Blog

9/18/2024

Gold and silver await Fed decision

OUTSIDE MARKET DEVELOPMENTS: Fed funds futures continue to suggest a 50 bps cut when the Fed announces policy this afternoon. That bias seems to ignore the central bank's "data dependency" mantra. Recent data have reflected an economy that remains resilient and therefore warrants a more conservative 25 bps cut.

The policy statement, economic projections, and Powell's presser will be closely scrutinized for clues as to the likely rate path moving forward. The market continues to price in 100 bps in cuts by year-end, implying that at least one of the three remaining FOMC meetings will end with a 50 bps cut. I just don't think it will be this one.

Former St. Louis Fed President Bullard agrees. He said the case for a half-point Fed rate cut is "overblown" in a CNBC interview this morning.

UK CPI held steady at 2.2% y/y in August. However, core CPI accelerated to 3.6% y/y from 3.3% in July on the back of rising services prices. The BoE was already expected to hold steady on rates tomorrow and the inflation data seals the deal.

The BoE made its initial rate cut in August on a controversial 5-4 vote. The rebound in inflation suggests the decision may have been premature. I'm sure this will be mentioned in the board room of the Eccles Building today.

ECB Governing Council Member and Bundesbank President Joachim Nagel urged patients on inflation, noting that services inflation in particular remains "alarmingly high." Nagel warned that borrowing costs "will certainly not go down as quickly and sharply as they went up." While this hints at an ECB hold in October, recent ECBSpeak has been mixed.

U.S. mortgage applications jumped 14.2% in the week ended 13-Sep as 30-year mortgage rates dropped to a 23-month low of 6.15%. While the purchase index rose 5.4%, high rates remain a headwind for the housing market.

U.S. housing starts rose 9.6% to 1.356M in August, above expectations of 1.311M, versus 1.237M in July. That's the best print since April as a strong 15.8% surge in single-family starts offset a 4.2% decline in multi-family starts. Completions increased by 9.2% to 1.788M.

Reports of a potential explosive device near a Trump rally on Long Island further amplifies political tensions in the U.S. This is a developing story.  


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$6.36 (+0.25%)
5-Day Change: +$58.33 (+2.32%)
YTD Range: $1,986.16 - $2,589.13
52-Week Range: $1,812.39 - $2,589.13
Weighted Alpha: +34.76

Gold is narrowly confined within yesterday's range as the trade eagerly awaits today's Fed decision. A cautious 25 bps cut could initially lead to corrective action, but regardless of the size, the Fed's first rate cut in more than four years is a generally bullish event for the yellow metal.



Even if the Fed goes aggressive and cuts by a half-point it would imply smaller cuts in November and December. This may lead to the "sell the fact" event I've warned about in previous commentary this week.

The guidance provided in the statement, the dots, and Powell's presser will set expectations for the two remaining FOMC meetings this year, and into Q1'25.

Downticks on Tuesday were successfully contained by support at $2,559.79/$2,557.21. This level is reinforced by yesterday's low at $2,561.96. Secondary support is noted at $2,529.57/$2,525.52. The 20-day moving average has provided good support on a close basis for more than a month and comes in at $2,523.13.

If gold sells off on the Fed's decision, it may take a dip below $2,500 to entice renewed buying interest. Solid chart support at $2,474.31/08 is bolstered by the 50-day moving average at $2,469.80.

On the upside, fresh record highs above $2,589.13 would clear the way for attainment of the $2,597.15/$2,600.00 objective. A secondary target is marked by Fibonacci resistance at $2,619.35. New highs would also intensify speculation about an eventual move toward $3,000.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.095 (-0.31%)
5-Day Change: +$1.773 (+6.18%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +31.39

Silver has slipped to new lows for the week as traders are perhaps a little less inclined to go long into the FOMC statement. A softer tone in gold and a slightly better dollar weigh.



A retreat below $30 must be considered if the Fed cuts by just a quarter-point. However, such a move would suggest potential for a retreat to the $29 zone where the important moving averages are clustered.

On the other hand, penetration of resistance at $30.963/$31.073 would keep the white metal on track for a challenge of the $31.652 high from 11-Jul. Above the latter, the high for the year at $32.379 (21-May) would attract.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/17/2024

Gold and silver correct ahead of tomorrow's Fed decision

OUTSIDE MARKET DEVELOPMENTS: German ZEW Economic Sentiment plunged 15.6 points to an 11-month low of 3.6 in September, well below market expectations of 17.0, versus 19.2 in August. The current conditions index dropped to -84.5 on expectations of -80.0, versus -77.3 in August. The current conditions print is the lowest since May 2020.

Two ECB rate cuts have done little to improve the mood in Europe's largest economy. The stalling German economy bodes ill for the rest of the EU. There are worries that Europe is heading for a Japan-like lost decade (or more) of stagnant growth, albeit for different reasons.

Europe has a fertility problem with birthrates well below replacement levels. In Germany, the birthrate fell to 1.36 last year. There is some speculation that birthrates may rebound as the Europeans continue to shake off lingering worries from the COVID crisis but a return to the replacement rate of 2.1 seems unlikely.

Equally significant is the fact that governments in Europe have a spending problem. European Commission data shows that EU general government expenditures are nearly half of GDP. In some individual countries, it's well over 50% of GDP.

As governments grow they require more and more resources, crowding out productive private businesses. The beast must be fed leading to ever higher tax rates. Generous government-funded welfare programs lure workers away and sap productivity.

German Productivity through June 2024

It's worth considering how government decisions to essentially allow unrestrained immigration might be factoring into this reality. The most recent data from Eurostat shows that 5.1 million immigrants entered the EU from non-EU countries in 2022. The Council on Foreign Relations estimates Europe has absorbed 29 million migrants in the past decade and growth risks abound nonetheless.

The U.S. is on a similar trajectory both in terms of demographics and growth of government. Without a course correction, America could face its own lost decades.

And speaking of troubling trends: The International Institute for Democracy and Electoral Assistance reports that the global state of democracy continues to erode, even in high-performing countries in Europe and the Americas. "We now live in an era of radical uncertainty, in which multiple, compounding challenges threaten the patterns of stability and growth on which we have come to rely," the organization warned.

The Fed will seek to address immediate growth risks with its first rate cut in four years at the end of the two-day FOMC meeting that begins today. Fed funds futures continue to favor a 50 bps cut, but there still seems to be a fair amount of debate on the size of the cut.

U.S. retail sales rose 0.1% in August, above expectations of -0.2%, versus +0.4% in July. Ex-auto also rose 0.1% on expectations of +0.2%, versus +0.4%.

U.S. industrial production rose 0.8% in August, above market expectations of +0.4%, versus a negative revised -0.9% in July (was -0.6%). Cap use rose to 78% from 77.4% in July.

U.S. business inventories grew by 0.4% in July in line with expectations, versus +0.3% in June. Sales rose by a solid 1.1% reflecting broad-based strength.

The NAHB Housing Market Index ticked up two points to 41 in September but remains well off the July high of 56 and the 2020 record high of 90.

Much of the incoming U.S. data continues to reflect a resilient economy, pushing the DJIA and S&P500 to record highs. This keeps me leaning toward a cautious 25 bps cut as the Fed's first move.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$10.07 (-0.39%)
5-Day Change: +$46.98 (+1.87%)
YTD Range: $1,986.16 - $2,589.13
52-Week Range: $1,812.39 - $2,5789.13
Weighted Alpha: +34.29

Gold has turned corrective as the dollar firmed intraday and traders square positions ahead of tomorrow's pivotal Fed decision. The yellow metal is off nearly 1% from yesterday's record high at $2,589.13.



While Fed funds futures continue to imply a 50 bps rate cut tomorrow, today's data reflect a resilient economy that may warrant a less aggressive 25 bps cut. If the policy move is 25 bps, gold could face more significant corrective action initially, perhaps back below $2500. However, investors are likely to view such a dip as yet another buying opportunity.

Gold is pressuring support at the $2,559.79/$2,557.21 level. Below that, a minor chart point at $2,529.57 and congestion around $2,500 are noted.

On the upside, the previously established measing objective at $2,597.15/$2,600.00 is now protected by Monday's high at $2,589.13. I've got another Fibonacci objective at $2,619.35.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.035 (-0.11%)
5-Day Change: +$2.255 (+7.94%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +32.63

Silver made another run at the $31 level early in today's U.S. session but upticks stalled at $30.963, leaving yesterday's high at $31.073 well protected. At this point, I don't expect to see the 31-handle again until after the FOMC policy statement tomorrow.



A short-term move back above $31 is likely contingent on a 50 bps rate cut. If the Fed only cuts by 25, I see the white metal retreating to at least the $30 zone as the market reassesses, but the potential would be back to the important moving averages which are clustered around $29.

The bull camp should be heartened by today's generally positive U.S. economic data. However, persistent growth risks in Europe and China are a significant offset in terms of global optimism.

A short to near-term breach of $31.073 would keep the white metal on the path for a challenge of the $31.652 high from 11-Jul. Penetration of the latter would further bolster the scenario that calls for a test of the high for the year at $32.379.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/16/2024

Gold sets more record highs, silver trades above $31 

OUTSIDE MARKET DEVELOPMENTS: Market focus is squarely on the FOMC meeting this week. Policy will be announced on Wednesday along with the Fed's latest economic projections.

Bets for a more aggressive rate cut have increased since last week's Wall Street Journal article by Nick Timiraos indicated some policymakers were "nervous" about keeping rates too high for too long. FedSpeak has tilted more dovish recently as well.

The potential for a 50 bps cut stands at 61% to start the new week. That's up from 50% on Friday, 30% a week ago, and 25% a month ago. I continue to believe the Fed will start its easing campaign with a 25 bps cut.

President Biden and UK PM Starmer met on Friday at the White House to discuss authorizing Ukraine to use long-range weapons systems to strike deep inside Russia. Vladamir Putin warned that providing such permission would be tantamount to a declaration of war. "This will mean that NATO countries, the U.S. and European countries are at war with Russia," said Putin.

After the meeting, a national security spokesperson for the Biden administration said there had been no change in the U.S. position on strikes within Russia. It is not clear at this time whether that is also the position of the UK government. However, just the fact that there were high-level talks about allowing Ukraine to use these systems to strike deep within Russia dials up the tension in the region considerably.

The U.S. and UK have expressed deep concern that North Korea and Iran are providing weapons and ammunition to Russia for use against Ukraine.

Houthi rebels in Yemen fired a long-range missile at Israel on Sunday. The rebels claim it was an advanced hypersonic missile. If that's true, the weapon would likely have been provided by Iran.

“This morning, the Houthis launched a surface-to-surface missile from Yemen into our territory. They should have known by now that we charge a heavy price for any attempt to harm us,” said Israeli Prime Minister Benjamin Netanyahu. A retaliatory strike by Israel against the rebels seems likely.

Another assassination attempt on former President Trump has also heightened U.S. political tensions. The would-be assassin never got any shots off at the Republican nominee for President. It was the second attempt on Mr. Trump's life in as many months and occurred just 50 days out from election day.

The September Empire State Index surged to a 29-month high of 11.5, well above expectations of -4.5, versus -4.7 in August. New orders climbed, and shipments grew significantly according to the NY Fed.

Arguably this is another indication that the economy remains resilient despite the current tight monetary policy conditions. A 50 bps cut does not seem warranted.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.34 (-0.01%)
5-Day Change: +$75.65 (+3.02%)
YTD Range: $1,986.16 - $2,589.13
52-Week Range: $1,812.39 - $2,589.13
Weighted Alpha: +35.56

Gold reached a new record high at $2,589.13 in overseas trading before retreating into the range. The yellow metal is being supported by more dovish rate cut expectations for this week and the corresponding weakness in the dollar. Heightened geopolitical and political tensions are also providing some lift. 



The $2,597.15/$2,600.00 objective has come within striking distance. Beyond that, there's a Fibonacci level at $2,619.35.

A sustained push above $2,600 seems unlikely ahead of the Fed's policy decision on Wednesday given the worsening overbought condition. As noted in commentary last week, there is some risk of a 'sell the fact' event on Wednesday. That risk is heightened if the Fed "disappoints" with a 25 bps cut now that expectations have swung in favor of a larger cut.

Nonetheless, short-term setbacks are likely to be viewed as buying opportunities. Initial support at $2,581/78 protects the more important $2,559.79/$2,557.21 level. Below the latter, $2,529.57 and congestion around $2,500 are noted.

ETF inflows were back on the rise last week after a brief pause in the first week of September. Net inflows totaled 11.6 tonnes, with North America accounting for 9.2 tonnes.

The COT report showed that net speculative long positions decreased to a 4-week low of 282.5k contracts in the week ended 13-Sep. That's a decline of 5.1k from 287.3k contracts in the previous week.

Gold analyst Jan Nieuwenhuijs has found trade statistics that he claims reveal that "the Saudi central bank has been covertly buying 160 tonnes of gold in Switzerland since early 2022, contributing to the current gold bull market." Nieuwenhuijs notes that some official buying is very transparent while other central banks prefer to operate covertly.

According to Nieuwenhuijs the PBoC is also a covert buyer, to the tune of 1,600 tonnes since the war in Ukraine began. He believes SAMA and the PBoC "must be confident in what direction the gold market is headed."

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.179 (+0.58%)
5-Day Change: +$2.384 (+8.41%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +33.05

Silver has traded with a 31-handle for the first time since 17-Jul, The rise in expectations for a more aggressive Fed rate cut, a weaker dollar, an impressive Empire State Index beat and new record highs in gold all conspire to support the white metal.



Upside potential is now seen to the $31.652 high from 11-Jul, but the worsening overbought condition may be a limiting factor in the short term. Risk that the Fed opts for a more cautious 25 bps rate cut this time around could also result in significant retracement of the recent gains. Beware the volatility.

While a measure of caution is warranted here, recent gains have returned considerable confidence to the longer-term bullish scenario. Suddenly the white metal is back within $2 of the 11-year high set in May at $32.379.

The latest COT report saw net speculative long positions dip 1.4k to 44.7k contracts last week, the lowest since March. Traders likely lightening exposure ahead of last week's inflation data and were reluctant to add positions with the Fed decision looming.

CFTC Silver speculative net position

The low for the day at $30.658 marks initial support. Former resistance at $30.164 down to $30 is the more important level to watch, followed by Friday's low at $29.869.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

9/13/2024

Gold extends to more record highs as silver trades with a 30-handle for the first time in 8-weeks

OUTSIDE MARKET DEVELOPMENTS: North Korea released photos of  Kim Jong Un touring a secret uranium enrichment facility. Kim said that Pyongyang needs to "exponentially increase" its nuclear weapons stockpile for "self-defense and the capability for a preemptive attack."

Just the mention of a potential nuclear first strike raises the risk factor in the region and globally. There is speculation that North Korea may be planning to run its first nuclear tests since 2017.

The timing of these provocative actions, just 52 days out from the U.S. presidential election, may be designed to send a message to the next U.S. administration. That message seems to be that the DPRK remains a destabilizing force in Asia and a foreign policy challenge for America.

On Thursday, a Wall Street Journal article by the influential Nick Timiraos suggested that a larger 50 bps Fed rate cut was not off the table. The probability of such a cut had tumbled into the teens after Thursday's inflation data but began climbing later in the session, ending at 28%. This morning the probability is at 43%.

Timiraos acknowledged that the Fed preferred to move in 25 bps increments but some policymakers are reportedly "nervous" about keeping rates too high for too long amid signs of mounting growth risks. The market continues to price in 100 bps of cuts by year-end, suggesting at least one of the three remaining FOMC meetings this year will have to end with a 50 bps cut. I continue to believe it won't be the first one.

News that the interest payment on the $35.3 trillion national debt cracked the $1 trillion barrier for the first time may provide additional incentive for the Fed to bring rates down. The government has paid $1.049 trillion to service the debt so far this year, up 30% from the same period last year. This is clearly unsustainable.

U.S. trade prices for August came in weaker than expected providing further evidence that inflationary pressures are moderating. The export price index fell by 0.7%, while import prices dropped 0.3%.

Preliminary Michigan sentiment for September rose to 69.0, versus 67.9 in August. Sentiment continues to improve from July's 8-month low at 66.4. The 1-year inflation index continued to fall, reaching a 45-month low of 2.7%.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$7.98 (+0.31%)
5-Day Change: +$72.83 (+2.92%)
YTD Range: $1,986.16 - $2,581.46
52-Week Range: $1,812.39 - $2,5781.46
Weighted Alpha: +35.39

Gold continues its march higher on Friday after initially pushing to record levels in U.S. trading on Thursday. The yellow metal is up more than 3% this week and will post its first higher weekly close in three. Gold is up nearly 25% YTD.



The yellow metal is being buoyed by revived expectations that the Fed will launch its easing campaign next week, with a 50 bps cut. New lows for the week in the dollar index are providing an additional boost to gold today.

Given the magnitude of this week's rise and the developing overbought condition, there is potential to see some profit-taking ahead of the weekend. However, short-term setbacks are likely to be viewed as buying opportunities in anticipation of a test of $2,597.15/$2,600.00. Beyond that, the next Fibonacci level I'm watching is $2,619.35.

This week's gains have reignited talk about $3000 gold. I'm quoted in a recent Reuters article on that topic.

Besides falling interest rates, Joseph Cavatoni at the World Gold Council suggests uncertainty surrounding the upcoming U.S. election as another source of demand as investors seek to hedge event risk.

Intraday supports around $2,570.00 and at $2,564.67/26 protect the session low at $2,557.21. 

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.121 (+0.41%)
5-Day Change: +$2.268 (+8.12%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +32.52

Silver has surged to 8-week highs above $30.164, helped by record highs in gold and a weaker dollar. The white metal is up nearly 10% this week, the biggest weekly rise since mid-May.



The breach of a minor chart point mentioned in yesterday's comment at $30.584 (18-Jul high) lends credence to the scenario that calls for additional short-term gains to $31.00 and the July high at $31.652. While the May high at $32.379 looks increasingly attractive with each uptick, the volatility we've seen since that high was set warrants continued caution.

The previous highs at $30.164/082 mark first support. Secondary support is defined by the overseas low at $29.869.


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.

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

U.S. calendar features Import/Export Price Indexes, Michigan Sentiment (Prelim).

9/12/2024

Gold and silver surge following today's PPI and claims data

OUTSIDE MARKET DEVELOPMENTS: U.S. PPI rose 0.2% in August, in line with expectations, versus +0.1% in July. The annualized rate of producer inflation fell to 1.7%, versus 2.2% in July.

Core PPI came in at +0.3% on expectations of +0.2%, versus UNCH in July; +2.4% y/y, unchanged from July.

Initial jobless claims rose 2k to 230k in the week ended 07-Sep, which was in line with expectations, versus a revised +228k in the previous week. Continuing jobless claims increased by 5k in the last week of August to 1,850k from a revised 1,845k the previous week. 

With the important inflation data in the rearview mirror, the market is confident that the Fed will ease by just 25 bps next week. Fed funds futures put the probability at 87% this morning. That's a tick higher than yesterday, but 27 percentage points higher than last week and 37 points higher versus 12-Aug.

August import/export prices come out tomorrow but are less important. Median expectations for both are -0.1%.

The ECB cut rates by 25 bps as was widely expected. The central bank noted, "Recent inflation data have come in broadly as expected." 

However, the ECB upped its 2024 forecast for core inflation to 2.9% but then expects a drop to 2.3% in 2025 and 2.0% in 2026. The central bank trimmed its growth projections to 0.8% for 2024, 1.3% for 2025, and 1.5% for 2026. The downward revisions were attributed to expectations of " weaker contribution from domestic demand over the next few quarters."


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$1.44 (+0.06%)
5-Day Change: +$5.33 (+0.21%)
YTD Range: $1,986.16 - $2,548.477
52-Week Range: $1,812.39 - $2,548.47
Weighted Alpha: +31.90

Gold has surged to new all-time following this morning's PPI release. The market now feels confident that a 25 bps Fed cut is in the offing for next week and that all the potential surprises are behind us. The yellow metal has exceeded my long-standing Fibonacci objective at $2,539.77, trading as high as $2,548.47 thus far.



The next upside target is the measuring objective at $2,597.15/$2,600.00. It may take until next week to get there as the market is already becoming a bit overextended. Also, be aware of a potential "sell the fact" event once the Fed announces policy on Wednesday.

Former resistance at $2,529.57/$2,527.97 now defines first support. Secondary support is the overseas low at $2,511.35 and there's congestion around the $2,500.00 level.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.417 (+1.47%)
5-Day Change: +$0.012 (+0.04%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +24.41

Silver surged to 2-week highs above $29 after the release of this morning's inflation and claims data. Everything was in line with expectations and the market now seems clear that the Fed will announce a 25 bps rate cut next week.



Upside momentum is strong this morning and the white metal seems on track for tests back above $30. A word of caution though, rallies have been consistently failing in recent weeks.

A minor chart point at $29.635 (29-Aug high) has been tested and penetration would clear the way for a challenge of the late August highs at $30.082/164. A breach of the latter would target $30.584 initially, with potential to the July high at $31.652.

Former resistance t $29.125 now offers support. Minor intraday support is noted at $28.731, which protects today's low at $28.557.

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.

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

U.S. calendar features PPI (+0.2% expected), Initial Jobless Claims, Treasury Budget.

9/11/2024

Gold and silver fade after CPI print further erodes chances for 50 bps Fed cut

OUTSIDE MARKET DEVELOPMENTS: U.S. CPI rose 0.2% in August, in line with expectations, versus +0.2% in July. The annualized rate of consumer inflation slid to 2.5% from 2.9% in July.

Core CPI came in at +0.3%, above expectations of +0.2%, versus +0.2% in July. Core consumer inflation held steady at 3.2% y/y.

Markets have been waiting for confirmation that inflation is still heading in the right direction and that the Fed should now focus on supporting the labor market via easier monetary policy. Today's data favors that rotation and prospects for a larger 50 bps rate cut have fallen to 21%. That's down from 34% yesterday, 44% a week ago, and 51% a month ago.

We'll get August PPI data tomorrow. The market is expecting a 0.2% m/m rise. Import/export prices come out on Friday.

BoJ policymaker Junko Nakagawa suggested a rate hike is still on the table a day after a Bloomberg article reported the central bank sees little need to raise rates again next week. The yen surged in reaction, pushing the USD-JPY rate to a new low for the year of 140.72.

The ECB is widely expected to trim rates by 25 bps tomorrow. Eurozone Q2 GDP was revised down to -0.2% q/q, versus a preliminary print of +0.3%. Government spending continues to rise as fixed investment tumbles.

This prompted former ECB chief Mario Draghi to warn that steps must be taken to correct this, or Europe will face a "slow agony." A 25 bps rate cut won't be enough. Draghi is advocating for up to €800bn a year in investment to pull the EU back from the brink.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$5.30 (+0.21%)
5-Day Change: +$27.74 (+1.11%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +31.90

Gold set a new 2-week high at $2,527.18 following the benign CPI print, but has since retreated into the range, leaving the record high from 20-Aug at $2,529.57 intact. Focus now shifts to tomorrow's PPI data.



Dimmed prospects for a larger 50 bps rate cut are keeping the dollar underpinned, providing a bit of a headwind for the yellow metal. The dollar index eked out a new high for the week, despite today's strength in the yen.

Choppy consolidative trading within the range is likely to continue at least through tomorrow's PPI report. The market seems to want to be 100% sure that inflation is in check before committing to a direction.

There is at least one near-certainty: The Fed will launch its easing campaign next week, most likely with a 25 bps cut. The trade will be very interested in the forward guidance and will start speculating about the size of cuts in November and December.

Initial support is a zone from $2,507.93 (20-day SMA) down to yesterday's low at $2,500.63. Secondary support at $2,487.11/06 protects the short-term range lows at $2,474.31/08.

On the upside, the $2,539.77 and $2,597.15/$2,600.00 objectives remain valid, contingent on a move to new all-time highs.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.417 (+1.47%)
5-Day Change: +$0.627 (+2.23%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +24.25

Silver traded as high as $28.842 in post-CPI trading before fading into the range once again. Resistances marked by the 20-, 50-, and 100-day moving averages at $28.930, $29.010, and 29.188 were left intact, leaving last week's high at $29.125 well protected.



Yesterday's low at $28.08 defines first support, protecting the recent lows at $27.791/732. Below the latter, I'm watching $27.505 and $27.237.


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