Blog posts tagged with 'precious metals'

10/7/2024

Gold and silver consolidate near historic highs as focus shifts to U.S. inflation data

OUTSIDE MARKET DEVELOPMENTS: Hamas reportedly fired rockets from the Gaza Strip at Tel Aviv on the first anniversary of the horrific October 7th terrorist attack. Israel has issued evacuation warnings for northern Gaza in advance of what may be a major new offensive.

Meanwhile, rockets fired by Hezbollah in the north struck the Israeli city of Haifa. Israel continues to attack Hezbollah positions within Lebanon and the IDF is said to be preparing a “serious and significant” retaliatory strike on Iran.

Hurricane Milton is tracking toward Tampa Bay, an area still reeling from the effects of Hurricane Helene. Milton is projected to make landfall on Wednesday.

Market focus this week will be on U.S. inflation data. September CPI will be released on Thursday and PPI comes out on Friday. Median expectations are +0.1% m/m for both, although Friday's better-than-expected jobs data suggests some upside risk to inflation.

The market is suddenly worried that the Fed's 50 bps rate cut in September was too aggressive. Consequently, expectations for another large rate cut in November have fallen to zero. A more cautious 25 bps cut is now favored, but the probability of a hold has increased to 16.5%.

Today's economic calendar is light with just August Consumer Credit. The market is expecting an increase of $12.0 bln.

We'll hear Fedspeak from Bowman, Kashkari, Bistic, and Musalem later today. 


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$2.69 (+0.10%)
5-Day Change: +$11.61 (+0.44%)
YTD Range: $1,986.16 - $2,684.45
52-Week Range: $1,812.39 - $2,684.45
Weighted Alpha: +38.09

Gold remains narrowly confined within striking distance of record highs, as ongoing haven interest is offset to some degree by less dovish Fed expectations and a strong dollar. While the yellow metal notched a second consecutive lower weekly close, I continue to be impressed by this market's resilience in the face of recent seven-week highs in the dollar index.



For five sessions, the yellow metal has been confined to the 01-Oct range ($2,670.67 - $2,633.48). Such price action does not indicate a top is forming but is more likely a continuation pattern. An eventual upside breakout is favored.

A breach of $2,670.67 would clear the way for a retest of the record high at $2,684.45. Above the latter, the $2,700.00/$2,709.14 objective remains valid.

The $2,633.48/$2,627.20 area marks initial support. The rising 20-day moving average will correspond with this support later in the week and is presently at $2,613.66.

The COT report for last week showed that net speculative long positions fell 15.5k to 299.9k contracts from 315.4k in the previous week. I imagine the spec longs that left the market will be quick to jump back onboard with new record highs.

Indian gold imports hit a more than three-year high of 125 tonnes in August, driven by strong consumer demand and industry restocking ahead of the festival and wedding season according to the latest edition of Heaeus's weekly market report. Consumption in India continues to be supported by this summer's steep cut in import duties.

Central bank demand remains an important driving force behind the rally in the gold market. Poland has been a leading buyer, adding 39 tonnes to its holdings over the past five months. The WGC reported The National Bank of Poland held 398 tonnes of gold as of the end of August.

"We now hold 420 tonnes," Adam Glapiński, president of the National Bank of Poland, told reporters last week.  Glapiński went on to note that Poland now has more gold reserves than the UK, viewing that as an important benchmark that ushers Poland into the "exclusive club of the world's largest gold reserve holders."

You may recall that Chancellor of the Exchequer Gordon Brown famously sold about half of Britain's gold between 1999 and 2000, at an average price of $275. It became known as Brown's Bottom.

Silver saw its fourth consecutive higher weekly close last week, and a fresh 12-year high at $32.70. While gains above $32 have proven unsustainable thus far, the trend remains positive.



Recently announced Chinese monetary and fiscal stimulus remains a primary supporting factor. We may see this influence re-exert itself this week as the Golden Week holiday winds down.

Russia has been a consistent buyer of gold as a means to sidestep international sanctions stemming from its invasion of Ukraine. Russia's Draft Federal Budget specifically mentions silver for the first time as part of its plan to continue increasing its holdings of precious metals.

While no real specifics were provided, a nation-state buyer in the silver market would have rather bullish implications. The silver market is substantially smaller than the gold market. The estimated market capitalization of the silver market is about a tenth that of the gold market.

First support at $31.451 (03-Oct low) protects the more substantial $31.041/$30.963 zone. The 20-day moving average has risen to $30.989 today, further bolstering this support level.

While the upside remains favored, be aware of the potential double-top formation at  $32.657/$32.700 that would be confirmed on a breach of $30.963. Such a move would suggest downside potential to the $30 zone initially.

At this point, buying strategies remain favored. An eventual breach of $32.700 would bode well for tests of previously established objectives at $33.00 and $33.972.

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.

10/4/2024

Gold remains consolidative despite dollar strength while silver hits a new 12-year high

OUTSIDE MARKET DEVELOPMENTS: U.S. nonfarm payrolls surged 254k in September, well above expectations of +150k, versus a positive revised +159k in August (was +142k). The unemployment rate ticked down to 4.1% from 4.2% in August.

Hourly earnings rose 0.4% on expectations of +0.3%, versus a positive revised +0.5% in August (was +0.4%). The average workweek edged down to 34.2 hours.

Stronger-than-expected jobs and earnings growth suggest growth risks may not be as worrying as the market thought. Arguably, there are also heightened price risks into year-end. This has prompted the market to completely unwind bets for another oversized rate cut. Fed funds futures now favor a 25 bps cut in November with a slight chance for steady policy.

Chicago Fed President Austan Goolsbee called the jobs report "superb" on BloombergTV. Goolsbee believes it is still appropriate for the Fed to bring the policy rate down "a lot" over the next 12 to 18 months.

"With the benefit of hindsight, the 50 basis point cut in September was a mistake...," wrote former Treasury Secretary Larry Summers on X. Summers believes "Caution in rate cutting" is required.

The Fed is still widely expected to ease in November and December. At the moment the bias is for more conservative 25 bps cuts. The Fed continues to remind us that the policy path is data-dependent and there are 34 days until the next FOMC meeting; plenty of time for more surprises. 

Given the recent more-dovish talk out of the ECB and BoE, shifting expectations for interest rate differentials has led to new seven-week highs in the dollar index. The low-to-high move in the DXY thus far has been 2.5%.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$2.23 (+0.08%)
5-Day Change: +$2.21 (+0.08%)
YTD Range: $1,986.16 - $2,684.45
52-Week Range: $1,812.39 - $2,684.45
Weighted Alpha: +44.88

Gold initially retreated in reaction to this morning's significant NFP beat, weighed by less-dovish Fed policy expectations and the corresponding rise in the dollar. Nonetheless, price action remains confined to Tuesday's range for a third session. An inside week is evident as well.

 

I wrote yesterday about gold's impressive resilience in the face of the dollar's recent rebound. That is even more evident today although dollar strength is seen as limiting the upside. High geopolitical tensions and rising political uncertainty a month out from U.S. elections provide the counterbalance.

A close above $2,658.20 is needed for the yellow metal to notch a fourth consecutive higher weekly close. That would bode well for a retest of the record high set last week at $2,684.45. Above that, the $2,700.00/$2,709.14 objective remains valid.

On the downside, the $2,633.48/$2,627.20 area marks first support. This level was reinforced by today's earlier intraday low at $2,637.43. The 20-day moving average is now at $2,606.50.

Setbacks into the range are likely to be viewed as buying opportunities even as the trade looks ahead to next week's important inflation data. Both CPI and PPI are expected to come in at a benign +0.1%.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +0.026 (+0.08%)
5-Day Change: +$0.952 (+3.01%)
YTD Range: $21.945 - $32.700
52-Week Range: $20.704 - $32.700
Weighted Alpha: +52.02

Silver continues to probe above the $32 level, heartened by today's better-than-expected jobs data and demand optimism stoked by Chinese stimulus. The white metal shrugged off seven-week highs in the dollar to slightly exceed last week's high at $32.657, eking out a new 12-year high of $32.70.



Silver is up nearly 2% this week and appears poised for a fourth consecutive higher weekly close. The last time that happened was in March.

A more convincing breach of the previous high would clear the way for short-term tests above $33 and lend credence to the previously established Fibonacci objective at $33.972.

Further out, $35.217 is an important level to watch as it marks 61.8% retracement of the entire decline from $49.752 (Apr'11 high) to $11.703 (Mar'20 low). An eventual breach of this would bode well for the bullish scenario that calls for a return to the $50 zone.

Initial support at $32.00 stands in front of the intraday low at $31.697. Several additional tiers of support now protect the key $31.041/$30.963 zone. 


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.

10/3/2024

Gold and silver display resilience in the face of dollar gains 

OUTSIDE MARKET DEVELOPMENTS: The IAF struck Hezbollah's intelligence headquarters in Beirut as Israel continues to degrade the terrorist organization's ability to wage war. IDF forces continue to conduct ground operations in southern Lebanon.

BoE Governor Bailey warned that the situation in the Middle East could lead to a 1970s-style oil shock. So far, oil gains have been limited and Bailey senses there is "a strong commitment to keep the market stable" from counterparts in the region.

If inflation continues to moderate, Bailey said the central bank could be “a bit more activist” in its policy decisions. Solid UK PMI readings with "improving order books accompanied by cooling inflationary pressures" suggest the BoE may indeed have room for more aggressive rate cuts. 

The prospect for accelerated BoE easing sparked a rally in Gilts and Sterling came under pressure. Cable tumbled to a three-week low, providing an additional tailwind for the dollar. The dollar index extended to a six-week high of 102.08.

Ongoing weakness in the Eurozone economy revealed by the latest PMI readings, has the market leaning toward another ECB rate cut in October. While inflation remains above target, the ECB's Mario Centeno worries that keeping policy restrictive for too long could result in inflation undershooting the 2% target.

ECBSpeak in general has tilted more dovish this week, raising the likelihood of another 25 bps cut this month. The euro is under pressure, reaching a three-week low against the dollar.

The U.S. Challenger report saw announced layoffs fall 3.1k to 72.8k in September, versus 75.9k in August. 
Announced hirings surged 397.8k to 403.9k led by the retail and transportation sectors that are looking ahead to seasonal holiday hiring needs.

U.S. initial jobless claims rose 6k to 225k in the week ended 28-Sep, above expectations of 223k, versus a revised 219k in the previous week. Continuing claims fell 1k to 1,826k in the week ended 21-Sep.

U.S. services PMI for September was revised down to 55.2, versus 55.4 flash and 55.7 in August. However, further solid expansions in output and new orders were noted. Price pressures increased to 54.6 from 52.9. Business confidence "dropped markedly due to concerns of a slowdown in the economy."

U.S. services ISM rose 3.4 points to 54.9 in September, above expectations of 51.7, versus 51.5 in August. That's the highest reading since February 2023. The sector has expanded in 49 of the last 52 months. Prices jumped to 59.4 from 57.3 in August.

U.S. factory orders fell 0.2% in August to $590.4 bln, below expectations of +0.2%. This modest setback comes on the heels of the 4.9% rise in July, the largest one-month percentage gain in more than four years.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$12.11 (-0.46%)
5-Day Change: -$27.67 (-1.04%)
YTD Range: $1,986.16 - $2,684.45
52-Week Range: $1,812.39 - $2,684.45
Weighted Alpha: +43.71

Gold continues to consolidate within the confines of Tuesday's range. The upside is being hindered by heightened expectations of more aggressively dovish policy paths for both the BoE and ECB, which has pushed the dollar index to six-week highs.



Scope for another aggressive 50 bps Fed cut in October has waned over the past week. Fed funds futures put the current probability at 33.3%, down from 35.2% yesterday and 49.3% a week ago. This too is providing a tailwind for the dollar.

However, the yellow metal is proving to be quite resilient in the face of this dollar strength. The last time the dollar index was this high was on 19-Aug and gold closed at $2,586.83 that day.

Global central banks reported just 8 tonnes of net gold purchases in August according to the World Gold Council. While it was the fifteenth consecutive monthly net gain, it was the smallest since March. Poland was the largest buyer in August at 6 tonnes, followed by Turkey and India at 3 tonnes each.

The WGC's Marissa Salim notes that "sales have not increased which may signal a likely wait and see approach rather than a change in trend." They believe that all of the drivers of central bank gold demand remain in place, although demand this year will be weaker than in 2023.

First support at $2,642.77 protects the more substantial $2,633.48/$2,627.20 area. The important 20-day moving average is at $2,598.89 today.

On the upside, sights remain set on the $2,700.00/$2,709.14 objective. Beyond that, psychological barriers at $2,800 and $2900 stand in front of the longer-term target at $3,000.

Silver continues to probe above the $32 level but remains confined to yesterday's range thus far. The white metal is also displaying impressive resilience in the face of today's dollar strength.

 

A breach of yesterday's high at $32.259 would clear the way for a retest of last week's 12-year high at $32.657. Beyond that, I have targets at $33.00 and $33.972.

An intraday level at $31.887/80 now protects the low for the day at $31.451. The importance of the $31 zone has been reinforced by buying interest that emerged in this area.

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.

10/2/2024

Gold consolidates within yesterday's range as silver tests back above $32 

OUTSIDE MARKET DEVELOPMENTS: Israeli Prime Minister Netanyahu has vowed retaliation for Iran's 'retaliatory' missile attack on Israel. Iran "made a big mistake tonight and it will pay for it,” warned Netanyahu. The cycle of retaliation seems likely to continue and the regional risks grow with each exchange.

Israel is thought to be considering taking out Iranian oil infrastructure and nuclear sites. It is believed that any response will be coordinated with the U.S.

Iran fired at least 180 missiles at Israel on Tuesday, but Israeli air defenses including the Iron Dome intercepted most. There are reports that U.S. forces participated in the defense effort. Despite the magnitude of the attack, damage and loss of life in Israel has been limited.

Hezbollah fighters in southern Lebanon say that they are engaged with IDF forces. Israel reports that eight soldiers have been killed in the fighting.

MBA mortgage applications fell -1.3% in the week ended 27-Sep, following some big weekly gains in the wake of the Fed's oversized rate cut on 18-Sep. Thirty-year mortgage rates ticked up for the first time in nine weeks to 6.14% from a 23-month low of 6.13%.

The ADP Employment Survey showed that private employers added 143k jobs in August, above expectations of +125k, versus a revised +103k in July (was +99k). Strength in the ADP report suggests some upside risk for Friday's NFP report, where the median payrolls estimate is +150k.

Richmon Fed President Thomas Barkin (moderate hawk) said there is still "significant uncertainty" about inflation and employment. Along with Fed Chairman Powell, he worries that core inflation won't come down much more until next year.

Incoming data and less dovish FedSpeak have seen the prospects for another 50 bps rate cut in October diminish to 34.7%. That's down from 36.8% yesterday and 57.4% a week ago.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$14.34 (-0.54%)
5-Day Change: -$6.03 (-0.23%)
YTD Range: $1,986.16 - $2,684.45
52-Week Range: $1,812.39 - $2,684.45
Weighted Alpha: +44.18

Gold is consolidating within yesterday's range but remains generally well-supported by elevated Middle East tensions.  Given that yesterday's Iranian attack on Israel was largely ineffectual, some of the haven bid has come out of the market.



Geopolitical risks are still elevated, and gold is the preferred hedge against such risks. An article by The World Gold Council outlines the advantages of a gold allocation in times of geopolitical crisis.

According to the WGC: "In almost every week during which the GPR [Geopolitical Risk] index soared by over 100%, gold saw positive returns. Gold averaged a weekly return of 1.6% during these spikes while global equities declined, on average, by 0.8%." 

Gold, a consistent outperformer during geopolitical crises

The dollar remains on the bid as the market pares expectations for another jumbo rate cut in October. This is providing a bit of a headwind for gold.

Nonetheless, the trend remains decisively bullish with fresh record highs anticipated. Initial resistances are noted at $2,670.67/$2,673.67 (01-Oct and 27-Sep highs), and $2,684.45 (26-Sep high).

Sights remain set on the $2,700.00/$2,709.14 objective. Beyond that, psychological barriers at $2,800 and $2900 stand in front of the longer-term target at $3,000.

First support at $2,644.46 protects the more substantial $2,633.48/$2,627.20 area. The important 20-day moving average is at $2,591.53 today.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +0.022 (+0.07%)
5-Day Change: +$0.544 (+1.77%)
YTD Range: $21.945 - $32.657
52-Week Range: $20.704 - $32.657
Weighted Alpha: +43.32

Silver tested back above $32 today as a little more risk-on sentiment allows some level of focus to return to China's massive monetary and fiscal stimulus efforts. This is providing support to the broader commodity complex, but silver is likely garnering some additional lift from being a less costly alternative to gold.

 

While the white metal has slipped back into the range, leaving last week's high at $32.657 intact, focus remains on buying strategies. The three daily lows so far this week reinforce the importance of the $31 zone as short-term support.

An eventual move to new 12-year highs above  $32.657 would bode well for the bullish scenario that targets $33.972 based on a Fibonacci projection. The $33 area can be considered an intervening barrier.


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.

10/01/2024

Gold rebounds from recent corrective losses on rising Middle East tensions

OUTSIDE MARKET DEVELOPMENTS: Israel has launched its anticipated ground incursion into Lebanon, to push Hezbollah forces further back from the border. Israel also revealed that its special forces had already conducted more than 70 small raids within Lebanon since the war began to destroy Hezbollah positions, tunnels, and weapons.

Besides strikes in Lebanon and Gaza, Israel has also attacked military targets in Yemen and Syria this week.

The AP is reporting that Iran is preparing to “imminently” launch a ballistic missile attack on Israel, citing senior administration officials. That same official warned that such an attack would have “severe consequences” for Iran.

The Pentagon announced on Monday that additional U.S. fighter jet squadrons were being sent to the Middle East. “The United States is committed to Israel’s defense,” said U.S. Secretary of State Anthony Blinken. As tensions rise, uncertainty about President Biden's mental acuity is particularly concerning.

NATO's new Secretary General Mark Rutte has pledged ongoing support for Ukraine. "We have to make sure that Ukraine prevails as a sovereign, independent, democratic nation," he said.

Rutte indicated he supported Ukraine's use of weapons supplied by alliance members to "strike legitimate targets on the aggressor's territory." 

Rutte also accused China of being a "decisive enabler" of Russia's war effort. "(China) cannot continue to fuel the largest conflict in Europe since the Second World War without this impact in its interests and reputation," he said.

In Nashville on Monday, Fed Chairman Jerome Powell said that policy is "not on any preset course," reiterating the Fed's data dependency. He noted that the labor market “clearly cooled over the last year.” The market is expecting a NFP print of +150k on Friday.

The JOLTS job openings increased 329k to 8,040k in August, versus a revised 7,711k in July. That's the highest print since May.

U.S. manufacturing PMI was revised to 47.3 in September, versus a preliminary print of 47.0. However, the final reading was down 0.6 points from 47.9 in August. "The US manufacturing sector moved deeper into contraction territory at the end of the third quarter of the year," said S&P. 

New orders saw the sharpest drop since June 2023. The employment component fell to 48.3, the lowest reading since June 2020, as "job shedding intensified."

U.S. manufacturing ISM was unchanged at 47.2 in September, below expectations of 47.5, and holding just above July's low at 46.8. Prices slid to a nine-month low of 48.3 from 54.0 in August.

U.S. construction spending fell 0.1% in August, below expectations of +0.2%, versus a negative revised -0.5% in July (was -0.3%). June was revised sharply lower to -1.1% from unchanged previously. 

Auto and light truck sales for September come out later today. The market is expecting 2.0M and 9.9M respectively.

Today marks the beginning of the Golden Week holiday in China. Many Chinese take advantage of factory and business closures to travel, although the recent tough economic times are expected to dull spending this year. Chinese markets are closed for the remainder of the week.  

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$15.10 (+0.57%)
5-Day Change: +$5.26 (+0.20%)
YTD Range: $1,986.16 - $2,684.45
52-Week Range: $1,812.39 - $2,684.45
Weighted Alpha: +45.04

Gold has rebounded from recent corrective action on heightened haven demand stemming from the most recent developments in the Middle East. The yellow metal has moved back within $20 of last week's record high at $2,684.45 on reports that Iran has indeed fired missiles at Israel.



Friday's high at $2,673.67 is the next intervening resistance level to watch. If the U.S. becomes directly involved in the fight, gold could quickly go much higher.

Near-term potential remains to the $2,700.00/$2,709.14 objective. Psychological barriers at $2,800 and $2900 stand in front of the longer-term target at $3,000.

Goldman Sachs has raised their gold price forecast for early 2025 to $2,900 from $2,700. If things heat up in the Middle East we could see those levels before year end.

"We reiterate our long gold recommendation due to the gradual boost from lower global interest rates, structurally higher central bank demand and gold's hedging benefits against geopolitical, financial, and recessionary risks," the bank said in a note.

Silver has recovered somewhat from recent corrective action, buoyed by gains in gold. While the white metal remains confined to yesterday's range thus far, further short-term probes above $32 are considered likely.



Silver gains are being muted by today's soft U.S. manufacturing data and safe-haven buying in the dollar. While I do expect some spillover haven buying in silver, the vast majority of silver demand comes from industry.

First resistance is marked by yesterday's high at $31.829, the penetration of which would favor a retest of last week's 12-year high at $32.657. Friday's high at $32.227 provides an additional intervening barrier.

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.

9/30/2024

Gold and silver remain corrective ahead of month-end and quarter-end

OUTSIDE MARKET DEVELOPMENTS: China's CSI 300 stock index surged 8.5% on Monday, its biggest gain since 2008, as markets continued to digest last week's bazooka stimulus. Hong Kong's Hang Seng Index posted a 2.4% gain and is now up 24% YTD.

The easing of home-buying restrictions in three major Chinese cities provided additional lift to shares and its troubled real estate sector. Steel and iron ore prices surged. Copper reached a 4-month high of $4.7382 before retreating somewhat.

Bejing is pulling out all the stops to get growth back to its 5% target. There's a growing sense that if additional stimulus is needed to achieve that goal, it will be forthcoming. That provides a considerable market tailwind.

Iran has vowed retaliation for recent Israeli attacks that have effectively decapitated Hezbollah. The Wall Street Journal is reporting that Israeli special forces have been conducting targeted raids within southern Lebanon, possibly paving the way for a broader IDF ground incursion. 

ECB President Christine Lagarde is worried that the EU "recovery is facing headwinds."  That acknowledgment may boost the prospects for an October ECB rate cut, but European bonds and shares were under pressure today.

German HICP inflation fell to 1.8% y/y in September, versus 2.0% in August. Italian HICP inflation fell to 0.8% y/y in September from 1.2% in August. These readings below the ECB target of 2.0% may provide clearance for more easing, but Lagarde sees scope for a Q4 inflation rebound driven by energy prices.

Chicago PMI rose to 46.6 in September, above expectations of 45.9, versus 46.1 in August. While comfortably above the May low of 35.5, the barometer has been in contractionary territory for 24 of the past 25 months. Troubles at Boeing continue to pose a headwind.

The Dallas Fed Index improved to -9.0 in September, inside expectations of -10.7, versus -9.7 in August. "Moderate upward pressure on prices and wages continued in September," according to the Dallas Fed. The comments section highlights how political uncertainty ahead of the November election has weighed on sentiment. 

Fed President Powell will speak at the NABE conference later today.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$6.68 (-0.25%)
5-Day Change: +$5.07 (+0.19%)
YTD Range: $1,986.16 - $2,684.45
52-Week Range: $1,812.39 - $2,684.45
Weighted Alpha: +42.86

Gold is maintaining a corrective tone to start the new week as traders ring up profits for month-end and quarter-end. The yellow metal is lower for a second session after setting a record high of $2,684.45 on Thursday.



Despite the recent setback, gold is poised to notch an eighth consecutive monthly rise and a fourth straight quarterly gain. The quarterly gain should be the best since Q1'16.

The trend remains decisively bullish. Consequently, pullbacks are likely to be viewed as buying opportunities. The  $2,700.00/$2,709.14 objective remains valid, with intervening barriers noted at $2,665.36, $2,673.67, and $2,684.45.

Supports at $2,624.58 and $2,614.86 protect the $2,600 zone. The rising 20-day moving average, which provided good support earlier in the rally, comes in at $2,575.17 today.

The COT report showed net speculative long positioning increased 5.3k contracts to 315.4k last week. That's the highest spec long positioning in more than four years.

CFTC Gold speculative net positions

I'm anticipating that gold ETFs saw good inflows last week as well, although my source for that information has not been updated yet. I'll cover ETFs tomorrow.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -0.485 (-1.53%)
5-Day Change: +$0.544 (+1.77%)
YTD Range: $21.945 - $32.657
52-Week Range: $20.704 - $32.657
Weighted Alpha: +43.32

Silver has corrected to the $31 zone on position squaring on this, the last trading day of September and Q3. However, last week's move to fresh 12-year highs has swung the technical picture decisively back in favor of the bull trend off the COVID-era low at $11.703.



I suspect the housing market reforms in China will ultimately have a positive impact on silver, as they have for steel and copper today. Silver has become an increasingly important component in home construction.

The net speculative long position in silver futures jumped 3.9k to 62.2k contracts according to the latest COT report. That's the biggest net-long position since late February 2020 and may be contributing to the recent corrective pressure.

 CFTC Silver speculative net positions

While additional downticks toward the $30 zone can not be ruled out, market focus is likely to remain on buying strategies in anticipation of further tests above $32.

On the upside, I have a Fibonacci projection at $33.972. Intervening barriers are found at $31.829, $32.227, and $32.657. Further out, a key retracement level is highlighted at $35.217 (61.8% retracement of the entire decline from $49.752 to $11.703). 


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
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