Blog posts tagged with 'precious metals'

8/29/2024

Gold and silver recover somewhat, await Friday's PCE data

OUTSIDE MARKET DEVELOPMENTS: U.S. Q2 GDP was revised up to 3.0% in the second report. That's above expectations of 2.8%, versus a preliminary print of 2.8%. The gains are largely attributed to sizable upside adjustments to personal consumption.

The GDP Chain Price Index was revised up to 2.5%, on expectations of 2.3%, versus 2.3% in the first report. Core prices were revised down to 2.8% from 2.9%.

Initial jobless claims dipped 2k to 231k in the week ended 24-Aug, below expectations of 235k, versus a revised 233k in the previous week. Continuing claims rose 13k to 1,868k, just off the 32-month from late July at 1,871k.

The U.S, Advanced Goods Trade deficit widened to -$102.7 bln in July, outside expectations of -$97.0 bln, versus a revised -$96.6 bln in June. Exports were unchanged at $172.9 bln, while imports rose 2.3% to $275.6 bln.

The NAR Pending Home Sales Index tumbled 5.5% to a record low 70.2 in July, below expectations of 75.5, versus 79. in June. "A sales recovery did not occur in midsummer. The positive impact of job growth and higher inventory could not overcome affordability challenges and some degree of wait-and-see related to the upcoming U.S. presidential election," said NAR Chief Economist Lawrence Yun.

The U.S. economy continues to display resilience in terms of growth, but inflation was sticky above target in Q2. Hints of weakness in the labor market persist and housing affordability remains a challenge.

Yields and the dollar have firmed in reaction. While the Fed is still likely to start easing in September, bets for a 50 bps rate cut have been pared somewhat.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$1.29 (-0.05%)
5-Day Change: +$28.84 (+1.16%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +31.47

Gold is trading higher on the day, despite follow-through gains in the dollar. Price action remains confined to yesterday's range, but Wednesday's reversal day may keep sellers at least somewhat interested ahead of tomorrow's inflation data.



A higher close today will diminish the significance of that chart pattern although the bulls are unlikely to jump back in until the PCE report is behind us. The market is expecting a scant 0.1% increase in PCE inflation. A print at or below expectations would re-embolden the bull camp.

A hotter-than-expected reading from the Fed's preferred measure of inflation would decrease 50 bps rate cut expectations. Further retracement of recent dollar losses would be expected, weighing on gold.

An FT article suggests that the uptrend in gold has "staying power," noting 22% gains already this year and the outperformance of the S&P 500.  Investors traditionally rotate into gold when interest rates fall. With other major central banks already easing and the Fed on the verge of joining them, "Rich individuals and financial investors have been filling their vaults," according to the FT.

At this point, important short-term support levels remain protected. Yesterday's low at $2,494.93 now provides a barrier ahead of Friday's low at $2,484.53. More substantial support is noted at $2,474.31 (22-Aug low) and corresponds closely with the rising 20-day moving average at $2,471.21 today.

On the upside, yesterday's high at $2,527.97 reinforced the record high from last week at $2,529.57. Nonetheless, the dominant trend remains bullish with targets at $2,539.77 (Fibonacci) and  $2,597.15/$2,600.00 (measuring objective) still valid.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.441 (+1.51%)
5-Day Change: +$0.397 (+1.37%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +24.16

Silver has rebounded from yesterday's weak close and is consolidating within the confines of Wednesday's range. Just over 50% of yesterday's losses have been retraced.



While the white metal probed back below the 50- and 100-day moving averages, the bears were unable to take the market lower, leaving last week's low at $28.830 well protected. Like gold, silver seems to be ignoring the headwind of a stronger dollar today.

Better-than-expected Q2 growth seems to be providing some lift for the white metal intraday. While concerns about the Chinese economy persist, the demand for silver should continue to expand as the world electrifies.

The market is increasingly excited about Samsung's new solid-state silver batteries as an alternative to traditional lithium-ion batteries. The new technology employs a silver-carbon composite layer for the anode. Reportedly, when used in EVs they will increase range, and slash charging times. On top of that, they're lighter and less costly.

That sounds like a win all the way around. However, for a market already in deficit, sourcing adequate supplies of silver could be an issue if the technology is widely adopted. That would lead to higher prices.

A breach of Monday's 6-week high at $30.164 is needed to keep the white metal on track for a challenge of the May high at $32.370. Intervening resistances are noted at $31.126 (78.6% retracement of the May/Aug decline) and $31.652 (11-Jul high).


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.

8/28/2024

Gold and silver correct, weighed by a firmer dollar

OUTSIDE MARKET DEVELOPMENTS: Risk appetite has waned somewhat as markets seek more data to clarify central bank policy intentions. While a Fed rate cut in September is now a foregone conclusion in the eyes of many, the debate on how big that first cut will be is underway.

The Fed's favored measure of inflation comes out on Friday. The PCE Chain Price Index is expected to show a scant 0.1% rise, which would reinforce Fed Chairman Powell's contention that "upside risks to inflation have diminished."

The dollar index has rebounded from yesterday's 13-month low. This action was likely associated with profit-taking ahead of formidable support at 99.58 (last year's low) and the upcoming long holiday weekend.

However, with the market still pricing in 100 bps of cuts by the end of the year, further losses in the dollar are considered likely. Fed funds futures are projecting more than 200 bps of easing through the end of next year. 

While the Fed is about to embark on an easing path, the BoJ will likely tighten again before year-end. Jaideep Tiwari, global head of FX strategy at Citi Wealth, told CNBC earlier this week that the dollar could reach the mid-130s against the yen next year. The USD-JPY rate is currently trading at 144.50.

Tiwari believes most of the speculative money has already been shaken out of the yen carry trade. However, impending changes in interest rate differentials could lead to further market volatility like we experienced early in the month.

I've written this year about the developing demographic issue facing China and the possible implications for the global economy. Surging school closures in China highlight how dire the situation has become.

According to NikkeiAsia, the number of children enrolled in preschool fell by 5 million last year to 40.92 million, the lowest figure in a decade. More than 20,000 schools have been shuttered in the past two years due to declining enrollment.

China's population fell by more than two million in 2023 to 1.409 bln. UN projections see China's population nearly halving by 2100. 

As the population ages in the years ahead, the workforce will continue to shrink. Meanwhile, the retirement-aged population is expected to swell to more than 400 million – bigger than the population of the entire U.S. – over the next 20 years.

Fewer employees and employers will be supporting all those retirees, straining the pension system and stoking a fiscal crisis. "The fiscal strain as a result of ageing is immediate and concerning," warned Economist Intelligence.

China is not alone. Demographic challenges are also manifesting in Japan, South Korea, and parts of Europe. Birth rates in Canada and the U.S. are also well below the replacement rate at 1.43 and 1.66 respectively.

According to the Institute for Health Metrics and Evaluations, "over half of all countries and territories (110 of 204) [are] below the population replacement level of 2.1 births per female as of 2021."

It's a disturbing global trend with far-reaching economic implications, perhaps especially for countries saddled with soaring debt burdens. Are the open border policies that have emerged in recent years in much of the West related to the burgeoning demographic issues?


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$18.75 (-0.74%)
5-Day Change: -$13.03 (-0.52%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +30.42

Gold eked out a new high for the week in early-Asian trading at $2,527.97, but could not take out last week's record high at $2,529.57. The yellow metal retreated in subsequent trading weighed by a stronger dollar and perhaps some position squaring ahead of the long holiday weekend.



From a technical perspective, the outside day and a likely lower close are at least short-term troubling. Tests below $2500 leave Friday's low at $2,484.53 vulnerable to a test. More substantial support is noted at $2,474.31 (22-Aug low) and corresponds closely with the rising 20-day moving average at $2,467.42 today.

A close above $2,506.22 would somewhat diminish the significance of the bearish reversal day. However, at this point, new record highs are probably off the table at least until July PCE data come out on Friday.

With gains in the dollar seen as corrective, losses in gold are seem as corrective as well. Further challenges of the upside are expected, with $2,539.77 and  $2,597.15/$2,600.00 still seen as valid objectives.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.477 (-1.59%)
5-Day Change: -$0.328 (-1.11%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +23.50

Silver tumbled to new lows for the week after repeatedly failing to sustain tests above $30. The white metal is off more than 3% from Monday's 6-week high at $30.164.



Silver is challenging the 50- and 100-day moving averages at $29.217/141, which protect more important chart supports at $28.950 (23-Aug low), 28.830 (22-Aug low), and 28.781 (19-Aug low). If the latter gives way, focus will shift to the 20-day moving average at $28.498.

A rise above the halfway back point of today's range at $29.611 would ease short-term pressure on the downside. However, the market seems to be waiting for some new catalyst to either push it toward the highs for the year above $32 or send it back into the range below $28.

A weak inflation reading in the PCE data on Friday would increase bets for a 50 bps Fed rate cut in September, putting the dollar back on the defensive and providing a renewed lift for the precious metals.  A more neutral inflation print would have the market looking further down the road to the following Friday and August jobs data. 

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.

8/27/2024

Gold and silver consolidate recent gains

OUTSIDE MARKET DEVELOPMENTS: With everyone seemingly in agreement that the Fed will begin easing in September, market focus is now on the size of that first cut. This morning, the probability of a larger 50 bps cut stands at 29.5%.

Fed funds futures continue to predict 100 bps of easing by year-end. With only three FOMC meetings remaining this year, at least one upsized cut would be required to meet that expectation.

Given the Fed's cautiousness in the lead-up to this first move, I think they'll start with a 25-bps cut. They claim to be data-dependent, and August jobs data will be a determining factor, but are they looking at asset prices?

The Dow Jones Industrial Average closed at a record high on Monday. This morning, the S&P/Case-Shiller Home Price Index for June printed at an all-time high.

Lower rates will drive asset prices even higher. However, ever-higher housing prices threaten to undermine the Fed's efforts to get inflation back to its 2% target.

News that Libya would take its oil production offline amid a dispute between rival governments initially sent oil prices higher. Libya produces 1.2 million barrels of oil per day, most of which is exported to Europe.

Given the revenue generated by oil – regardless of which government is in charge – I don't imagine the supply disruption will last very long. Nonetheless, the situation has the potential to drive up energy prices ahead of upcoming central bank policy decisions.

U.S. Consumer Confidence rose to a 6-month high of 103.3 in August, above expectations of 100.5, versus an upward revised 101.9 in July (was 100.3). The year-ahead inflation index fell to a 4-year low. However, it wasn't all rosy: The job strength diffusion index fell to a 41-month low, a level not seen since the pandemic.

The Richmond Fed Manufacturing Index slid to a 4-year low of -19 in August, below expectations, versus -17 in July. The employment component fell 10 points to -15, the weakest print since May 2020.

Today's data indicate some downside risk for August payrolls.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$9.11 (-0.36%)
5-Day Change: -$1.45 (-0.06%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +31.42

Gold continues to consolidate recent gains and is trading just off the all-time high set last week at $2,529.57. Corrective activity since that record was set has been minimal, favoring further tests of the upside.



The technical outlook remains unchanged. The next upside target is $2,539.77 (Fibonacci) with $2,529.57 marking the intervening barrier. Beyond the former, a measuring objective at $2,597.15/$2,600.00 attracts.

The dollar remains defensive, which is also helping gold. The dollar index hit a 13-month low on Monday and scope is now seen for a test of the 99.58 low from July 2023.

Net gold ETF inflows were 8 tonnes last week, most of which was attributable to North American buyers. European investors bought 4.4 tonnes, while Asia accounted for 3.7 tonnes of outflows. ETF flows remain broadly supportive.

Initial support is marked by the overseas low at $2,506.22. 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 $2,464.24 today.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.011 (-0.04%)
5-Day Change: +$0.540 (+1.83%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +27.67

Silver continues to probe above $30, but price action remains confined to yesterday's range thus far. A breach of yesterday's 6-week high of $30.164 would confirm the breach of the $30.142 Fibonacci level, clearing the way for additional retracement to $30.584 (18-Jul high).



A more convincing breach of $30.142 would also highlight the next Fibonacci level which comes in at $31.126 (78.6% retracement of the May/Aug decline). Further out, the May highs above $32 are looking increasingly attractive.

India's demand for silver is on pace to nearly double this year, driven largely by demand for solar panels and consumer electronics. H1 imports have already exceeded the 3,625 tonnes of total imports in 2023. The CEO of a leading Indian silver importer told Reuters he believes imports could be as high as 7,000 tonnes this year.

This would offset concerns about demand destruction associated with the faltering Chinese economy. The IMF is forecasting 5% growth in China this year, and 7% growth in India.

India slashed import duties on gold and silver to 6% from 15% previously. That's a pretty substantial effective price drop, which is further stoking demand.

In terms of support. the overseas low at $29.821 now protects Monday's low at $29.665. More substantial support is marked by last week's lows at $28.950/$28.781. The 50- and 100-day moving averages provide intervening barriers at $29.227 and $29.127 respectively.


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.

8/26/2024

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.