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Gold hits record highs for a fifth straight day, silver at its highest since November

OUTSIDE MARKET DEVELOPMENTS: Ongoing uncertainty on the trade front continues to drive speculation about inflation. My news feed is chock full of one article after another about what will cost more due to the Trump tariffs.

While President Trump delayed tariffs on Canada and Mexico after some progress on border security issues, the drama is far from over. Canadian PM Trudeau has called a trade summit on Friday with the goal of building a "long-term prosperity agenda for Canada. One that is resilient, that breaks down barriers between provinces and territories, and that is diversified in global trade."

In seeking greater trade diversification, Trudeau seems to acknowledge that Canada had become too dependent on its neighbor to the south. Prior to the pause, Canada appeared ready to launch retaliatory tariffs, but with the reprieve comes the opportunity for both countries to seek an equitable trade deal.

Today's big ADP jobs survey beat creates upside risk for Friday's payrolls report and is suggestive of ongoing U.S. economic resilience. Fed funds futures continue to suggest midyear as the most likely timing for the next rate cut.

FedSpeak this week has centered on the "no hurry" to adjust policy messaging, amid ongoing uncertainty. "There is just a lot of uncertainty in the air," said Richmond Fed President Barkin (moderate hawk). However, with signs of economic growth and an expectation that inflation will ultimately continue to moderate, Barkin said he is leaning toward further cuts.

The dollar continues to ease from Monday's high after a measured response from China on tariffs. The PBoC chose not to devalue the yuan as an offset to U.S. tariffs, which also suggests some level of tolerance. 

Further weight was applied to the greenback after stronger-than-expected wage growth in Japan boosted prospects for more BoJ rate hikes, and lifting the yen. The USD-JPY rate slid more than 1% to an eight-week low of 152.119.

MBA Mortgage Applications rebounded 2.2% on stronger refinancing demand in the week ended 31-Jan, versus -2.0% in the previous week. The 30-year mortgage rate dipped back below 7%.

ADP Employment Survey +183k in January, above expectations of +142k, versus an upward revised +176k in December (was +122k). "We had a strong start to 2025 but it masked a dichotomy in the labor market. Consumer-facing industries drove hiring, while job growth was weaker in business services and production," said Nela Richardson, Chief Economist at ADP.

Trade Balance widened to a -$98.4 bln deficit in December, outside expectations of -$96.3 bln, versus a revised -$78.9 bln in November. It was the second largest deficit on record as imports surged 3.5% to $364.9 bln on tariff frontrunning.

S&P Global Services PMI edged up to 52.9 in January on expectations of 52.8, versus 52.8 in December.  "Service sector businesses reported a slowdown at the start of 2025, with activity levels growing at a reduced pace compared to the robust gains seen late last year," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

Services ISM fell to 52.8 in January, below expectations of 54.2, versus a revised 54.0 in December. Prices moderated from 64.4 to 60.4.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$26.26 (+0.92%)
5-Day Change: +$109.72 (+3.98%)
YTD Range: $2,607.16 - $2,880.41
52-Week Range: $1,986.16 - $2,880.41
Weighted Alpha: +40.09

Gold has now reached fresh record highs in five consecutive sessions. The yellow metal is being driven by ongoing trade uncertainties but received an additional boost over the last two days from a weaker dollar.



Arguably, concerns about an all-out trade war have moderated somewhat since the beginning of the week. Yen strength today is contributing to the weight on the dollar. The dollar index has retrace all of Monday's sharp gains and then some. The breach of support at 107.50 leaves last week's low at 106.97 vulnerable to a retest.

With the Fibonacci objective in gold at $2,857.21 exceeded, the $2936 measuring objective gains credence. The latter corresponds fairly closely with the next Fibonacci level at $2,943.10 (161.8% retrace of the decline from  $2,789.68 to $2,541.42).

The increase in upside momentum this week bodes well for attainment of the $3,000 psychological threshold. New corrective lows in the dollar should bring this level within reach.

Market dislocation associated with the movement of physical gold from global trading centers to Comex, both to avoid potential tariffs and to take advantage of the arbitrage opportunity presented, continues to roil the market. Liquidity issues in London and structural concerns about the LBMA – even if its just perception – add another level to the buying interest that could overshadow the developing overbought condition.

But has the pendulum swung too far? Ross Norman of MetalsDaily makes a good point: "[I]f 435 tonnes of kilobars are now in New York then surely the problem is as much about surpluses on one side of the Atlantic, as much as so-called 'shortages' on the other."

The last time we saw anything like this was during COVID. Ultimately that situation got unwound and the gold market returned to more-or-less normal operations. However, twice in five years may lead to erosion of trust in the paper claims on physical gold that have become such a big part of the market. 

Today's Asian low at $2,840.60 marks first support. Setbacks are likely to be viewed as buying opportunities with the $2,800 zone seen as well protected.

Silver remains well-bid above the $32 level, buoyed by yet another round of record highs and gold and a softer dollar. Some moderation of trade concerns may be helping the cause, but uncertainty prevails on that front.



The white metal has notched only one lower close (Friday) in the last seven sessions. Upside momentum has increased as confidence from the bull camp grows.

The $32.534 Fibonacci level has been pressured but remains intact thus far. A breach of this level would return additional credence to the longer-term uptrend, targeting $33.00 initially, and then the next Fibonacci tier at $33.554 (78.6% retracement).

The $32.00 level now defines first support and is reinforced by today's intraday low at $31.996. Secondary support is marked by Tuesday's low at $31.40.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com

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 MBA Mortgage Applications, ADP Employment Survey, Balance of Trade, Services PMI & ISM, EIA Data.

FedSpeak due from Barkin, Goolsbee & Bowman.

Gold hits record highs for a fourth straight day, as silver reaches 13-week highs above $32

OUTSIDE MARKET DEVELOPMENTS: News that tariffs against Mexico and Canada will be delayed has improved risk appetite. The two countries acquiesced to some demands on border enforcement, but President Trump also seeks to address trade imbalances moving forward.

China’s Ministry of Finance responded to U.S. tariffs by announcing retaliatory measures. The actions raise concerns about a potential trade war between the world's two largest economies.

While it appears Trump is using access to the U.S. consumer market as a cudgel to extract concessions from its trading partners, there are legitimate concerns that a cycle of tariffs and counter-tariffs could stoke inflation. That in turn could prompt more central banks to pause their easing campaigns.

The Fed is already on hold, despite pressure from the White House to ease further. There is "a ton of uncertainty in a ton of space," said Atlanta Fed President Bostic. Fed funds futures aren't pricing in another rate cut until July. and less than 50 bps in total through year-end.

Attention this week is also on U.S. jobs data. That culminates with January nonfarm payrolls on Friday. Median expectations are +165k jobs.

The Bank of England will announce policy on Thursday and is widely expected to cut by 25 bps to 4.5%. That would leave the BoE bank rate 175 bps higher than the ECB's refi rate. Given the worsening growth picture in the UK and the still restrictive policy, there is room for further easing.

Trade between the U.S. and UK is generally in balance, suggesting that they may be safe from tariffs. Nonetheless, the BoE is likely to strike a cautious tone in light of broader global trade uncertainties.

Factory Orders fell 0.9% in December, below expectations of -0.8%, versus a negative revised -0.8% in November (was -0.4%). Factory orders have contracted in four of the last five months.

JOLTS Job Openings fell 556k to 7,600k in December, below expectations of 8,000k, versus an upward revised 8,156k in November (was 8,098). Available jobs for unemployed job seekers are roughly in balance.

RCM/TIPP Economic Optimism Index edged up to 52.0 in February, below expectations of 53.0, versus 51.9 in January. “Americans' economic confidence improved slightly in February. However, fears of inflation and a slowdown persist," according to Real Clear Markets.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$1.23 (+0.04%)
5-Day Change: +$56.72 (+2.05%)
YTD Range: $2,607.16 - $2,828.55
52-Week Range: $1,986.16 - $2,828.55
Weighted Alpha: +36.84

Gold has reached new all-time highs for a fourth straight session as global trade uncertainty continues to drive safe-haven interest. That outweighs the headwinds of heightened risk appetite and an eight-session high in the dollar index.



The $2,857.21 Fibonacci target (127.2% retracement of the decline from $2,789.68 to $2,541.42) has come within striking distance. A breach of this level would clear the way for additional gains to the $2,936 measuring objective (triangle breakout) and the next 'big round number' at $3,000.

Last week's COT report showed that net speculative long positioning edged down to 299.4k contracts, versus the 17-week high of 300.8k in the previous week.

Gold futures continue to trade at a significant premium to the spot market perpetuating the arbitrage opportunity that is drawing gold to the U.S. Flows from London and Switzerland to Comex vaults have been the story in recent weeks but gold is also coming in from Asia and the Middle East. "The U.S. is like a gold magnet right now, pulling in gold from all over the world," said one expert in a Reuters article.

Arbitrage opportunities are typically fleeting, quickly getting offset as traders jump on the price dislocation. While Comex vaults are as full as they've been since the pandemic, futures premiums remain resilient.

ETF data flow data have not been published yet, but I'm expecting some of the North American outflows from the previous week to be recouped as gold set new record highs late last week.

The market is becoming overbought, with indicators reaching levels last seen in October. This could prompt some profit-taking given that gold is up 9% already this year. However, setbacks into the range are likely to be viewed as buying opportunities.

Today's intraday low at $2,808.92 marks first support. Below that, the previous highs at $2,789.68/84.96 come into play. 

Silver is trading above $32 for the first time since mid-December (13-week highs) buoyed by some optimism on trade stemming from forstalled tariffs against Mexico and Canada. The former is the world's largest producer of silver by a wide margin.



Since the push above $31, upside momentum has accelerated suggesting that the white metal may finally be playing some catch-up with gold. The inability of the gold/silver ratio to sustain gains above 90 bodes well for the catch-up scenario.

Now that silver has broken into the upper half of the $34.853/$28.783 range, a measure of credence has been returned to the longer-term uptrend. A close above $32 today would offer further encouragement to the bull camp. However, global growth risks are still seen as a headwind.

The COT report for last week showed a decrease in net speculative long positions of 3.1k to 44.4k contracts, versus 47.5k in the previous week. A more convincing breach of the 12-Dec high at $32.306 should draw more spec longs back into the market.

CFTC Silver speculative net positions

Such a move would highlight the 61.8% retracement level at $32.534. Beyond that, $33.554 (78.6% retracement) is the last significant Fibonacci level ahead of the $34.853 cycle high from October.

Keep an eye on $32 on a close basis. Secondary support is marked by the highs from late last week at $31.712/619.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com

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.

Gold eases from record high, while silver consolidates within Thursday's range

OUTSIDE MARKET DEVELOPMENTS: Global trade worries have increased after President Trump said he would impose tariffs on Canada and Mexico on Saturday. The President cited the trade deficits with those countries, along with the flow of illegal immigrants and drugs across the borders as the reasons for the tariffs.

"If the president does choose to implement any tariffs against Canada, we’re ready with a response – a purposeful, forceful but reasonable, immediate response," responded Canadian PM Justin Trudeau.

"We will wait, as I have always said, with a cool head, when taking decisions. We are prepared and we maintain this dialogue," said Mexican President Claudia Sheinbaum.

As the world's largest consumer market, the U.S. carries trade deficits with nearly all of its trading partners. If a deficit makes you a potential target for U.S. tariffs maybe everyone is rightfully worried.

In making imported goods less attractive to U.S. consumers by raising prices through tariffs, perhaps domestic products become more appealing and provide a boost to GDP. However, it's a very complex system and there will be unintended consequences. Some level of heightened inflation is likely one of them.

That may make it difficult for Trump to honor his pledge to reduce inflation. Maybe reduced energy and regulatory costs will offset price increases elsewhere, but that's a big maybe.

Increased price risks will also make it difficult for the Fed to continue on its easing path, which is also one of Trump's desires. Further rate cuts could stoke inflation even more. The Fed may actually have to consider tightening to check a rise in prices.

Bottom line, Trump's economic team has its work cut out for it. This has raised uncertainty and sapped risk appetite.

The Fed's favored gauge of inflation rose in December in line with expectations. The annualized rate of PCE inflation increased to 2.6% from 2.4% in November. Core PCE inflation was steady at 2.8%.

Warmer inflation caused rate cut expectations through July to moderate slightly. How the new administration's fiscal policies play out is of interest to Fed Governor Bowen (centrist/hawk). "It will be very important to have a better sense of the actual policies and how they will be implemented, in addition to greater confidence about how the economy will respond," she said.

Q4 Civilian ECI rose in line with expectations at a 0.9% pace, versus +0.8% in Q3. Employment costs continue to gradually, if somewhat erratically, moderate from pandemic-era highs.

Personal Income rose 0.4% in December, in line with expectations, versus +0.3% in November.

PCE rose 0.7% in December, above expectations of +0.5%, versus a positive revised +0.6% in November (was +0.4%). The jump in consumption was supported by the rise in wages, but it was also supported by a decline in the savings rate.

PCE Chain Price Index rose 0.3% in line with the consensus, versus +0.1% in November; +2.6% y/y, up from 2.4% in November. Core chain prices rose 0.2% which was also in line with expectations, versus +0.1% in November; +2.8% y/y, unchanged from November.

Chicago Fed PMI rebounded to 39.5 in January, above expectations of 39.0, versus a seven-month low of 36.9 in December. It was the first increase since September as Boeing continues to weigh on the index, even post-strike.

Ag Prices come out this afternoon. 


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$6.99 (+0.25%)
5-Day Change: +$32.30 (+1.17%)
YTD Range: $2,607.16 - $2,815.25
52-Week Range: $1,986.16 - $2,815.25
Weighted Alpha: +35.60

Gold extended to new all-time highs on Friday above $2,800. The yellow metal is poised for a fifth straight higher weekly close as global trade uncertainties stoke haven interest.

 

The ongoing easing bias of major central banks continues to offer support as well. This is true even though the Fed appears to be on hold for the time being and the BoJ is cautiously raising rates from sub-zero levels.

Market dislocation associated with the transfer of physical gold from London to Comex to front-run tariff risks is also providing a tailwind. Diminished liquidity in London, the global center of the gold trade, is buoying the price. “People can’t get their hands on gold because so much has been shipped to New York, and the rest is stuck in the queue,” said one expert in an FT article this week.

In addition, 64.2 tonnes of gold was exported from Switzerland to the U.S. in December. That's the highest monthly gold flow since March 2022, in the wake of Russia's invasion of Ukraine.

While it's not abundantly clear to me why gold would be targeted for tariffs, Trump's threats have been rather sweeping. It's therefore understandable that those involved in the gold trade would take steps to limit their exposure.

If a trade deficit with the U.S. makes you a general target for tariffs, it's worth noting that we frequently have a trade surplus with the UK. That's not the case with the Swiss.

The arbitrage opportunity presented by high futures premiums on Comex strikes me as a more logical catalyst. Commodities flowing toward the highest available price makes sense to me. That contango bodes well for the newly reestablished uptrend.

However, the current situation is creating issues elsewhere in the market. Lease rates have soared and there's panic in the EFP market. "You currently have to pay to be short gold on the OTC spot market (more typically shorts get paid a yield). This has put a strain on bullion dealers and refiners," said Adam Packard, Vice President of Operations at Zaner Metals. He expects the situation to continue for a while longer.

Gold has backed off from the intraday high at $2,815.25 on profit-taking ahead of the weekend, but short-term setbacks are likely to be viewed as buying opportunities. Sights remain on the the $2,857.21 Fibonacci level (127.2% retracement of the decline from $2,789.68 to $2,541.42), as well as a measuring objective at  $2,936.00 and of course $3,000 as the next "big round number."

Today's low from Europe at $2,791.90 marks first support and protects the previous highs at $2,789.68/$2,784.96. Monday's low at $2,732.23 should correspond closely with the 20-day moving average next week and is a key short-term level to watch.

Silver has been confined to Thursday's range, despite the fresh record highs in gold as the latest uptick in global trade tensions gives the bull camp pause. Nonetheless, the white metal is holding above $31 and is on track to notch a second consecutive higher weekly close.



I have maintained that a rise above $31 would set a more neutral tone, mitigating downside risks somewhat. However, $32 must be cleared to set a more favorable technical tone. I'm still waiting.

A close above all the major moving averages seems likely today. I am also watching the 20-week moving average at $31.128. A close above would offer some additional encouragement to the bulls.

The 100-day moving average at $31.085 bolsters the significance of the $31 level as support. A breach of this level next week would call for further consolidation with a bearish tilt.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com

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 mixed in early U.S. trading.

U.S. calendar features Q4 ECI, PCE, Personal Income, Chicago PMI, Ag Prices.

Gold sets new record highs, while silver cleared $31 to reach 7-week highs

OUTSIDE MARKET DEVELOPMENTS: The ECB eased by an additional 25 bps today. The decision was unanimous and widely expected. It was the fifth cut since June for a total of 175 bps.

"The disinflation process is well on track," according to the statement and the ECB foresees the 2% target being achieved "in the course of this year." However, there was an acknowledgment that "the economy is still facing headwinds," which suggests more cuts are in the offing.

"The risks to economic growth remain tilted to the downside. Greater friction in global trade could weigh on euro area growth by... weakening the global economy," said ECB President Christine Lagarde during her press conference.

Today's ECB action comes on the heels of yesterday's Fed decision to hold steady on rates. The FOMC noted, "economic activity has continued to expand at a solid pace." The committee continues to see inflation as "somewhat elevated."

The line that said "inflation has made progress toward the Committee's 2 percent objective" was struck from the statement, prompting the market to interpret the Fed's decision as a hawkish pause. Fed funds futures continue to suggest the next cut won't come until midyear. Clearly, this is not what President Trump was hoping for.

Chairman Powell said he has not had any contact with the President thus far and would not comment on Trump's call for rate cuts. “I'm not going to have any response or comment whatsoever on what the president said. It's not appropriate,” Powell said.

President Trump almost immediately took a swipe at Powell and the Fed via TruthSpocial:

The market now looks ahead to next week's Bank of England monetary policy decision. The BoE is widely expected to ease by 25 bps.

The trade will also be paying close attention to tomorrow's PCE data, particularly the chain price index which is the Fed's preferred measure of inflation. Median expectations favor a 0.3% rise.

Q4 GDP (Advance) moderated to a 2.3% pace, below expectations of 2.7%, versus 3.1 in Q3. The imbalance in trade into year-end was a drag on growth, but solid consumption provided a bit of an offset.

Initial Jobless Claims fell 16k to 207k in the week ended 25-Jan, below expectations of 220k, versus 223k in the previous week. Continuing claims tumbled 42k to 1,858k in the 18-Jan week, versus a three-year high of 1,900k in the previous week.

Pending Home Sales Index fell 5.5% to 74.2 in December on expectations of unch, versus a negative revised 78.5 in November. It was the first m/m decline since July. 


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$18.50 (+0.67%)
5-Day Change: +$27.94 (+1.01%)
YTD Range: $2,607.16 - $2,797.07
52-Week Range: $1,986.16 - $2,789.68
Weighted Alpha: +34.18

Gold has pushed to new all-time highs, helped by a softer dollar and ongoing uncertainty about President Trump's trade policies. The corrective/consolidative phase that has dominated since the previous record high was established at $2,789.68 on 30-Oct is over.



This move had been anticipated since the upper boundary of the symmetrical triangle pattern was cleared on 10-Jan. A measuring objective off of that chart pattern now projects to $2,936.00. An intervening target is marked by the $2,857.21 Fibonacci level (127.2% retracement of the decline from $2,789.68 to $2,541.42). The $3,000 level remains an attraction as well.

While the Fed appears to be on hold until June or July and interest rate differentials remain dollar favorable, growth weakness into year-end has given dollar bulls pause. The dollar index remains more than 2% off the 110.18 high set on 13-Jan.

Tariff concerns prompted a massive transfer of physical metal from London to COMEX vaults. "Over the last two months, 12.2 million troy ounces of gold were delivered to COMEX-approved warehouses, raising stocks there by 70% to 29.8 million ounces, the highest since August 2022," according to a Reuters article.

This leaves loco London stocks significantly depleted and the lack of liquidity is contributing to the bid in gold. The market has turned to the BoE as a source of leased supply.

The one-month lease rate remains elevated above 3% and deliveries from the BoE are now taking weeks, when the norm had been less than a week previously. “The key with the BoE is that they are not a commercial vault so not prepared to handle the onslaught of gold borrowing banks are requesting from the central banks,” said an industry expert quoted in the Reuters piece.

While gold seems an unlikely target for tariffs, the bullion banks remain concerned. Market dislocation seems likely to continue for some time.

A minor chart point at $2,765.72/64.78 stands in front of today's intraday low at $2,758.79. The low for the week from Monday at $2,732.23 is considered well-protected.

Weakness in Asian jewelry demand provides a bit of a headwind. Chinese jewelry giant Chow Tai Fook reported a 14.2% y/y drop in Q4 sales. Near-record prices likely tempered demand into yesterday's Lunar New Year.     

Silver led the way higher today, surging to new seven-week highs above $31. I had been anticipating that new record highs in gold would drag silver above $31, but it was the other way around today.

 

Nonetheless, I do see gold's strength on haven interest as helping to underpin the white metal which is still more than 9% off the October cycle high and nearly 37% off the all-time high.

The technical picture has certainly improved today and a close above the 100-day moving average will lend significance to today's move higher. The last time silver closed above the 100-day was on 13-Dec.

My position has been that $32 must be regained to confirm a more bullish near-term tone within the range. With an intraday high of $31.712, the $32 threshold can be considered within striking distance.

A move above $32 would put silver convincingly within the upper half of the $34.853/$28.783 range, shifting focus to the 61.8% retracement level at $32.534.

However, global growth risks – including recent indications of U.S. slowing – and tariff concerns will continue to pose headwinds for industrial metals like silver. Failure to sustain the move above the 100-day MA would call for further consolidation in the lower half of the range.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com

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 Q4 GDP Advance Report (+2.7% expected), Initial Jobless Claims, Pending Home Sales Index.

Gold consolidates ahead of Fed, silver sets new highs for the week

OUTSIDE MARKET DEVELOPMENTS: The market's focus is on the Fed today. The policy decision itself is deemed to be a foregone conclusion – steady policy is expected – but the statement and Powell's presser could prove interesting.

While the trade seems to have revived hope for less hawkish guidance, apparently there's insufficient confidence to to price those hopes in. Fed funds futures continue to suggest the next 25 bps Fed cut won't happen until midyear.

I suspect that following President Trump's vow to push for lower interest rates, the Federal Open Market Committee (FOMC) and/or Chairman Powell will assert the Fed's independence. In my opinion, it's better to avoid directly challenging the President and focus instead on how monetary policy decisions must be data-driven.

The Bank of Canada cut rates by 25 bps as was widely expected. Forward guidance was more dovish amid heightened tariff uncertainty.

“The economy is expected to strengthen gradually and inflation to stay close to target. However, if broad-based and significant tariffs were imposed, the resilience of Canada’s economy would be tested,” according to the policy statement.

"A long-lasting and broad-based trade conflict would badly hurt economic activity in Canada," worried Governor Tiff Macklem.

Sweden's Riksbank delivered a 25 bps rate cut, in line with expectations. "Inflation is expected to be close to target in the coming years," according to the policy statement. This suggests the Riksbank is now on hold. 

The ECB is expected to cut rates by 25 bps tomorrow as growth concerns persist. However, the uptick in inflation into year-end 2024 means the central bank will have to be measured on its forward guidance. Undoubtedly, the threat of U.S. tariffs will be noted.

The U.S. tech sector has stabilized after Monday's rout amid evidence that DeepSeek may achieve its results through distilling. This process allows "developers to obtain better performance on smaller models by using outputs from larger, more capable ones, allowing them to achieve similar results on specific tasks at a much lower cost," according to the FT.

That suggests to me that the large processing and energy-intense models are still needed. I suspect OpenAI and the other big players in the AI sector will find means to prevent distilling, beyond legal recourse. DeepSeek has also raised national security concerns and the Navy has already banned its use.

Trade data released this morning showed the U.S. goods trade deficit surged 18% to a record-wide -$122.1 bln in December as businesses continued to front-load in anticipation of Trump's tariffs. Exports also contracted, adding further to the record deficit.

The trade data resulted in significant negative revisions to GDP estimates. The Atlanta Fed's GDPNow model for Q4'24 plunged nearly a full percentage point to 2.3%, versus 3.2% yesterday. That puts the Atlanta Fed model more in line with the blue chip consensus.

MBA Mortgage Applications fell 2% in the week ended 24-Jan, versus a 0.1% rise in the previous week. Purchases declined 0.4%, while refinancing fell 6.8% as 30-year mortgage rates remained elevated above 7%.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$4.20 (-0.15%)
5-Day Change: +$1.55 (+0.06%)
YTD Range: $2,607.16 - $2,784.96
52-Week Range: $1,986.16 - $2,789.68
Weighted Alpha: +32.54

Gold remains confined to Monday's range as the market awaits today's Fed decision and policy guidance. Ongoing uncertainty as President Trump's policy agenda unfolds is stoking safe-haven interest and should continue to limit the downside.



If the FOMC's guidance is suggestive of a less hawkish bias moving forward, gold could push to new record highs. Today's downward revisions to GDP may give them the cover they need, but I think they will be keen to avoid the appearance of kowtowing to the President's desire for lower rates.

Less hawkish guidance would likely perpetuate the dollar's slightly easier tone, providing an additional tailwind for gold. However, in the wake of today's BoC and Riksbank cuts and tomorrow's anticipated ECB cut, interest rate differentials remain broadly dollar-supportive.

A breach of Monday's high at $2,771.52 would clear the way for another run at the $2,784.96/$2,789.68 highs. Penetration of the latter would bolster the bullish scenario that targets the $2,857.21 Fibonacci level initially, with potential to a measuring objective at $2,936 and the $3,000 psychological barrier.

Today's intraday low at $2,750.09 protects the lows from earlier in the week at $2,735.55/32.23. A retreat below the $2,700 zone would favor further consolidation and raise concerns about the potential double top at $2,784.96/$2,789.68.

Silver jumped to new highs for the week, even though gold remains well contained.  However, price action remains generally confined between the 100-day and 200-day moving averages awaiting the Fed.



A close above the 100-day or below the 200-day is likely to set the near-term tone. Uncertainty about global growth risks and tariff worries are seen as a headwind. However, the softer dollar and persistent haven interest in gold provide some underpinning.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com

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