Blog posts tagged with 'silver'

Gold slid more than 1% last week, logging a second consecutive lower weekly close. The yellow metal is being weighed by heightened expectations for another Fed rate hike in May, while geopolitical and growth risks are limiting the downside thus far.

Focus is already on next week’s FOMC meeting, where another 25-bps rate hike is widely expected. The CME’s FedWatch tool places the probability at 92%. The odds for an additional 25-bps hike in June continue to edge higher and now stand at 24.1%.

The Fed seems to think they have more to do on the inflation front, even as the market’s expectations for inflation continue to moderate. The index of common inflation expectations fell to 2.22% in Q1, the lowest level since Q2-21.

Meanwhile, incoming data continue to suggest the economy is slowing. The minutes from the March FOMC meeting revealed that even the central bank’s staff believe a mild recession will begin “later this year, with a recovery over the subsequent two years.”

In addition, job growth slowed in March and is forecast to come in weaker yet in April. Median expectations for nonfarm payrolls are +175k, down from +236kn in March.

A recession would certainly knock inflation lower, as would slower jobs and wage growth. However, the market seems to believe the Fed won’t wait for any of that to happen and will instead remain aggressive in battling price risks. That strategy does not bode well for a soft landing.

With gold trading less than 4% off its all-time high of $2075.28, the yellow metal is arguably well positioned to push to record highs if the Fed (and other central banks) are put in the position of having to reverse course and start easing policy. My first significant technical objective would be $2194.58 based on a Fibonacci projection.

Last week I suggested short-term downside potential was to $1959. So far, the market has traded as low as $1969.30. There is scope for further tests of the downside until the next policy announcement on May 3^rd, particularly if prospects for a June rate hike continue to increase.

Silver

Silver ended last week with a 1.1% loss, but a firmer tone prevailed on Monday. Thus far, the white metal is holding its 20-day moving average.

While the trend remains favorable, rising economic growth risks warrant a measure of caution. Silver ETFs saw significant outflows last week, suggesting that investors may lack confidence in the fundamentals needed to push silver back to the critical $30 zone.

A recession later in the year could result in a significant retracement of the March-April rally, but I also suspect the Fed will be quick to start cutting rates in reaction. That would help limit downside potential as will the more favorable economic prospects for China as the world’s second-largest economy continues to recover from COVID lockdowns.

Last week, the Silver Institute highlighted that “all major demand categories achieved record highs in 2022.” Total silver demand jumped 18% y/y to a record 1.242 billion ounces.

Amid this strong demand environment and a marginal contraction in mine output, the supply deficit reached 237.7 Moz in 2022. The Silver Institute called it "possibly the most significant deficit on record."

The Silver Institute is projecting that the silver market will remain out of balance in 2023, to the tune of 142.1 Moz. If confirmed, it would be the third consecutive annual supply deficit, which should help underpin the market.

Renewed probes about $26 would return focus to the $26.95 high from March 8, 2022. The latter is seen as the trigger that would put the key COVID-era highs at $29.86/$30.14 in play.

On the downside, a violation of the 20-day SMA at $24.83 would shift attention to congestive support around $23.70, which corresponds with the 38.2% retracement level of the rally from $19.90. Short-term losses are still seen as corrective in nature.

PGMs

Platinum surged nearly 8% last week, establishing a 13-month high at $1143.25. It was the sixth consecutive higher weekly close.

However, platinum had become quite overextended, the most since December 2020. Corrective pressures emerged on Monday, resulting in a loss of 3.6%.

At this point, I’m viewing this week’s setback as corrective.  While mounting growth risks do have the potential to take the wind out of platinum’s sails, supply and demand fundamentals are likely to limit the downside.

Persistent power issues in South Africa should keep supply tight. The deficit is expected to reach 556 koz this year.

On the demand side of the equation, global light vehicle sales are expected to increase by 6.2% in 2023 to 86.1 million units. The China Association of Automobile Manufacturers (CAAM) is projecting a 3% bump in Chinese sales to 27.6 million units. That would be nearly a third of projected global sales.

CAAM is anticipating that demand for “new-energy” vehicles will increase by 35% to 9 million units. That will do more for silver and copper than platinum.

While auto sector supply chain issues are still likely to be a problem, ongoing platinum for palladium substitution and increased loading in catalytic converters should help to underpin platinum.

Despite 6-weeks of gains in palladium, the chart suggests the gains were corrective in nature. Recent probes above the 100-day SMA could not be sustained and palladium retreated more than 4% on Monday.

A retreat below $1489/87 would return a measure of credence to the dominant downtrend, returning focus to the $1329.18 low from March 9^th.

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.

While we think the #gold market has posted a moderately reliable low with the Wednesday washout, we also expect volatility to increase in both gold and #silver ahead and we expect both markets to retest and perhaps temporarily violate recent lows.

However, the gold market showed signs yesterday that it was receiving a flight to quality bid from renewed economic uncertainty and perhaps more importantly from escalating concerns of potential trouble in the financial markets from the debt ceiling situation.

In fact, a significant jump in credit default swap rates has surfaced and according to Reuters, those yields reached the highest levels in more than a decade, with some analysts suggesting the prospects of a technical default are no longer insignificant...[MORE]

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April 20 (Reuters) - Gold prices firmed above the $2,000 level again on Thursday as the dollar and Treasury yields pulled back after soft U.S. data pointed to the economic toll of the Federal Reserve's interest rate-hike cycle, strengthening the case for an imminent pause.

Spot gold climbed 0.6% to $2,004.59 per ounce by 10 a.m. EDT (1400 GMT), after hitting a two-week low of $1969.1 in the previous session. U.S. gold futures rose 0.4% to $2,016.00...[LINK]

While gold prices waffled around both sides of unchanged overnight the charts remain bearish and are accentuated by ongoing bearish macro psychology.

While gold and silver prices came under significant attack yesterday morning, the markets posted a very impressive rebound, which in turn should discourage some sellers today.

However, the threat of rising interest rates in the US and UK continues to create headwinds for all the markets especially as that theme has lifted the dollar this week and resulted in treasury bonds reaching the lowest level since March 15th yesterday...[MORE]

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Good morning. The precious metals are mostly lower in early U.S. trading.

U.S. calendar features Philly Fed Index, Initial Jobless Claims,  Leading Indicators, Existing Home Sales, and lots of #FedSpeak.

Good morning. The #preciousmetals are higher in early

U.S. trading. U.S. calendar features Housing Starts, #FedSpeak from Bowman.

Gold closed down 0.2% last week but not before a new 13-month high was attained at $2048.79. A corrective tone persisted early in the new week amid speculation that the Fed will hike rates again in May, even as inflation continues to slow.

Both CPI and PPI came in below expectations in March. PPI posted its biggest monthly decline since April 2020.  With inflation concerns waning, so too does a significant bullish catalyst.

Nonetheless, there is a growing expectation that the Fed will hike interest rates at the May FOMC meeting. Based on the CME’s FedWatch tool, the probability of a 25-bps hike now stands at 91%, that’s up from 72.2% last week and 20.7% a month ago.

Assuming the Fed does indeed tighten in May to the 5.00-5.25% range, the market believes they will hold steady in June. There is however an 18% probability of another 25-bps high in June.

Keep an eye on EU and UK inflation data this week. Hot numbers would likely prompt the respective central banks to maintain their bias toward tighter policy with the potential to further narrow interest rate differentials.  

Providing some additional weight on gold is the fact that the dollar held a significant support level. The low from February 2 in the dollar index at 100.82 was ever-so-slightly exceeded on Friday last week but may be considered technically intact.

While the subsequent rally hasn’t been terribly impressive, a case can be made for a potential double-bottom. The confirmation point for that pattern is the 105.88 high from March 8, which is not in any immediate jeopardy.

The dollar has pressured its 20-day SMA already and penetration would clear the way for additional gains toward the 103.50 zone, where the 100 and, 200-day SMAs converge with the 50% retracement level of the latest leg down.

Such gains in the greenback would likely keep the pressure on gold. Short-term potential is back to the $1959 level, but such a move would be seen as corrective. My sense is that there are quite a few interested buyers feeling the market got away from them.

While there are reports that the recent higher prices have tamped Asian demand, I still believe there is potential for a near-term challenge of the all-time high at $2075.14.

Global gold ETF inflows were 164,805 ounces last week. It was the fifth consecutive weekly inflow, but holdings are still 0.3% lower YTD. We’ll be watching closely to see if more buyers come in on the break or if the recent longs are weak.

Silver

Silver gained 1.6% last week, it was the fifth consecutive high weekly close for the white metal, which probed above $26 for the first time since April of last year.

A softer tone prevailed on Friday into Monday, taking out nearby trendline support. Scope is seen for additional short-term losses back to the 20-day SMA at $24.25. Secondary support is marked by the 38.2% retracement level of the recent leg higher at $23.72.

The IMF now forecasts global growth of 2.8% in 2023, down from 3.4% in 2022. They believe China and India will account for more than half of that growth.

The IMF then sees the global economy averaging around 3% growth over the next 5 years. That’s well below the 3.8% average that was achieved in the previous 20 years.

That outlook doesn’t bode terribly well for industrial metals, and yet I suspect much of the growth that is realized will be driven by technology and the strong trend toward electrification. Silver should fare well in such an environment, even if the overall pace of global growth is weak.

Last week the Biden administration announced a plan to significantly increase vehicle emission standards beginning with the 2027 model year, projecting that 2/3rds of all vehicles sold in the U.S. would be EVs by 2032. That’s less than 10 years from now!

Whether such lofty goals are even remotely feasible remains to be seen, but it does seem likely that EVs will continue to gain market share. On average, EVs contain about 44% more silver and 2.5 times more copper than conventional vehicles.

PGMs

Platinum posted a 4% gain last week, notching a fifth consecutive higher weekly close. While gold and silver were defensive to start the week, both platinum and palladium displayed some buoyancy on Monday.

While platinum remains well within its range, the recent strength seems to defy the tepid global growth prospects and the Biden administration’s push to get rid of most vehicles powered by internal combustion engines.

Fewer ICE vehicles will ultimately result in diminished demand for auto catalysts. However, the market may have latched on to the expectation that emission standards will continue to be more stringent in the intervening years, requiring greater PGM loading.

Palladium has rallied about 18% since the $1329.18 low was set on March 9. A move above the 100-day SMA at $1612.66 would suggest potential back to $2000.

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.