fourth consecutive deficit.
The supply/demand fundamentals remain broadly supportive for silver, favoring the 4-year uptrend that began with the $11.703 low in March 2020. Gains since that low have been as much as 176.7%. I think this market is still good, although further short-term corrective/consolidative price action can not be ruled out.
The overseas low at $29.356 defines initial support, which protects $29.022 (18-Jun low) and the important $28.719 low from 13-Jun.
Friday's high at $30.824 is now the level to watch on the upside. A climb back above $30 would be an encouraging technical signal.
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
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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.
6/21/2024
Gold and silver tumble intraday on solid U.S. PMI readings
OUTSIDE MARKET DEVELOPMENTS: Weak PMI data in Europe and the UK have weighed on the euro and pound respectively. The euro is threatening the 7-week low set against the dollar last week at 1.0667 on bets that further ECB rate cuts are in store to temper rising growth risks.
While the BoE held steady earlier in the week, a rate cut is widely believed to be in the offing. Sterling slid to a 5-week low of 1.2631 versus the dollar.
The gist of FedSpeak this week has been that while we're moving in the right direction, getting inflation back to the 2% target will take some time, and patience is required. This messaging combined with more dovish stances overseas is underpinning the dollar. The dollar index jumped to a fresh 7-week high, buoyed by weakness in the euro and pound.
The markets however continue to like the idea of two rate cuts this year. Fed funds future still put the probability of a Sep cut at around 60%. Former St. Louis Fed President Bullard said he sees two rate cuts this year. During his time on the FOMC, Bullard was one of its more hawkish members.
U.S. S&P flash manufacturing PMI rose to 51.7 for Jun on expectations of 51.0, versus 51.3 in May. The services PMI print was 55.1, above expectations of 54.0, versus 54.8 in May. These data offset some of the signs of weakness seen yesterday and will likely temper Sep rate cut expectations.
Leading indicators (-0.4% expected) and the Dallas Fed Index come out later this morning.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +4.03 (+0.17%)
5-Day Change: +33.81 (+1.45%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34
Gold was sustaining yesterday's gains into early U.S. trading, but rotated lower on the day following better-than-expected U.S. PMI data. A second consecutive higher weekly close is suddenly in jeopardy. The yellow metal must end the session above $2,333.05 to preserve the higher weekly close.
It looks like some of the bets on two rate hikes that were put on yesterday are now getting unwound. A breach of yesterday's low at $2,328.18 would create an outside day and would be troubling from a technical perspective.
The fact that the 07-Jun low at $2,287.64 has held for two weeks was encouraging for the bull camp. The magnitude of retracement seen through overseas trading bolstered the notion that the corrective low was in place. However, price action today suggests the bears still have some sway in the short term.
That doesn't necessarily mean new cycle lows, but possibly more consolidative trading within the range set on 07-Jun. Where we end today's session and early action next week will tell us a lot.
Perhaps not surprisingly there were 12 tonnes of North American outflows from gold-backed ETFs last week. This happened in the wake of the near-$100 sell-off of 07-Jun. Inflows from Europe were 7 tonnes amid rising economic and political concerns. The net change for the week was -4.6 tonnes.
Czech National Bank Governor Michl wants to grow the central bank's gold holdings from its current 40 tonnes to 100 tonnes over the next 5 years. This desire is consistent with the well-defined trend of robust central bank gold-buying that is expected to continue.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.281 (-0.91%)
5-Day Change: +0.961 (+3.25%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Silver tumbled on the solid PMI data, following gold lower. Nearly all of yesterday's gains have been retraced and the $29.716 low has been pressured. It seems like a strong U.S. manufacturing sector would be good news for silver, as the white metal derives most of its demand from industrial applications, primarily electronics.
Like gold, if yesterday's low is exceeded an outside day will be confirmed. An outside day with a lower close is a rather negative chart formation. Nonetheless, barring a complete rout, silver looks like it will still notch a second consecutive higher weekly close.
Today's close will be telling from a technical perspective.
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.
6/20/2024
The precious metals surged to 2-week highs despite dollar strength
OUTSIDE MARKET DEVELOPMENTS: The Bank of England held steady on rates by a vote of 7-2. That's one more dissenter than at the May MPC meeting, suggesting the BoE is moving cautiously toward that first rate cut. For now, the bank rate remains at 5.25%.
The policy summary noted, "The restrictive stance of monetary policy is weighing on activity in the real economy, is leading to a looser labour market and is bearing down on inflationary pressures. Key indicators of inflation persistence have continued to moderate, although they remain elevated."
The Swiss National Bank surprised with their second rate cut. The policy rate now stands at 1.25%. "[U]nderlying inflationary pressure has decreased again compared to the previous quarter" according to the statement.
Norges Bank also announced policy today. They left the policy rate unchanged at 4.5% which was widely expected.
U.S. initial jobless claims fell 5k to 238k in the week ended 15-Jun on expectations of 233k. That's down from a 10-month high of 243k in the previous week. Continuing claims jumped 15k to a 5-month high of 1,828k.
U.S. Housing Starts tumbled 5.5% to 1.277M in May, well below market expectations of 1.382M, versus a negatively revised 1.352M in Apr.
The Philly Fed Index dropped to a 5-month low of 1.3 in Jun, well below market expectations of 4.0, versus 4.5 in May. That's down significantly from the 2-year high of 15.4 seen in Apr. The ISM-adjusted index rose modestly from April's 4-month low of 47.2 to 47.6.
Despite the generally disappointing U.S. data, Treasury yields are rising today, providing a lift for the dollar. Minneapolis Fed President Kashkari made note of the resilience of the U.S. economy and said it may take a year or two to bring inflation down to the 2% target. Kashkari is a moderate hawk and I would categorize that statement as moderately hawkish, consistent with 'higher-for-longer' messaging.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +11.36 (+0.49%)
5-Day Change: +35.84 (+1.56%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34
Gold jumped to 2-week highs in overseas trading and extended those gains early in the US. session. Generally soft U.S. data have bolstered expectations that the Fed is on the verge of pivoting. While today's SNB cut and the BoE's 'dovish-hold' seem friendly to that line of thinking, FedSpeak continues to slant hawkish.
More than 61.8% of the near-$100 plunge on 07-Jun has now been retraced. The next retracement level is at $2,365.66 (78.6%). Beyond that, focus shifts back to the 07-Jun high at $2,386.90.
Israel has warned of the potential for "all-out war" in Lebanon following threats from Hezbollah. Israel's Foreign Minister said earlier in the week that "operational plans for an offensive in Lebanon were approved and validated."
The prospects for a widening conflict in the region are driving safe-haven interest in gold. Hezbollah also threatened Cyprus, warning that allowing Israel to use Cypriot airports and bases would be dealt with as "part of the war."
A Global Trade Research Initiative (GTRI) report revealed that India agreed to import 200 metric tonnes of gold annually from the UAE with a 1% tariff concession as part of a trade agreement signed in 2022. This drove a 147.6% surge in gold imports from $3 bln in FY23 to $7.6 bln in FY24.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.498(+1.67%)
5-Day Change: +1.388 (+4.79%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Silver surged back above $30 in overseas trading, taking out resistance at $30.169 (last week's high). Gains mounted in early U.S. trading after soft economic data heightened prospects for a sooner-than-later Fed rate cut.
More than 61.8% of the decline off the 07-Jun high at $31.516 to the 13-Jun low at $28.719 has now been retraced. Short-term focus is now on the 78.6% retracement level at $30.917. Above that, $31.516 is back in play.
Former resistance at $30.169 now marks initial support. This level is reinforced by the U.S. session low at $30.104.
The aforementioned GTRI report showed a 60x increase in silver imports from the UAE from $29.2M in FY23 to $1.74 bln in FY24. Not surprisingly, Indian importers like the 8% duty on UAE silver far better than the 15% duty on imports from other nations.
In fact, the tariff differential makes UAE silver cheaper even though they are not a producer. The UAE is a processor of silver, importing large bars and converting them to grain (shot) for export.
India is now concerned about lost tariff revenue and the arbitrage opportunity of their own making.
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
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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.
Good morning. The precious metals are higher midsession in Europe.
U.S. markets are closed in observance of the Juneteenth Holiday.
U.S. calendar features MBA Mortgage Applications, NAHB Housing Mkt Index.
6/18/2024
Gold caught a bid following weak retail sales data as U.S. yields and the dollar fell
OUTSIDE MARKET DEVELOPMENTS: FedSpeak on Monday generally affirmed the likelihood of a single rate cut this year. Philly Fed President Harker warned that no cuts or two cuts were also possibilities, depending on incoming data.
There's more FedSpeak on the calendar for today from Cook, Barkin, Collins, Logan, Kugler, Musalem, and Goolsbee.
Fed funds futures show that the market continues to lean toward two cuts, the first in September and then again in November. This scenario was reinforced today by weak U.S. retail sales data.
U.S. retail sales rose 0.1% in May, below expectations of +0.3%, versus a negatively revised -0.2% in Apr. Ex-auto fell 0.1% on expectations of +0.2%, versus a negatively revised -0.1% in Apr.
U.S. yields and the dollar fell in reaction, providing some intraday support for the precious metals.
U.S. industrial production for May comes out later this morning. Median expectations are +0.4%. Capacity utilization increased to 78.7% in May, just above expectations of 78.6%, versus a negatively revised 78.2% in Apr.
U.S. business inventories for Apr are expected to come in at +0.3%.
The RBA held steady on policy in line with expectations. Governor Bullock expressed some uncertainty in the presser amid simultaneous growth and price risks. "Earlier on when we were raising rates it was quite obvious what we had to do. It's not so obvious now," she said.
The PBoC held steady on policy earlier in the week. This was also widely expected as the Chinese central bank is constrained by a weak yuan.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$10.63 (-0.46%)
5-Day Change: -3.35 (-0.14%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34
Gold started the U.S. session on the defensive having set a new low for the week overseas, but price action remains confined to Friday's range. The yellow metal caught a bid following the weak retail sales data as U.S. yields and the dollar fell.
Softness in the consumer sector can ease price pressures but is a harbinger of mounting growth risks. As the Fed is data-dependent, it will be interesting to hear the tenor of today's FedSpeak. Fed funds futures now put the odds of a 25 bps rate cut in Sep at 60%. That's up from 56.7% yesterday and 46.8% a week ago.
Nearby supports and resistances remain unchanged from yesterday.
I'm watching the low from 13-Jun at $2.296.92 on the downside to keep the more important $2,289.43/$2,287.64 lows at bay.
On the upside, the overseas high at $2,325.23 protects Friday's high at $2,334.92 and last week's high at $2,339.48.
The World Gold Council's latest Central Bank Gold Survey revealed that 29% of survey respondents said they "intend to increase their gold reserves in the next twelve months." That's the highest level the WGC has observed since the survey began in 2018. The survey also shows that 81% of respondents believe global central bank gold holdings will increase over the next 12 months.
This certainly takes some of the sting out of the news from 07-Jun that China's PBoC had bought no gold in May. It is likely that they only paused their buying. The survey results reinforce my expectation that global central banks will continue to expand their gold reserves amid "an increasingly complex geopolitical and financial environment."
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.332 (-1.13%)
5-Day Change: -0.082 (-0.28%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Silver has formed an outside day, exceeding both yesterday's high and low. The $29 zone has attracted buying interest in recent weeks.
Today's retail sales miss prompted an intraday rebound as the dollar retreated. However, weaker demand for consumer electronics and cars could be seen as a negative for silver.
At this point, last week's low of $28.719 remains protected by Friday's low of $28.887. Fresh highs today would be encouraging, shifting focus to last week's high at $30.169.
BofA remains bullish on silver, targeting $35 within the next 2 years. They see the global economy "turning the corner," which will not only increase industrial demand for the white metal but pull investors into the market.
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.
6/17/2024
The precious metals start the week easier after notching higher closes last week
OUTSIDE MARKET DEVELOPMENTS: Consolidative trading prevails for the precious metals as the market awaits a host of FedSpeak this week. Minneapolis Fed President Kashkari said over the weekend that a single rate cut this year was a “reasonable prediction.”
Additional FedSpeak is due from Williams, Harker, and Cook today. The calendar is chock-full of Fed speakers this week. I suspect the message will be largely consistent: One rate cut this year, probably in November, but it's all data-dependent.
Policy decisions are on tap this week for the BoE, SNB, RBA, PBoC, and Bank Indonesia. While the global bias is toward easing, timing remains dependent on perceived progress toward taming inflation and maintaining jobs growth.
U.S. calendar highlights include May retail sales (+0.3% expected) and IP (+0.4% expected) on Tuesday. Flash PMIs come out on Friday. Initial jobless claims will also be closely watched on Thursday, given the 10-month high of 242k seen in the last report.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -12.56 (-0.54%)
5-Day Change: +8.41 (+0.36%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34
Gold ended higher last week, breaking a string of three consecutive lower weekly closes. Price action was choppy, but confined to the previous week's range, leaving the $2,287.64 low from 07-Jun intact.
The yellow metal begins this week on its back foot and still appears vulnerable to further tests of the downside with the dollar holding firm. Gold may be forming a base here, or staging for another leg down. The low from 13-Jun at $2.296.92 protects more important support marked by the $2,289.43/$2,287.64 lows.
First resistance is marked by Friday's high at $2,334.92, which stands in front of last week's high at $2,339.48. Penetation of the latter would highlight $2348.98 initially, but such a move would make the 07-Jun high at $2,386.90 look attractive.
RBI data revealed that India's forex reserves reached a record $655.8 bln in the week ended 07-Jun. Gold reserves rose by $481 million to $57 bln.
The sharp sell-off on 07-Jun was triggered by news that China's central bank hadn't bought any gold in May. Central bank gold buying is expected to remain a major source of demand, even if the PBoC has paused its buying.
The latest COT report for the week ended 14-Jun shows that net spec positions in gold dipped to 233.9k, versus 237.3k in the previous week.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.322 (-1.09%)
5-Day Change: -0.473 (-1.59%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Silver closed higher last week, but not before setting a 4-week low at $28.719. The lower low and higher close result in a simple reversal on the weekly chart, but the white metal is defensive early in the new week. Price action remains confined to Friday's range thus far.
Recent losses are still seen as corrective within the longer-term uptrend. While dips below $29 have generated some buying interest, momentum on the upside has failed to impress, suggesting that the low is not in yet.
Geopolitical tensions surrounding China's EV exports may be damping demand amid worries of a trade war. Additionally, the recent lurch right in the EU parliament may temper aggressive low-carbon benchmarks in Europe, which currently include banning ICE vehicle sales by 2035.
A less aggressive push toward EV and solar adoption could somewhat lessen the demand for silver, but I doubt it will materially alleviate the current supply deficit. This could however be a positive for platinum and palladium, which are used in the catalytic converters of ICE vehicles to reduce emissions.
U.S. Mint data show that demand for silver coins remained robust in May. A total of 1.75Moz of silver coins were sold in May, a rise of 9.7% y/y. Year-to-date sales now stand at 12.6Moz. +52% versus this time last year.
The latest COT report for the week ended 14-Jun shows that net spec positions in silver dipped to 51.7k, versus 56.4k in the previous week.
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.