Blog

7/5/2024

Gold and silver surge to 4-week highs on Fed rate cut expectations
 
OUTSIDE MARKET DEVELOPMENTS: The Labour Party scored a historic victory in UK elections, ending a 14-year Tory Party reign. Incoming Prime Minister Keir Starmer says "change begins now."

He is likely referring to the homefront, where he plans to tackle the cost-of-living crisis, illegal immigration, crime, and long NHS wait times. Foreign policy is expected to remain largely unchanged, including continued robust military support for Ukraine.

Labour views Russia as a threat to Europe and their manifesto favors NATO membership for Ukraine. NATO on its border is a red line for Russia and that threat arguably played a significant role in Putin's decision to invade.

The latest polling in France suggests Marine Le Pen's National Rally party which made strong gains in the first round of voting may still fall short of a majority in the National Assembly. There has been increased violence in France during the election process including attacks on candidates. Prime Minister Gabriel Attal called on the French people to "reject the climate of violence and hatred that's taking hold."

Iranians voted between hardliner Saeed Jalili and reformist Masoud Pezeshkian in a runoff presidential election. Regardless of the winner, Supreme Leader Ayatollah Ali Khamenei will still have the final say on just about everything of consequence.

Widespread apathy and calls for a boycott to protest the regime led to low voter turnout in the first round. A Jalili win would likely bend policy toward closer ties with Russia and China and a push forward in nuclear weapons development. It's doubtful that Pezeshkian has the wherewithal to develop a more moderate tone toward the West.

The Nikkei 225 continued to set record highs on Thursday, led by heavy buying in tech and automaker shares. The breakout above the previous record high set in 1989 initially occurred in March and gains have been mounting since, driven largely by the AI frenzy that is also lifting U.S. equities.

U.S. nonfarm payrolls rose 206k in June, above expectations of +200k, versus a negative revised +218k in May (was +272k). While the headline number was good, private payrolls were just +136k, below expectations of +175k, versus a negative revised +193k (was +229k).

The unemployment rate ticked up to 4.1% on back-month revisions, weak civilian employment, and an uptick in the labor force participation rate to 62.6%. Hourly earnings were up 0.3% in line with expectations. The average workweek was steady at 34.3 hours.

Hints of weakness in the jobs report give further confidence to the sooner-than-later-rate-cut camp. The prospects for a September rate cut have jumped to 71.8% based on Fed funds futures. Additionally, the FOMC minutes released on Wednesday revealed that policymakers saw "modest further progress toward the 2% inflation goal," a gradually cooling economy, and policy as restrictive.

Nonetheless, the FOMC is still displaying enough uncertainty as to the appropriateness of current policy and the tack of incoming data to cast doubt on a September rate cut. Proximity to the November election may be a Fed consideration as well.

Fed Chairman Powell's monetary policy testimony before the House and Senate next week may provide additional clues to the Fed's intentions. I expect him to maintain his cautious tone and maybe even come off a little hawkish to temper the recent market reactions.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$7.86(+0.33%)
5-Day Change: +$38.05 (+1.64%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34
Weighted Alpha: +24.65

Gold has surged to 4-week highs on mounting expectations that the Fed will cut rates twice this year, despite persistent words of caution from Fed policymakers. The yellow metal is poised for a second consecutive higher weekly close.



An upside breakout of the symmetrical triangle pattern that formed since the record high was set on 20-May at $2,449.34 bodes well for a continuation of the dominant uptrend. However, sustained gains above $2400 may be difficult initially due to the current overbought condition.

Former resistances at $2,367.22 and  $2,364.17/$2,361.88 now define initial support levels.

Ole Hansen, Head of Commodity Strategy at Saxo Bank remains bullish on gold based on persistent geopolitical risks, strong retail demand in China, ongoing central bank demand, rising debt-to-GDP ratios among major economies (most notably the U.S.), and higher rate cut expectations. Hanson's year-end gold forecast is $2500.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.212 (+0.70%)
5-Day Change: +$1.455 (+4.99%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +38.93

Silver is adding to gains having broken out above channel resistance earlier in the week. Heightened expectations of a September rate cut are helping the cause. 



The white metal is up more than 6% this week and is currently trading at 4-week highs. The 61.8% retracement level of the corrective decline from $32.379 has been negated at $30.942 lending considerable credence to the notion that the corrective low is in place at $28.618.

The next level to watch on the upside is $31.516 (07-Jun high) which corresponds closely with the 78.6% retracement level at $31.574. A push through this level may prove difficult initially given the developing overbought condition, but short-term setbacks are likely to be viewed as buying opportunities.

Former resistances at $30.78/82 and $30.622/56 now mark the first two tiers of support.

Saxo Bank's Hansen is sticking with his year-end target of $35.


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.

7/3/2024

Gold and silver jump on rising Fed rate cut expectations

OUTSIDE MARKET DEVELOPMENTS: Markets seem to be reading yesterday's comments by Fed Chairman Powell at the Central Banking Forum in Portugal as dovish. U.S. yields and the dollar have weakened, providing a lift for the precious metals.

In my view, Powell didn't say anything new or exciting. The market however has latched on to his statement that "we are getting back on the disinflationary path.” That's just another way of saying we've made progress on inflation, but Powell added that more data are needed before the Fed can start easing policy.

Nonetheless, the prospects for a September rate cut have edged higher. Fed funds futures put the probability at 62% this morning. Attention now turns to this afternoon's release of the minutes from the June FOMC meeting to see if any additional clues are revealed.

ECBSpeak out of Portugal suggests the European Central Bank is on hold for July due to "sticky inflation." However, mounting growth risks likely warrant additional rate cuts later in H2.

The U.S. ADP Employment Survey saw private payrolls increase by 150k in June, below expectations of +165k, versus an upward revised +157k in May.

Initial jobless claims were 238k in the week ended 29-Jun, above expectations of 235k, versus an upward revised 234k in the previous week.

Challenger layoffs declined to 48.8k in June, versus 63.8k in May. That's the lowest print since December.

The U.S. trade deficit widened to -$75.1 bln in May, inside expectations of -$76.4 bln, versus a revised -$74.5 bln in April. Both imports and exports dropped. The deficit remains well off the historic wide of -$101.9 bln from March 2022.

Factory orders fell 0.5% in May, below expectations of +0.3%, versus a negative revised +0.4% in April (was +0.7%).

Services PMI rose modestly to 55.3 in June from 55.1 in May. However, services ISM tumbled to 48.8 in June, well below expectations of 52.5, versus 53.8 in May.

Today's generally weak U.S. economic data – and neutral jobs data – may give the Fed room to make their first rate cut sooner than later.  


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$16.63 (+0.71%)
5-Day Change: +47.66 (+2.07%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34
Weighted Alpha: +23.29

Gold jumped in overseas trading helped by an easier dollar. Gains extended in early U.S. trading and the yellow metal has reached a 2-week high of $2,354.41.


With resistances at $2,337.90/$2,338.03 and $2,339.36 negated, the 21-Jun high at $2,367.22 is the next attraction. While short-term price action has been rather choppy, June's range is intact and June's range was within May's.

Taking all that into consideration, trading since the all-time high was set at $2,449.34 on 20-May sure looks like a continuation pattern within the dominant uptrend. A breach of the June high at $2,386.90 would offer additional encouragement to the bull camp. However, such a move may prove difficult ahead of tomorrow's holiday session given the developing overbought condition.

The World Gold Council's mid-year outlook notes that gold has benefitted this year from "continued central bank buying, Asian investment flows, resilient consumer demand, and a steady drumbeat of geopolitical uncertainty."

The WGC sees gold garnering support in H2 from falling yields along with, "investors looking to hedge bubbling risks amid a complacent equity market and persistent geopolitical tensions."


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.648 (+2.19%)
5-Day Change: +1.471 (+5.11%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +36.72

Silver surged back above $30 overseas and added to those gains in early U.S. trading. The white metal is up over 3% on the day, buoyed by growing confidence that the Fed will cut rates twice this year.



Today's gains constitute an upside breakout of the bear channel that developed over the 6 weeks since silver established an 11-year high at $32.379 on 21-May. As noted in yesterday's commentary, I like it when silver leads on rallies. I really like it when there's buy-in from the gold market.

The $30.824 high from 21-Jun is the next resistance level I'm watching. Given the intraday overbought condition that has developed and tomorrow's holiday, look for the upside to be somewhat limited ahead of Friday's jobs data. However, the underlying uptrend has regained some credence with today's gains.

Today's FOMC minutes remain a potential wild card.

Maria Smirnova, chief investment officer for Sprott Asset Management said, "We expect silver prices to continue to improve, driven by low interest rates, more robust physical, ETF purchases and increased industrial demand.”


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.

7/2/2024

Gold choppy within recent ranges while silver sets 7-session highs
 
OUTSIDE MARKET DEVELOPMENTS: Markets are reacting to comments coming out of the Central Banking Forum in Sintra, Portugal. Fed Chairman Jerome Powell acknowledged that the Fed has made considerable progress, but wants to be sure inflation is indeed headed toward the 2% goal before starting to cut rates. 

Powell sees risks as being more two-sided now but was disinclined to provide any hints on a timeline. "I am not going to land on any specific date," said Powell.

Chicago Fed President Austan Goolsbee warned that holding rates where they are as inflation comes down is tantamount to tightening. "You should do that by decision, not by default," said Goolsbee. The implication is that rates should be coming down with inflation so policy doesn't become too restrictive and amplify growth risks.

While Powell's comments didn't break any new ground, the markets seemed to like what Goolsbee had to say. Yields and the dollar eased in reaction providing an intraday lift for the metals. That lift was temporary for gold, but silver is holding onto gains.

Eurozone CPI ticked down to 2.5% y/y in June, versus 2.6% in May. ECB Governing Council member Vasle suggested rates could be cut further but wants to see more data to confirm the downward trajectory of inflation.

ECB President Lagarde apparently concurs. "It will take time for us to gather sufficient data to be certain that the risks of above-target inflation have passed," she said.

U.S. JOLTS job openings rose to  8,140k in May, versus a downward revised 7,919k in Apr.

RCM/TIPP Economic Optimism Index rose to 44.2 in Jul, up from 40.5 in Jun.

Domestic auto and light truck sales for Jun come out later today. The market is expecting 2.1M and 10.2M respectively.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$7.50 (-0.32%)
5-Day Change: +$8.91 (+0.38%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34
Weighted Alpha: +22.02

Gold is trading in a choppy manner today, but price action remains confined to yesterday's range thus far. It is in fact the second consecutive inside day. 



Comments out of the Central Banking Forum in Portugal are driving the trade. The central bankers seem to like the trajectory of inflation but are reluctant to declare victory over price risks. More data are needed.

Short-term resistance is clearly defined by the highs from the previous two sessions at $2,337.90/$2,338.03. This level is bolstered by a Fibonacci level at $2,339.36. Penetration of the latter would shift focus to the 21-Jun high at $2,367.22.

Support is marked by the lows for the previous two sessions at $2,319.98/85. Below that, the 26-Jun low at 2,295.86 protects the more important cycle low at $2,287.64 from 07-Jun.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.110 (-0.37%)
5-Day Change: +$0.481 (+1.66%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +31.50

Silver is trading higher for a fourth consecutive session. The white metal has set a 7-session high of $29.748. Generally speaking, I like it when silver leads on rallies.




Despite all the words of caution coming out of Portugal, Fed funds futures continue to price in two rate cuts this year. If the Fed can orchestrate a soft landing, the fundamental picture for silver remains broadly supportive.

More than 50% of the leg-down from $30.824 (21-Jun high) to $28.618 (26-Jun low) has now been retraced. The upper limits of the bearish channel have also been challenged. Additional upside follow-through would bode well for a test of the 61.8% retracement level at $29.981.

Trades with a 30-handle would go a long way toward convincing me the corrective low is now in place. I'd like to see some better performance on the upside out of gold as well. 


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.

7/1/2024

Gold and silver consolidate within Friday's ranges with focus still on Fed intentions

OUTSIDE MARKET DEVELOPMENTS: The year's second half begins with heightened political uncertainties. The top of the ticket for the Democratic Party is suddenly in doubt for the U.S. election in November after incumbent Joe Biden's dismal debate performance on Thursday.

Post-debate polling is perpetuating the angst among Democrats, having swung in favor of former President Donald Trump. A CBS News/YouGov poll showed that 72% of registered voters surveyed do not believe Biden has the “mental and cognitive health necessary to serve as president.” Nonetheless, at this point, Biden remains the presumptive nominee.

It appears that French President Macron's gamble to call snap elections following the swing to the right in European Parliamentary elections in June has failed. In the first round, Marine Le Pen's National Rally party received over 33% of the vote, while the far-left Popular Front got 28%. Macron's centrist alliance came in third at 20.8%.

The PBoC has announced they will intervene in the bond market "in the near future." The goal is undoubtedly to halt the bond rally that has driven China's 10-year yield to 2.18%, its lowest level since 2002.

U.S. bases in Europe went on heightened alert over the weekend amid possible terrorist threats. Force Protection Condition “Charlie” is the second highest alert status and reportedly hasn't been seen "in at least 10 years" according to a U.S. official cited by CNN.

U.S. manufacturing PPI rose to 51.6 in Jun, versus 51.3 in May and 51.7 flash. Manufacturing ISM fell to 48.5 in Jun on expectations of 49.1, versus 48.7 in May. ISM prices fell to 52.1 from 57.0 in May.

Construction spending fell 0.1% in May, below expectations of +0.3%, versus a revised +0.3% in Apr (was -0.1%).

Taken in conjunction with last week's soft inflation data, this morning's economic reports perhaps give a slight boost to sooner-than-later Fed rate cut expectations. Fed funds futures put the prospect of a Sep rate cut at 58.2% this morning.


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$5.51 (+0.24%)
5-Day Change: +$2.09 (+0.09%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34
Weighted Alpha: +22.58

Gold starts H1 in neutral territory despite heightened political uncertainty and worries about a potential terrorist attack in Europe. Price action has been contained by Friday's range thus far.



Gold achieved a higher close last week, but ended the month of June with a slight loss (-$1.31). It was the first lower monthly close in five. The yellow metal posted a 4.2% Q2 gain and was up 12.8% for H1.

The corrective low from 07-Jun at $2,287.64 has held for over three weeks now, adding some degree of confidence to the notion that the low is in. A breach of short-term chart/Fibonacci resistance at $2,338.03/$2,339.36 would offer further encouragement to the bull camp and favor a retest of the 21-Jun high at $2,367.22.

On the other hand, a retreat below Friday's low at $2,319.85 would call for more consolidation in the lower half of last week's range with some heightened risk to key support at $2,287.64.

The COT report showed that net speculative long positions rose to 246.2k contracts last week, versus 243.2k in the previous week. That's the highest since Apr 2022 and suggests the $2,300 zone continues to draw bids. 

Central banks reported 10 tonnes of net gold buying in May, despite record-high prices at the time. Top buyers were Poland (10 tonnes), Turkey (6 tonnes), India (4 tonnes), and the Czech Republic (3 tonnes). Kazikstan was the biggest seller at -11 tonnes.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.098 (+0.34%)
5-Day Change: -$0.271 (-0.92%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +30.95

Silver is trading higher for a third session but price action is well contained within last week's range. The white metal notched a second consecutive lower weekly close on Friday and ended June with a decline of 4.2%. It was the first lower monthly close in four.

 

Silver rose 16.8% in Q2 and posted a 22.5% gain for H1. Despite the June losses, the dominant trend is still bullish.

Last week's range of $28.618 to $29.714 defines short-term support and resistance.

The COT report showed that net speculative long positions rose to 56.0k contracts last week, versus 51.9k in the previous week. That's the highest since the first week of June.

Heraeus notes that increased solar power manufacturing in the U.S. and the expansion of EV charging infrastructure bodes well for domestic silver demand. The U.S. is also expected to announce new tariffs aimed at Chinese solar panels. 


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 mostly higher in early U.S. trading.

U.S. calendar features Manufacturing PMI & ISM, Construction Spending.

Powell speaks at Central Banking Forum in Sintra, Portugal.

6/28/2024

Gold hovers near unchanged for the month but appears poised for weekly, quarterly, and H1 gains
 
OUTSIDE MARKET DEVELOPMENTS: The U.S. Democratic Party is in panic mode following President Biden's debate performance last night. The President appeared feeble and was at times incoherent.

Very senior party officials and pols are reportedly having serious conversations about replacing Biden at the top of the ticket with just 130 days until election day. I suspect many Americans are wondering this morning if the true reigns of power are already not in Mr. Biden's hands. If they're not, who's running the country? If they are, should they be?

U.S. personal income rose 0.5% in May on expectations of +0.4%, versus +0.3% in Apr.

PCE climbed 0.2%, just below expectations of +0.3%, versus a negative revised +0.1% in Apr.

The PCE chain price index was unchanged, in line with expectations. The core PCE chain price index also matched expectations at +0.1%.

I see these data as broadly neutral, perhaps modestly heartening those calling for two rate cuts this year. Prospects for a Sep rate cut continue to hover around 60% despite recent hawkish FedSpeak that seems to be trying to dispel the two-cut notion.

The IMF has warned that U.S. high deficits and debt "create a growing risk to the U.S. and global economy." They called on the U.S. to raise taxes to address the issue. The IMF also revised down its U.S. growth outlook from 2.7% to 2.6%.

The latest ECB Consumer Expectations Survey suggests Eurozone inflation will continue to ease. This and the uptick in German unemployment to 6% should help keep the ECB on its recently initiated easing path.

Japan sacked Masato Kanda, Vice Minister of Finance for International Affairs within the Ministry of Finance, replacing him with Atsushi Mimura. Kanda had led unsuccessful efforts to support the yen through jawboning and direct intervention.

The yen has fallen to 38-year lows. Efforts to support the yen are expected to persist, but Japan's massive debt and demographic challenges are a millstone around the neck of monetary policy. Mimura faces those same challenges.

The dollar remains generally well bid with the yen on the ropes and scope seen for further ECB rate cuts. The dollar index retested the 8-week high set on Wednesday at 106.13. While this level remains intact thus far, a challenge of the high for the year at 106.52 seems likely. Beyond that, last year's high of 107.35 attracts. 

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$8.24 (+0.35%)
5-Day Change: +13.39 (+0.58%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34
Weighted Alpha: +23.04

Gold extended to a new high for the week of $2,338.03 following a generally uneventful PCE report for May. Most importantly, the Fed's favored measure of inflation suggested price risks are in check which may give the central bank room for at least one, and possibly two rate cuts this year.



The yellow metal appears poised for a higher weekly close. A close above $2,327.82 would confirm a fifth consecutive higher monthly close. With gold presently trading around $2,331.00 the monthly close is too close to call. Current pricing puts gold up 4.4% in Q2 and +13% in H1.

Tests of the downside this week have reinforced support marked by the 07-Jun low at $2,287.64. Bull camp confidence that the corrective low is in place has been bolstered. The 61.8% retracement level of the decline from last week's high has been pressured at $2,339.36. A breach of this level would bode well for a test of $2,367.22 (21-Jun high).

A new intraday low below $2,319.85 would deflate bullish optimism setting up potential for further probes below $2300.

I wrote yesterday about the "Costco effect" pulling average U.S. investors into the gold market and the warmer feelings toward gold among professional investors. An AP article this week reports that Poles have turned to gold amid high inflation and ongoing concerns about geopolitical instability in the region that has led to a migration crisis.

"In Poland, gold’s allure is intertwined with the enduring trauma of World War II, when it could ensure survival." This theme has been repeated around the world and throughout history. A client of a company I previously worked for told a harrowing tale of escaping Vietnam with his family after the fall thanks to their horde of gold tael bars.

A survey from SSGA and WGC showed that 76% of investors in the Asia/Pacific region have some allocation to gold. Nearly half have allocations of 1% to 4.9%. That 24% have no allocation to gold means there is significant room for demand to grow.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.396 (-1.37%)
5-Day Change: -$0.180 (-0.61%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +32.99

Silver set a 5-session high of $29.587 following the PCE report, but the high for the week at $29.714 was not seriously challenged. The white metal fell to a 5-week low midweek and appears poised for a lower weekly close and the first lower monthly close in four.

 

Based on a current price of $29.30, silver is up about 17% for Q2 and +23% for H1. The longer-term trend remains bullish, but I'd need to see further evidence to convince me the corrective low is in place.

UBS believes U.S. rates and the dollar need to start coming down in H2 to open the upside for silver and draw investors back into ETFs. Today's data seem to favor at least one Fed rate cut this year, but even once Fed easing is underway I think interest rate differentials will underpin the dollar for some time.

UBS believes industrial demand, particularly from the photovoltaic sector, will remain strong. They also see mine output contracting marginally this year. Strong demand and reduced supply bode well for the price of silver in H2, even if the dollar remains supported.


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.

6/27/2024

Gold and silver rebound from Wednesday's losses with focus on presidential debate and inflation data

OUTSIDE MARKET DEVELOPMENTS: The dollar has eased from yesterday's 8-week high, providing some relief for the precious metals. The pullback is seen as corrective in nature with interest rate differentials expected to remain broadly supportive to the greenback.

Sweden's Riksbank held steady on rates as expected, but the messaging was quite dovish with inflation seemingly in check and the economy slowing. "If inflation prospects remain the same, the policy rate can be cut two or three times during the second half," said Riksbank Governor Erik Thedeen.

U.S. market focus remains squarely on tonight's presidential debate and Friday's personal income and PCE data for May. Particular attention will be paid to the PCE chain price index as it is the Fed's preferred measure of inflation. Median expectations are unchanged, and an uptick of 0.1% in the core reading.

U.S. durable goods new orders rose 0.1% in May on expectations of +0.2%, versus a negative revised +0.2% in Apr (was +0.7%). Ex-transportation fell 0.1% and shipments came in at -0.3%.

Initial jobless claims fell 6k to 233k in the week ended 22-Jun, versus an upward revised 239k in the previous week.

U.S. advance goods trade deficit expanded to -$100.6 bln in May, outside expectations of -$96.0 bln, versus -$97.9 bln in Apr.

U.S. Q1 GDP was revised up to 1.4% in the third report in line with expectations, versus 1.3% previously. The GDP chain price index was revised to 3.1% from 3.0%. Core was revised up to 3.7% from 3.6%.


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$17.11 (+0.74%)
5-Day Change: -$41.80 (-1.77%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34
Weighted Alpha: +21.84

Gold has retraced all of yesterday's losses and then some, buoyed by a setback in the dollar. Important short-term support at $2,287.64 was left untested yesterday as the trade awaits tomorrow's inflation data.



A downtick in inflation would likely be a positive for gold as it would heighten expectations for a sooner-than-later Fed rate cut. On the other hand, a hot inflation print would keep the Fed on hold and continue to pose a headwind for the yellow metal.

China's net imports of gold through Hong Kong fell 22.7% to 26.722 tonnes in May, versus 34.575 tonnes in Apr. This may be attributable to record high prices in May.

The CEO of MKS PAMP, the fabricators of the Fortuna gold bar being sold at Costco, says he has "not seen such dynamic physical markets." Certainly, Costco's entrance into the bar and coin market last year is having an outsized impact on the space.

Wells Fargo estimates that Costco is selling $200M worth of gold per month. That's more than 80,000 ounces every month, and that's being throttled by availability. Costco inventory typically sells out "within a few hours."

The following is a fascinating graphic from the latest Costco article, showing the decline in Americans' confidence in political and social institutions. The implication is that this broad-based loss of confidence is driving average investors to seek shelter in "the old-school store of value."



A recently commissioned World Gold Council survey shows that gold ownership is also on the rise among professional investors. "A staggering 85% reported an allocation to some type of gold investment, up from 69% in 2018," said the WGC. The survey suggests gold allocations will be steady to higher over the next 12-18 months.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.126 (+0.44%)
5-Day Change: -$1.638 (-5.33%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +31.30

Silver has bounced from the 6-week low set yesterday at $28.618. However, the new cycle lows set this week leave the downside vulnerable heading into the end of Q2 and H1.



It would take a rebound above $29.714/$29.721 to set a more favorable short-term tone. This level is defined by the high for the week from Monday and the halfway back point of the decline from last week's high at $30.824.

Such a move seems unlikely in advance of Friday's inflation data and the intraday overbought condition that has developed. Below-expectations inflation tomorrow could open the upside to more serious tests. Alternatively, hot inflation would keep focus on the downside.

Action tomorrow should be telling. Will corrective forces continue to dominate, or will the long-term up-trend reexert itself early in Q3?


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
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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.