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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.

8/16/2024

Gold reaches new record highs as silver consolidates within yesterday's range

OUTSIDE MARKET DEVELOPMENTS: Despite a bit of an upside surprise in July export prices (+0.7%), this week's U.S. data largely supports the notion that inflation continues to moderate. This bodes well for the Fed to begin easing in September.

The prospects for a larger 50 bps rate cut have ebbed significantly to just 28.5%, versus more than 50% last week. The unwinding of those bets weighed on markets earlier in the week, but conditions seem to have stabilized ahead of the weekend.

U.S. housing starts fell 6.8% to 1.238M in July, below expectations of 1.350M, versus a downward revised 1.329M in June (was 1.353M). Permits and completions also undershot expectations as high mortgage rates continue to weigh on the housing sector.

Atlanta Fed President Bostic said earlier in the week that he wanted to see "more data" before supporting rate cuts. However, he told the FT that the Fed "can't afford to be late." There are plenty of worries that the central bank is already well behind the curve.

Chicago Fed President Austan Goolsbee (centrist-hawk) expressed concerns today about the weakening jobs market in an NPR interview. He warned that the U.S. economy is flashing recessionary warning signals.

Michigan Sentiment (prelim) rebounded to 67.8 in August, above expectations 66.5, versus an 8-month low of 66.4 in July. This ended the string of consecutive monthly declines at five.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$8.48 (+0.35%)
5-Day Change: +$37.08 (+1.53%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +31.54

Gold extended to new record highs in early U.S. trading, signaling that the dominant uptrend is back underway. The yellow metal is trading more than 2% higher on the week.



With the uptrend officially back underway, scope is seen for tests of upside targets at $2,500.00/$2,503.27 and $2,539.77. A measuring objective off the recent corrective/consolidative pattern suggests potential toward $2,597.15/$2,600.00.

Gold continues to be supported by haven buying, rate cut expectations, a weaker dollar, and seasonals. The yellow metal tends to bottom mid-summer ahead of the Indian festival and wedding seasons.

The highs from earlier in the week at $2,476.29/$2,472.36 now define initial support.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.234(-0.83%)
5-Day Change: +$0.620 (+2.26%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +22.31

Silver has been unable to build on yesterday's solid gains, despite new all-time highs in gold. Nonetheless, the white metal is poised for a higher weekly close.



The tone in silver remains consolidative to corrective. Price action today is confined to the high end of yesterday's range, while price action this week is within last week's range.

The fresh highs in gold along with silver's move back above the 20-day moving average will lend credence to the scenario suggesting that the corrective low is in place at $26.524 (08-Aug low). If silver holds above the 20-day and registers a higher close today the bull camp will be further emboldened.


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.

8/12/2024

Gold and silver trade higher as the market looks ahead to U.S. inflation data

OUTSIDE MARKET DEVELOPMENTS: U.S. Defense Secretary Lloyd Austin pledged "to take every possible step to defend Israel" in a call with Israeli Minister of Defense Yoav Gallant. Amid ongoing fears of an Iranian retaliatory strike on Israel, Austin has ordered the USS Georgia guided missile submarine to the region and the USS Abraham Lincoln carrier strike group to "accelerate its transit" to the Middle East.

Ukrainian President Zelensky confirmed over the weekend that Ukrainian troops are operating inside Russia. The incursion is entering its seventh day and Russian forces are still trying to contain the attack. The U.S. is sending an additional $125M worth of weapons to Ukraine, bringing total military aid to $55.6 bln since the beginning of the war.

The slowing Chinese economy is leading to labor unrest in the country. Nikkei Asia reports that labor strikes in China rose 3% in H1 to 719 incidents, led by the construction and manufacturing sectors. This number is probably low, but the fact that workers are willing to take such risks is a testament to how dire the situation is becoming.

Japanese markets were closed on Monday in observance of the Mountain Day holiday. Further near-term yen and stock market volatility are likely.

Today's U.S. economic calendar is light with just the release of July Treasury Budget on the agenda. The market is anticipating a deficit of $242 bln, versus -$66 bln in June and -$228 bln a year ago. The ever-rising level of U.S. debt is an ongoing concern for investors with significant implications for Treasuries and the dollar.

Focus this week is on U.S. inflation data. July PPI comes out tomorrow with median expectations of +0.2% m/m and a drop to 2.2% y/y. July CPI data will be released on Wednesday. The market is expecting +0.2% m/m with the annualized rate holding steady at 3.0%. 


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$12.49 (+0.51%)
5-Day Change: +$32.37 (+1.34%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +29.64

Gold is trading higher for a third session with more than 78.6% of the early-August sell-off now retraced. The yellow metal is being buoyed by rate-cut expectations and ongoing geopolitical tensions as markets await U.S. inflation data this week.



Hotter-than-expected inflation readings could temper Fed easing expectations and ramp volatility yet again. If inflation comes in as expected or below expectations, the Fed will remain on track for up to a 50 bps rate cut at the September FOMC meeting. Fed funds futures currently put the probability of a 25 bps cut at 52.5% and a 50 bps cut at 47.5%.

The underlying trend for gold remains bullish but be prepared for additional short-term choppy trade. The unwinding of yen carry trades factored into the volatility seen early last week and further unwinding remains a risk.

The BoJ only pledged to stall further tightening "when financial markets are unstable," but the writing is on the wall. The BoJ is on a tightening path and the Fed is on the verge of easing. The BoJ will announce policy on 20-Sep just two days before the next policy statement from the FOMC.

Fresh all-time highs in gold may be difficult before the CPI release. However, the closes last week back above the 20-day moving average, and today's upside follow-through all bode well for the bull camp.

The series of lower highs and higher lows that have emerged since the record high was set at $2,481.33 on 17-Jul is indicative of a symmetrical triangle. This chart formation is typically a continuation pattern within the dominant trend, so an eventual upside breakout is favored.

The 02-Aug high at  $2,474.58 marks initial resistance. A breach of this level would clear the way for a retest of $2,481.33. Beyond that $2,500.00/$2,503.27 would attract.

Initial support is defined by an intraday chart point at $2,440.37/$2,440.00. More substantial support is found at the 2424.62/$2,417.62, where today's overseas low, and Friday's low converge with the 20-day SMA.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.479 (+1.74%)
5-Day Change: +$0.673 (+2.47%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +21.23

Silver is trading higher on the day, probing into the upper half of last week's range. While the white metal is garnering some support from a more bullish gold market, global growth risks continue to weigh.



On top of persistent worries about Chinese and U.S. growth, there are increasing concerns that waning economic confidence and weaker manufacturing orders could tip Germany back into a technical recession in Q3. Japan remains in a tenuous position as well. Worries about the four largest global economies do not bode well for industrial metals, which include silver.

Today's action may be short covering ahead of U.S. inflation data. A move back above $28 could trigger additional position squaring with potential at that point back to the 20-day moving average at $28.483.

However, I'd still like to see trades with a 29-handle to at least suggest the corrective low is in place. Such a move seems unlikely ahead of Wednesday's CPI report unless PPI comes in shockingly low.

Further out, the $30 level must be regained to return confidence to the longer-term uptrend and put the July high at $31.652 and the May high at $32.379 back in play. That seems unlikely without some significant change to global growth prospects, leaving the bears in control.

A more likely scenario is that a consolidative pattern emerges within the broad $32.379/$26.524 rage that developed over the past several months, particularly if haven buying can offset some of the demand-destruction-related selling. 

Initial support is noted at $27.703/681, which protects the overseas low at $27.255. The latter corresponds pretty closely with the halfway back point of the recent bounce.

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.

8/9/2024

Gold and silver stabilize after Thursday's solid gains

OUTSIDE MARKET DEVELOPMENTS: Ukraine continues to press its offensive within Russian territory. Fierce battles are reportedly underway in the Sudzhansky and Korenevsky districts in Russia's Kursk Oblast.

While Russia claimed the incursion was halted, reports from residents in the region suggest otherwise. Seemingly, Russia was caught completely off-guard by the offensive and is scrambling to respond.

Additionally, Russia's Lipetsk region has "been subjected to a massive [drone] attack” according to the regional governor there. A military airfield outside the city of Lipetsk appears to have been the target.

Recent seismic activity has prompted Japan to issue its first-ever megaquake advisory. A megaquake is defined as a magnitude 8 or higher, with the potential for significant structural damage and loss of life.

Wall Street had its best day since 2022 on Thursday, just days after its worst day for the same period. Yesterday's lower-than-expected initial jobless claims tempered labor market worries triggered by the July nonfarm payrolls miss, boosting sentiment.

However, I believe the optimism that was generated is overblown. The 3-month uptrend in initial and continuing claims remains intact, creating downside risk for August payrolls. Look for market volatility to remain elevated amid persistent uncertainty about inflation, growth risks, central bank policy, and the unwinding of yen carry trades.

Attention now turns to U.S. inflation data that comes out next week. The market is expecting a monthly rise of 0.2% for July PPI. Median expectations for July CPI are +0.2% m/m as well.

Ross Norman senses some frustration in the markets "that the higher-for-longer narrative is long beyond its sell-by date." Next week's data could intensify that frustration, or blow it up.

If inflation readings are hotter than expected, we could see some tempering of Fed rate cut expectations for September. That could lend itself to heightened market volatility on worries that the central bank is mismanaging efforts to orchestrate a soft landing.

Today's U.S. economic calendar is empty. We will hear FedSpeak from nonvoting KC Fed President Jeffrey Schmid this evening. Schmid is a centrist.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +3.80 (+0.16%)
5-Day Change: -$11.16 (-0.46%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +28.09

Gold notched its first higher close in six sessions on Thursday as risk appetite returned. While modest upside follow-through has been seen today, a close above $2,446.00 seems unlikely so we should see a lower weekly close.



Nonetheless, more than 50% of this week's decline has been retraced and gold has moved back within 2% of its all-time high. The yellow metal also registered a close back above the 20-day moving average yesterday, another bullish signal. A breach of the $2,434.29 Fibonacci level (61.8% retracement of the decline from last week's high) would lend additional credence to the long-term uptrend.

While risk appetite recovered in the latter half of the week, I suspect prudent investors who were rattled by this week's market plunge are adding gold to their portfolios as a hedge against ongoing risks. An easier dollar is providing some underpinning for gold as well.

A retreat below the 20-day SMA at $2,415.92 would favor further consolidation within the range. Today's overseas low at $2,417.83 bolsters this support area.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.046 (+0.17%)
5-Day Change: -$1.058 (-3.71%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +19.27

Silver saw a key reversal on Thursday, but upside follow-through today has been disappointing thus far. The white metal is poised for its 8th lower weekly close out of the last 12.



The trend since the 11-year high was established at $32.379 on 21-May remains bearish amid ongoing global growth worries. The 20-day moving average is now below both the 50- and 100-day SMAs.

A climb back above $29 is needed to ease pressure on the downside, but right now it's questionable whether silver can reclaim the 28-handle before renewed selling interest emerges.

On the downside, the $26.124/$26.049 area may still be a short-term attraction. This zone is defined by the low from 02-May and the 200-day moving average. The lows from earlier in the week at $26.571/524 provide a good intervening barrier.


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