Blog posts tagged with 'precious metals'

8/26/2024

Gold just below record territory as silver trades above $30

OUTSIDE MARKET DEVELOPMENTS: “The time has come for policy to adjust,” was Fed Chairman Powell's unequivocally dovish message from Jackson Hole on Friday. The Fed's focus is turning from the two-year fight against inflation to supporting the labor market.

While Powell didn't specifically mention the September FOMC meeting for that first policy adjustment, his keynote, the minutes from the July meeting, and recent FedSpeak from other policymakers all send a pretty clear signal. The market has been fully pricing in a September rate cut for some time now and it's just a matter of whether it will be 25 bps or 50 bps.

I believe it will be the former unless August employment data are significantly weaker than expected. Median expectations for nonfarm payrolls are +150k. That report comes out on Friday, 06-Sep.

There's still plenty for the market to hash out in terms of the longer-term policy outlook after Powell through in the 'data-dependence qualifier'. "The timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks,” said Powell.

Except for the BoJ, major central banks are either currently on easing paths or about to embark on one. This should keep pressure on yields and currencies, most notably the dollar. However, once that first Fed rate cut is behind us, the market should be more focused on interest rate differentials.

The dollar index fell to a new 13-month low in earlier trading today. This leaves the 99.58 low from July 2023 vulnerable to a test. Below that, Fibonacci support at 98.97 (61.8% retracement of the rally from 89.20 to 114.78).

Israeli forces struck Hezbollah positions in southern Lebanon over the weekend in an effort to thwart anticipated missile and drone strikes on Israel. Hezbollah claims they were still able to launch hundreds of missiles and drones resulting in the death of one IDF soldier.

The risk of a wider conflict in the Middle East persists amid retaliation after retaliation. Last week's optimism about a potential cease-fire between Israel and Hamas has fizzled.

U.S. durable orders rebounded 9.9% in July, well above market expectations of +4.5%, versus a negative revised -6.9% in June. The strength was in the transportation sector, which saw a 34.8% bounce, mostly associated with aircraft. Orders ex-transportation fell 0.2%.

The Dallas Fed Index rose 7.8 points in August to reach a 19-month high of -9.7, versus -17.5 in July. Nonetheless, the index has been signaling contraction for 27 months.

Today's data lend a little credence to the soft landing scenario. We should see 50 bps rate cut bets pared today. 

GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$13.06 (+0.52%)
5-Day Change: +$21.63 (+0.86%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +32.37

Gold moved back within striking distance of last week's record high at $2,529.57, buoyed by Fed rate cut expectations and the resulting weakness in yields and the dollar. The yellow metal is also getting a boost from heightened Middle East tensions. Price action has been narrowly confined so far today due to the Summer Bank Holiday in the UK.

 

While gold retreated following a solid U.S. durable goods print, downticks within the range are likely to be viewed as buying opportunities. An eventual move to new all-time highs would clear the way for a challenge of the previously established $2,539.77 Fibonacci objective and will lend additional credence to the secondary objective at $2,597.15/$2,600.00.

The COT report for last week showed that net speculative long positions increased by 24k contracts to 291.3k contracts. That's a more than 4 year high.

Initial support is marked by the overseas low at $2,509.25. Friday's low at $2,484.53 protects more substantial support at $2,474.31 (22-Aug low) and the rising 20-day moving average that comes in at $2,458.85 today.

Here are a couple of fun facts to start your week:

According to the World Gold Council, a 400-ounce good delivery gold bar now costs more than $1,000,000!

Guess what you could have bought a 400-ounce gold bar for in 1971?

It would have been $14,000 before 15-Aug and $17,440 after Nixon closed the gold window.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.296 (+0.99%)
5-Day Change: +$0.677 (+2.30%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +28.52

Silver has traded with a 30-handle for the first time in more than a month. While upticks above $30 have been tentative thus far, the breach of the $30.142 retracement level (61.8% of the decline from $32.379 to $26.524) should embolden the bull camp.



The next levels I'm watching on the upside at $30.584 (18-Jul high), and $31.126 (78.6% retracement of this year's correction). Further out, potential is back to the high for the year at $32.379.

With the Fed poised to support the economy with easier monetary policy, we could see some mitigation of growth risks that would underpin the white metal. Heraeus thinks industrial demand looks "relatively strong" according to their weekly report, driven by ongoing growth in the solar energy sector.

Net speculative long positions rose 4k contracts to 49.3k contracts according to last week's COT report. It was the first increase in six weeks.

CFTC Silver speculative net positions

The overseas low at $29.665 marks initial support. The 50-day moving average at $29.221 and the 100-day at $29.110 now look to be well protected. More substantial short-term support is defined by last week's lows at $28.950/$28.781.

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.

8/23/2024

Gold and silver firm ahead of Powell's speech

OUTSIDE MARKET DEVELOPMENTS: Market focus today will be on Fed Chairman Jerome Powell's keynote speech in Jackson Hole. Recent FedSpeak and the minutes from the July FOMC meeting have laid the groundwork for a September rate cut as long as the incoming data cooperate.

I think Powell will stick to that messaging. I am interested to hear his thoughts on the labor market in the wake of this week's big negative revision to payrolls for a period when the Fed was still tightening.

The market believes the probability of an ease in September is 100%. The chances for a larger 50 bps cut continue to fluctuate but have mostly settled into the 25% zone.

Powell is scheduled to take the podium at 10:00 EDT. We'll also hear from BoE Governor Bailey at 11:00 EDT, and ECB Executive Board Member Philip Lane at 12:25 EDT.

The BoE and ECB have already started down the easing path. Both are expected to cut rates further before the end of the year, and September is on the table in each case.

The BoJ on the other hand has begun raising rates. Bank of Japan Governor Kazuo Ueda hinted today that further tightening is likely. "Japan's short-term rates are very low. If the economy is in good shape, they will move up to levels deemed neutral," Ueda told Parliament.

The expansion of interest rate differentials stemming from rising yen rates and declining rates elsewhere threatens to precipitate further unwinding of yen carry trades, leading to additional market volatility. "Markets at home and abroad remain unstable, so we will be highly vigilant to market developments for the time being," Ueda said. 

U.S. new home sales rose 10.6% to a 14-month high of 739k in July, above expectations of 625k, versus an upward revised 668k in June (was 617k). The median price rose 3.1% to $429,800, still well above the pre-pandemic high of $343,400. 

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$14.50 (+0.58%)
5-Day Change: -$5.48 (-0.22%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +32.31

Gold has been choppy since setting a new record high at $2,529.57 on Tuesday, but the dominant uptrend remains highlighted. Setbacks into the range are considered corrective and should continue to attract buying interest. A close above $2,507.65 is needed to register a second consecutive higher weekly close.



Dovish central bank bets – with Japan as the notable exception – and ongoing haven flows remain broadly supportive of the yellow metal. The market is eager for Fed Chairman Powell to tip in a September rate cut in his speech today.

In an FT article earlier this week, John Reade, chief market strategist at the World Gold Council noted that Western investors and speculators are returning to the gold market. More than 90 tonnes in holdings have been added to gold-backed ETFs since May alone.

The same article notes that demand in India has surged in recent weeks, stoked by seasonal festival buying and a substantial cut in import duties. “India is seeing huge amounts of physical demand for gold,” said Ruth Crowell, chief executive of the LBMA.

With gold probing back above $2,500 ahead of Powell's speech, scope is seen for a short-term retest of Tuesday's high. A move to new record highs would put the yellow metal back on track for a challenge of the $2,539.77 Fibonacci objective. Beyond that, potential is seen to $2,597.15/$2,600.00 based on a measuring objective.

On the downside, the overseas low at $2,484.53 protects more important support marked by yesterday's low at $2,474.31. Secondary support remains defined by Friday's low at $2.451.50, which now corresponds with the 20-day moving average.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.451 (+1.56%)
5-Day Change: +$0.467 (+1.61%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +24.77

Silver is trading higher, but remains within the confines of yesterday's range. Despite the inability of the white metal to regain $30 this week, and yesterday's setback, I remain cautiously bullish.



A close above $29.015 today would confirm a second consecutive higher weekly close. The white metal would also register its first close above the 20-week moving average in five weeks with a close above $29.079. These events would further embolden the bull camp.

I've been impressed by the bullish moment since silver formed a key reversal on 08-Aug. Silver has rallied $3.353 (+12.64%) since the low on that day. More than half of the retreat off the May high at $32.379 has been retraced.

While considerable credence has been returned to the longer-term uptrend, I'd still like to see a breach of $30.00/14 to clear the way for a move back to the $32 zone. The $30.14 level marks 61.8% retracement of the decline from $32.379 to the cycle low at $26.424.


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.

8/22/2024

Gold and silver corrected as 50 bps rate cut bets ebb

OUTSIDE MARKET DEVELOPMENTS: Minutes from the last ECB meeting revealed acceptance of the need to review the policy stance in September with an "open mind." While the 'data dependency' qualifier remains, recent signs of growth risks have the market leaning toward another rate cut in September. The ECB cut rates for the first time in nearly five years in June.

On Wednesday, ECB Governor and Banca d'Italia President Fabio Panetta hinted that another rate cut was in the offing. "It is reasonable to think that we are going toward a phase of loosening of monetary policy," said Panetta.

Earlier in the week, Olli Rehn, ECB Governor and Bank of Finland President was a little more forthright. "The recent increase in negative growth risks in the euro area has reinforced the case for a rate cut at the next ECB monetary policy meeting in September, provided that disinflation is indeed on track," said Rehn.

Minutes from the Fed's July FOMC meeting revealed "several" members could have supported a rate cut at that meeting based on slowing inflation and the rise in the unemployment rate. While that didn't happen, expectations for a September rate cut have been reinforced.

"The vast majority observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting." – FOMC minutes

A rate cut has been fully priced in by the market for some time, but the absence of anything overly dovish in the minutes saw prospects for a 50 bps cut wane to 28.5%. I don't think Powell's speech in Jackson Hole tomorrow will offer anything new.

ZeroHedge asks that we speculate on what will happen to record-high asset prices once the Fed starts easing. It'll be great fun for the owners of such assets...at least initially, but it has the potential to end badly. 

This is all quite fascinating in light of the tax policies being bandied about at the DNC. The Harris campaign has endorsed the tax policies espoused within the Biden-Harris administration's fiscal year 2025 budget proposal.

“Together, the proposals would increase the top marginal rate on long-term capital gains and qualified dividends to 44.6 percent,“ according to the budget. It also includes a proposal for a 25% tax on unrealized capital gains for individuals with income and assets exceeding $100 million.

Such changes to the tax code would require the consent of both houses of Congress. Arguably the buffer is the GOP's razor-thin majority in the House.

It's also worth noting in the wake of yesterday's revelation that payrolls were likely overstated by 818,000 for the 12 months ending March 2024, the Fed was still raising rates during that period to the tune of 50 bps. The FOMC hiked by 25 bps in May 2023 and another 25 bps in July 2023.

Would weaker jobs data at the time have altered those decisions? That's hard to say, but the BLS payrolls guidance certainly reinforces the notion that the Fed is behind the curve. When half of your mandate is "maximum employment," it's really helpful to have good data.

Initial jobless claims for the week ended 17-Aug rose 4k to 232k, below expectations of 235k, versus a revised 228k the previous week. Continuing claims rose 4k to 1,863k, just below the 32-month high of 1,871k at the end of July.

U.S. S&P Flash Global Manufacturing PMI fell 1.6 points to 48.0 in August, the weakest print since December. Services PMI rose 0.2 points to 55.2, versus 55.0 in July.

The Chicago Fed National Activity Index fell to -0.34 in July, versus a revised -0.09 in June (was 0.05).

U.S. existing home sales rose 1.3% in July to 3.950M, above expectations of 3.910M, versus an upward revised 3.900M in June. Sales remain weak amid limited supply as owners are reluctant to leave their existing homes in the current high mortgage rate environment. Persistently tight supply leaves affordability near historic lows.


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$6.65 (-0.26%)
5-Day Change: +$45.45 (+1.85%)
YTD Range: $1,986.16 - $2,527.10
52-Week Range: $1,812.39 - $2,527.10
Weighted Alpha: +32.29

Gold has fallen back below the $2,500 level, as diminished prospects for a 50 bps rate hike bolster yields and the dollar. However, downticks are seen as corrective within the well-established uptrend.


The move to new lows on the week leaves Friday's low at $2.451.50 vulnerable to a challenge. The 20-day moving average comes in at $2,445.74 today, lending import to this support zone.

Chinese gold imports fell 24% in July to 44.6 tonnes. Economic weakness and record-high prices conspired to drive imports to the lowest level since May of 2022. However, as I wrote about yesterday, the PBoC providing higher import quotas to commercial banks may indicate expectations for higher demand.

A short-term move back above $2,500, particularly on a close basis, would bode well for further attacks on the upside. A breach of Tuesday's record high at $2,529.57 would keep the yellow metal on track for tests of previously established objectives at $2,539.77 and $2,597.15/$2,600.00.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.003 (-0.01%)
5-Day Change: +$1.144 (+4.03%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +25.06

Silver breached initial support marked by Tuesday's low and the 50-day moving average at $29.240/209. The white metal ticked briefly below the 100-day moving average and the $29 level before rebounding into the range.



The inability of silver to reclaim the 30-handle so far this week and today's retreat leaves the medium-term tone neutral. However, I still think the corrective low is in place at $26.524 (08-Aug low).

That could certainly change if incoming U.S. and/or Chinese data signals heightened growth risks. In that case, industrial demand destruction worries could overwhelm safe-haven interest and put silver back on the defensive.

I continue to watch resistance at $30.00/14, penetration of which would return focus to the highs for the year at $32.254/379. Tuesday's 5-week high at $29.877 provides a good intervening upside 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.

8/21/2024

Gold consolidates recent gains, while silver plays catch-up

OUTSIDE MARKET DEVELOPMENTS: The dollar index slid to a 7-month low in overseas trading. The greenback fell to its lowest level since January against the euro and a 13-month low versus Sterling.

Meanwhile, the yen is showing signs of renewed strength after BoJ research highlighted persistent inflationary pressures. This suggests another rate hike remains on the table, which could prompt additional yen carry trade unwinding, putting the recent risk-on tone in jeopardy.

Economist Art Laffer recently warned that the dollar is becoming "an unhinged paper currency," noting flight to alternatives such as gold and bitcoin. "We're in a new period of collapse of the U.S. dollar, and it's quite frightening," said Laffer.

The U.S. must rebuild trust in its currency or the global de-dollarization trend will continue. Unsound money leads to high interest rates, high inflation, and ever-more government debt, which all weigh on growth prospects.

MBA data showed mortgage applications fell 10.1% last week, even as the 30-year mortgage rate fell to a 15-month low of 6.50%. Purchases were off 5.2%, while refinances declined by 15.2%. With lending still well below the January highs, home sales still face considerable headwinds from high mortgage rates.

BLS payrolls guidance suggested a likely annual revision of -818k jobs for the 12 months ending in March. That's the largest downward revision since the period that included the global financial crisis (-824k), indicating the U.S. economy may be weaker than many believe. 

While a Fed rate cut is fully priced in for September, expectations as to whether it will be 25 bps or 50 bps continue to fluctuate. The probability of a 50 bps cut has edged up recently amid signs of slowing growth.

The market will be looking for clues in the FOMC minutes from the July meeting, which will be released this afternoon. Traders will also look to glean insight into the Fed's policy intentions from the KC Fed's Jackson Hole Symposium, particularly Chairman Powell's speech on Friday.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$4.82 (-0.19%)
5-Day Change: +$64.53 (+2.64%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +33.08

Gold has turned mildly corrective in the wake of Tuesday's move to new record highs. However, the trend remains decisively bullish and dips are likely to be viewed as buying opportunities.



The breach of support at $2,500.00/$2,498.32 leaves Monday's low at $2,488.19 vulnerable to a test. The latter protects more important support marked by Friday's low at $2.451.50, which should correspond closely with the 20-day moving average early next week.

Short-term upside potential remains to the $2,539.77 Fibonacci objective, with Tuesday's all-time high at $2,529.57 now providing an intervening barrier. Further out, $2,597.15/$2,600.00 attracts based on a measuring objective.

The PBoC reportedly gave several commercial banks new import quotas this month after a 2-month pause. This suggests that the central bank is anticipating increased demand from the world's largest consumer of gold, despite record high prices. Gold set a new record high against the yuan on Tuesday at ¥18,089.60, and is up nearly 25% YTD.

The PBoC hasn't made any official purchases of gold for the past three months, through July. However, it is widely believed that China's appetite for gold remains robust as it diversifies its reserves away from dollars.

Revived buying interest from Chinese investors, and the official sector could be the catalyst that drives gold to $3,000. More and more analysts seem to be subscribing to the $3,000 objective in recent weeks.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.155 (+0.53%)
5-Day Change: +$2.081 (+7.55%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +25.88

Silver is consolidating within yesterday's range after setting a 5-week high on Tuesday just shy of the important $30 level. The longer-term uptrend in silver regained some credence with gold's move to new all-time highs.



While global growth risks remain a headwind for industrial demand, silver typically garners some safe-haven spillover interest as a much less expensive alternative to gold. The gold/silver ratio recently reached a 4-month high of 90.048 before retreating to a 3-week low of 84.461 on Tuesday.

I see potential in the ratio back to the 80 zone initially as silver continues to play catch-up. That should equate with a silver price approaching $32. A breach of Fibonacci resistance at $30.14 would bolster confidence in this scenario.

Yesterday's low at $29.24 corresponds closely with the 50-day moving average and marks the first tier of support. More substantial support is at $29.04 (100-day SMA) down to Monday's low at $28.781.


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.

8/20/2024

Silver buoyed by fresh record highs in gold

OUTSIDE MARKET DEVELOPMENTS: The dollar has fallen to new 7-month lows on high expectations that the Fed will begin easing at next month's FOMC meeting. This week's market focus is on tomorrow's release of the minutes from the July FOMC meeting and the KC Fed's Jackson Hole Symposium.

At least a 25 bps rate cut is fully priced in for September, but investors are still seeking clarity on the central bank's policy intentions for the remainder of the year. They're hopeful that the minutes and/or Chairman Powell's speech at Jackson Hole on Friday will provide that clarity.

FedSpeak from Bistic and Barr is on tap for today.

As ceasefire talks continue in the Middle East, the bodies of six Israeli hostages were recovered in Gaza. U.S. Secretary of State Antony Blinken said earlier in the week that Israel had agreed to a ceasefire for hostages deal. Hamas has not signed on yet and it's not clear at this point if the deaths of the six hostages have changed the mood of the Israelis.

The Democratic National Convention is underway in Chicago, with President Biden taking a victory lap and passing the reigns to Kamala Harris. Harris's recent policy proposal to curtail inflation with price controls didn't go over so well, leaving many to wonder if she'll back away from that position when she speaks before the party faithful on Thursday evening.

The Philly Fed Nonmanufacturing Survey suggests the services sector remains weak. The current regional activity index fell 6 points to -25.1, the lowest reading since December 2020.


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +18.40 (+0.73%)
5-Day Change: +$61.70 (+2.50%)
YTD Range: $1,986.16 - $2,527.10
52-Week Range: $1,812.39 - $2,527.10
Weighted Alpha: +34.15

Gold extended to the upside in early U.S. trading to establish a new record high at $2,529.57 before retreating into the range. The yellow metal is getting a boost from lower rates, a weaker dollar, and burgeoning speculative interest.



Gold ETFs saw solid net inflows of 8.5 tonnes last week, 7.4 tonnes of which were attributed to North American investors. European investors added 1.1 tonnes, while Asian investors accounted for 1.6 tonnes of outflows.

The COT report showed that net speculative long positions rebounded 28.6k to 267.3k contracts last week. Most of the declines from the previous two weeks have been retraced and I suspect long positions will continue to build this week. 

CFTC Gold speculative net positions

The World Gold Council expects India's "pro-gold policy measures" to bolster demand by 50 tonnes or more in H2. The slashing of import duties effectively resulted in a 6% reduction in the price of gold, making for an attractive buying opportunity. The WGC also sees the RBI continuing with its gold-buying campaign.

Upside potential in gold based on Fibonacci and measuring objectives remain highlighted at $2,539.77 and  $2,597.15/$2,600.00. 

Initial support is noted at $2,500.00/$2,498.32. This level protects Monday's low at $2,488.19.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.309 (+1.05%)
5-Day Change: +$1.904 (+6.84%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +26.52

Silver has garnered some buoyancy from the latest round of new all-time highs in gold, reaching a 5-week high of $29.877 in early U.S. trading. However, upticks faltered ahead of $30 and the white metal retreated to trade lower on the day.



Nonetheless, price action this week has improved the technical picture significantly.  Notably, silver has now retraced more than half of the nearly $6 decline since the May high at $32.379, and is back above the 20-, 50-, and 100-day moving averages.

I'd still like to see a convincing move above $30.00/$30.14 to return additional credence to the underlying uptrend. Any signs of heightened growth risks – such as today's Philly Fed survey – are likely to weigh on industrial metals such as silver.

While scope for further retreats into the range should not be ruled out, the new record highs in gold have me fairly confident the low is in for silver. I'll be more confident with a trade above $30.14.

Today's low at $29.24 corresponds closely with the 50-day moving average, marking initial support. Secondary support is at $29.02 (100-day SMA) down to yesterday's low at $28.781.

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.

8/14/2024

Gold and silver retreat as prospects for a 50 bps rate cut ebb

OUTSIDE MARKET DEVELOPMENTS: Hamas has said that it will not participate in the latest round of cease-fire talks with Israel, even as international pressure intensifies to end the 10-month-old conflict. Nobody seems optimistic that the latest talks will bear fruit.

Meanwhile, worries of a wider regional war persist. The U.S. has pledged to defend Israel and is rushing additional military assets to the region as a signal to Iran and its proxies of that commitment. The U.S. has also approved a new $20 bln weapons sale to Israel.

A Ukrainian military commander proclaimed that his troops now control nearly 400 square miles of Russian territory. Reports say about 200,000 people have been evacuated from the Kursk border region as the Russian military mounts a counterattack.

U.S. CPI rose 0.2% in July, in line with expectations, versus -0.1% in June; 2.9% y/y, down from 3.0% in June. Core CPI rose 0.2% as well on expectations of the same, versus +0.1% in June; 3.2% y/y, versus 3.3% in June.

In conjunction with yesterday's PPI data, the U.S. inflation picture was largely benign in July. The market still expects the Fed to begin easing in September, although prospects for a 50 bps cut have moderated since yesterday. Nonetheless, Fed funds futures continue to suggest scope for 100 bps of cuts by year-end.

Atlanta Fed President Raphael Bostic said yesterday that he wants to see "a little more data" before he'll be ready to support rate cuts. Bostic is an ardent dove, so his apprehension is tantamount to hawkishness. "I am willing to wait, but it's coming ... It is coming," Bostic said. 

The final inflation reads for the week come out tomorrow in the form of import and export price indexes. The market is expecting unch for exports and -0.1% for imports.


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$9.88 (+0.40%)
5-Day Change: +$87.98 (+3.69%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +31.73

Gold failed to set new all-time highs despite modest easing in annualized consumer inflation that likely keeps the Fed on track for a rate cut in September. The yellow metal has retreated into the range as prospects for a larger 50 bps rate cut ebbed, but weakness in the dollar should be a limiting factor on the downside.



Today's setback without reaching new highs bolsters the prospects for further choppy trade within what appears to be a symmetrical triangle pattern. Look for the lows to be higher within the range and perhaps more lower highs as well, before gold ultimately breaks out to the upside.

A breach of the record high at $2,481.33 (17-Jul) is needed to clear the way for an upside extension to  $2,500.00/$2,503.27 initially. Beyond that, the $2,539.77 Fibonacci objective attracts.

On the downside, a minor chart point at $2,440.37/$2,440.00 offers support. If this level gives way, scope is seen for additional retracement to the $2424.62/$2,417.67 zone, where the lows from Monday and Friday correspond with the 20-day moving average.

Wells Fargo notes that Asian gold ETF holdings have increased 56% year-to-date, with the vast majority of that growth attributed to China. Chinese investors are seeking diversification in the tried and true asset amid growing economic uncertainty and an ongoing real estate crisis. Asian interest, despite near-record highs, is a bullish signal for gold.

While the PBoC has reported no purchases of gold for 3-months now, a recent World Gold Counsel survey suggests central banks will continue to be net buyers for the remainder of the year. Central bank interest should continue to be broadly supportive for gold.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.111 (+0.40%)
5-Day Change: +$1.258 (+4.73%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +21.01

Silver started the U.S. session modestly higher, but once again upticks have proven unsustainable. The white metal appears poised for a second consecutive lower close and nearly all of Monday's gains have been retraced.



The three-month downtrend remains highlighted. New lows for the week below $27.255 would constitute more than a 50% retracement of the bounce from last week's cycle low at $26.524. Such a move would shift focus to $27.098 initially, but the cycle low would be considered back in play.

I suggested yesterday that "fresh highs in gold might prevent new cycle lows in silver." That didn't happen today, so the downside in silver remains vulnerable.

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.

8/13/2024

Gold flirts with record highs, while silver remains defensive 

OUTSIDE MARKET DEVELOPMENTS: The New York Fed Survey of Consumer Expectations indicated that U.S. consumers see spending increasing at a slower 4.9% pace over the next 12 months. That's the smallest increase in spending since April 2021, when inflation was first taking hold.

July retail sales data come out on Thursday, so we'll see if consumers have started pulling back. The market is expecting a 0.4% m/m rise. We will also get earnings reports from some key retailers this week.

As consumers refuse to pay high prices and reduce spending inflation tends to cool. Three-year-ahead inflation expectations tumbled 0.6% to a new series low (since June 2013) of 2.3% in July. 

While it seems extremely likely that the Fed will cut rates in September, at least consumers think inflation will remain above the central bank's 2% target for several more years. If that's the case, while rates may come down, monetary policy will likely remain broadly restrictive for some time to come.

Home Depot's CFO says that consumers continue to have a “deferral mindset” when it comes to buying/selling homes and making home improvements due to high prices, high interest rates, and growing uncertainty about the economy. While Q2 earnings and sales beat expectations, guidance is calling for a decline of 3% to 4% in full-year comparable sales.

U.S. PPI rose 0.1% in July, below expectations of +0.2%, versus +0.2% in June; 2.2% y/y, down from a revised 2.7% in June. Core was unchanged, below expectations of +0.2%, versus a revised +0.3% in June; 2.4% y/y, down from 3.0% in June.

U.S. yields and the dollar slid in reaction as Fed easing expectations once again favor a 50 bps cut at the September FOMC meeting. Focus now turns to tomorrow's CPI release and import/export prices on Thursday.

The NFIB Small Business Optimism Index rose 2.2 points in July to 93.7, the highest reading since February 2022. However, the 50-year average for the index is 98, and June was the 31st consecutive month below that average.

Inflation remains the most significant issue weighing on small business optimism. “Cost pressures, especially labor costs, continue to plague small business operations, impacting their bottom line," said NFIB Chief Economist Bill Dunkelberg.

We'll hear FedSpeak from Atlanta Fed President Bostic this afternoon. Bostic is a fervent dove.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$9.83 (-0.40%)
5-Day Change: +$83.26 (+3.48%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +31.85

Gold breached resistance at $2,474.58 (02-Aug high) in overseas trading, establishing a fresh 4-week high at $2,476.29 before dipping back into the range. The yellow metal appears poised for new all-time highs, with just the $2,481.33 peak from 17-Jul left to beat.



Gold is back above the 20-, 50-, and 100-day moving averages and all are tracking higher once again. We just need new highs to confirm the uptrend is back underway after a very reasonable four-week corrective/consolidative phase.

I suspect gold will be tentative ahead of tomorrow's CPI print, but the technical picture is looking pretty good at this point. Even if there is a pullback into the range, I anticipate the lows will be higher and I would look for a continuation pattern to continue developing.

A confirmed upside breakout would target $2,500.00/$2,503.27 initially. Beyond that, $2,539.77 would attract based on a Fibonacci projection.

Initial support is defined by the overseas $2,459.42. There's some minor intraday support from yesterday at $2,440.37/$2,440.00, but the more substantial $2424.62/$2,417.83 zone appears to be well protected at this point.

Not surprisingly, last week's sharp sell-off led to outflows from gold ETFs. North Americans were the biggest sellers. Asian investors took advantage of lower prices and were net buyers.

 
Inflows in July were the largest in more than two years and it was the third consecutive month of net inflows. North Americans and Europeans led the charge. With mounting growth risks in the front of investors' minds, gold is likely to remain attractive portfolio diversification moving forward.

The most recent COT report showed speculative net positions declined further last week to 238.7k contracts, versus 246.6k in the previous week. It was the second consecutive decline from the near two-year high of 273.1k at the end of July.

CFTC Gold speculative net positions

I imagine this week's price action is wooing back at least some of those spec longs. New record highs would attract further buying interest.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.243(-0.87%)
5-Day Change: +$0.671 (+2.49%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +19.57

Silver was unable to sustain yesterday's gains and is currently trading more than 1% lower on the day. The white metal seems to be largely ignoring gains in the gold market.



This suggests that worries about global growth risk and demand destruction in the industrial sector are overwhelming the haven appeal of silver.

So far, today's price action remains confined to Monday's range. However, the fact that silver continues to attract selling interest on upticks leaves more important resistances at $29 and $30 well protected.

With the market still below the important 20-, 50-, and 100-day moving averages, further attacks on the downside can not be ruled out. However, fresh highs in gold might prevent new cycle lows in silver below last week's low at $26.524.

A sharp drop in consumer inflation tomorrow might help the cause as well. That would heighten Fed rate hike expectations and weigh on the dollar.

The COT report for silver showed that net speculative positions held steady at 49.1k last week. I see that as somewhat encouraging given the magnitude of last week's decline.

CFTC Silver speculative net positions

I think the specs are likely to remain cautious, even at these arguably attractive prices. If we see an increase in the net long position this week without making new lows, I'd be a little more confident about suggesting 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.