Blog

11/13/2024

Gold and silver remain defensive

OUTSIDE MARKET DEVELOPMENTS: Markets continue to process the U.S. election outcome. The trade implications of the second Trump Presidency seem to be the biggest area of concern.

On the campaign trail, President-elect Trump claimed that he didn't need Congress to enact his trade policies. Many beg to differ. While his hardline on trade could just be a negotiating tactic, U.S. trade partners are understandably worried.

Bundesbank President Joachim Nagel worries that Trump tariffs could have a -1% impact on German GDP. With Europe's largest economy already stagnant that could lead to a recession. "If the new tariffs actually materialise, we could even slip into negative territory," said Nagel.

Shares of Japanese automakers have been hit hard over the past week. Japan's auto exports to the U.S. are more than three times as large as its domestic market. 

The IMF forecasts Japan's GDP to be just +0.3% this year, and +1.1% in 2025. Japan's export-driven economy would be hard-hit by tariffs.

Trump appears to really have it in for China, threatening them with tariffs of 60% to 100%. However, China holds a trump card in the form of more than $800 bln in U.S. debt. Retaliation could turn the bond market ugly in a hurry.

With more than $1 trillion in U.S. debt, Japan certainly has the means to retaliate as well.

Reduced trade could also hasten de-dollarization and lead to weaker demand for Treasuries. That being said, our trading partners want and need access to U.S. consumers. There's plenty of room for negotiation in most instances.

Increasing optimism about the U.S. economy and the wealth effect of high-flying stocks could set the stage for the best Christmas buying season in years. Many Americans may be planning purchases of imported goods such as electronics before tariffs are applied.

My 18-year-old who has been kicking tires for several weeks is keen to get a car bought "before prices go up." I love that he's thinking about such things... 

U.S. MBA Mortgage Applications rose 0.5% in the week ended 08-Nov, versus -10.8% in the previous week. Purchases were up 1.9%, while refis fell 1.5%. New 17-week highs in the 30-year mortgage rate pose a headwind.

U.S. CPI +0.2% in October, in line with expectations, versus +0.2% in September; +2.6% y/y, up from 2.4% in September. Core CPI rose 0.3% on expectations of the same, versus +0.3% in Sep; +3.3% y/y, unchanged from September.

I call today's inflation reading fairly benign. Despite the slightly hotter annualized headline CPI print, the odds for a December Fed hold fell today to 17.7% from 41.3% yesterday.

Treasury Budget for October comes out this afternoon. Median expectations are -$242.5 bln. 

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$12.37 (+0.48%)
5-Day Change: -$51.04 (-1.92%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +29.99

Gold started the U.S. session with a bit of a bid, as prices not seen in September and an oversold condition prompted some bargain hunting and perhaps some short covering.  However, upticks could not be sustained and the yellow metal has subsequently fallen to fresh eight-week lows.



Yesterday's breach of chart/trendline support at $2,606.62/$2,604.16 (10-Oct) leaves the downside vulnerable to the next tier of support at $2,549.18 (18-Sep low). The rising 100-day moving average comes in modestly lower at $2,540.84 today.

Despite Fed funds futures showing more favorable odds for another 25 bps rate cut in December, the dollar remains on the bid. The dollar index extended to 12-month highs and continues to weigh on gold.

Losses since the $2,789.68 record high was set on 30-Oct have exceeded $200 (7.5%). The short-term trend remains down, but I still see it as corrective within the longer-term uptrend.

Today's earlier high at $2,614.77 marks first resistance. Yesterday's high at $2,625.32 and the 50-day moving average at $2,649.75 protect the halfway back point of the decline at $2,684.54.

The IMF is being urged to sell 4% of its gold holdings to replenish its Catastrophe Containment Relief Trust (CCRT) and help poor countries deal with climate-related catastrophes. The IMF currently has 90 Moz of gold so a 4% sale would equate with 3.62 Moz.

Such a sale strikes me as unlikely and is probably not contributing meaningfully to today's losses in gold. The IMF hasn't sold gold since the tail-end of the global financial crisis in 2009/10.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +0.164 (+0.53%)
5-Day Change: -$0.289 (-0.93%)
YTD Range: $21.945 - $34.853
52-Week Range: $20.704 - $34.853
Weighted Alpha: +28.49

Silver ticked briefly back above the $31 level in early U.S. trading, but these gains could not be sustained as the dollar went back on the bid and gold fell to eight-week lows. While silver is back trading lower on the day, yesterday's low at $30.228 remains protected thus far.



If silver does set new cycle lows below $30.229/228 it would shift focus to $29.705 (61.8% retracement of the leg up from 26.524 to $34.853). A minor intervening chart point is noted at $29.850.

Today's intraday high at $31.021 marks initial resistance. More substantial resistance is noted at $31.503/536 where Monday's high corresponds closely with the 50-day moving average. The halfway-back point of the decline thus far is well protected at $32.540.


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.

11/12/2024

Gold still weighed by risk-on flows and dollar strength

OUTSIDE MARKET DEVELOPMENTS: It appears that the Republican Party has secured control of the House of Representatives. The 270ToWin site shows the GOP with 219 seats, one seat beyond the 218 majority threshold, with six races yet to call. The AP has yet to call a number of close races and their count remains at 214-205.

Trump is expected to push Russia and Ukraine toward a negotiated peace deal, but Ukraine is loath to give up any of its territory. While Trump is a staunch supporter of Israel, he indicated at the GOP convention that if elected he wanted Israel to wrap up operations before inauguration day. He has also demanded Hamas release the remaining hostages by 20-Jan or it will pay “​​a very big price.”

Perhaps there is some optimism about these foreign policy tactics built into the so-called "Trump trade." If the war in Ukraine and Israel's war with Iran and its proxies are wound down, it would be a major coup for the new President. However, new geopolitical hotspots are likely to flare.

The President-elect has been busy over the past week filling cabinet posts. China hawk Mike Walz has been tapped as National Security Advisor. Marco Rubio, another Israel-friendly foreign policy hawk, is widely expected to be named Secretary of State.

Amid Trump's frequent talk of tariffs trade tensions with China are already on the rise and are perhaps being amplified by the Middle Kingdom's existing economic woes. Tensions with Mexico are ramping up as well, on trade and anticipated pressure to staunch the flow of illegal immigrants to the U.S.

The FOMC studiously avoided commenting on the election last week and FedSpeak thus far today has been mum on that topic. As I said right after the election, the Fed is unlikely to alter monetary policy based on campaign rhetoric. When that rhetoric transitions to policy, that's another story.

The market has priced in about a 35% chance of a December hold by the Fed. That could creep up if forward-looking indicators continue to reflect economic optimism.

Case in point: 

U.S. RCM/TIPP Economic Optimism Index surged 13.4% to a 39-month high of 53.2 in November, versus 46.9 in October. That print is 8.3% above the historic average of 49.1.

"The index had been in negative territory for 38 consecutive months, starting in September 2021, and broke out decisively in November after President Donald Trump's historic return as the 47th President," said Real Clear Markets. 

U.S. NFIB Small Business Optimism Index rose 2.2 points to 93.7 in October, above expectations of 92.0, versus 91.5 in September. While nine of ten components rose, it was the 34th consecutive month below the 50-year average of 98.

The NFIB's uncertainty Index humped to a record high of 110 ahead of the election. “With the election over, small business owners will begin to feel less uncertain about future business conditions,” said NFIB Chief Economist Bill Dunkelberg.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$21.89 (-0.84%)
5-Day Change: -$143.42 (-5.23%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +29.45

Gold remains under pressure, reaching an eight-week low of $2,591.64 as the "Trump trade" continues to broadly impact global markets. The traditional inverse relationship between the yellow metal and the dollar seems to have re-exerted itself with gains in the greenback pushing gold lower.

 

Market worries that Trump policies may restoke inflation and cause the Fed to become less dovish are contributing to the dollar's gains. Additionally, optimism about the U.S. economy has sparked increased foreign flows into U.S. shares. Dollars are needed to make those stock purchases.

The World Gold Council saw a GOP win as increasing the opportunity costs for holding gold. That seems to be how things are shaking out in the immediate aftermath of the election.
  

That being said, the WGC views this as a "near-term phenomenon" and expects market focus to shift back to the following "more fundamental concerns":

• A world where protectionism is likely going to be more acute and current conflicts see no signs of abatement
• Equity markets are heavily concentrated and richly valued during the end of a business cycle
• Cryptocurrencies continue to be a marginal consideration and not a replacement for gold
• Western investors have, outside of futures, not added much gold this year and so there is unlikely a slew of sellers in the wings.

The Trump administration is perceived to be crypto-friendly, which has led to strong gains in BitCoin, Ethereum, and others. In the alternative asset realm, I suspect the rotation out of gold to crypto is not insignificant. Whether that's a sticky rotation or just a trade remains to be seen.

Gold's breach of important chart/trendline support at $2,606.62/$2,604.16 (10-Oct) leaves the downside vulnerable. The next significant support zone I'm watching is defined by the 18-Sep low at $2,549.18 and the rising 100-day moving average which is at $2,538.02 today.

The magnitude of the fall from the 30-Oct record high at $2,789.68 to today's low is just over 7%, still within the parameters of a correction. That cuts into the YTD gains significantly, but the yellow metal is still up more than 25% in 2024.

With the market increasingly oversold there is scope for a short-term bounce. Initial resistance is marked by today's Asian high at $2,625.32. Above that, additional resistances are noted at $2,648.04 (50-day MA), $2,685.11 (yesterday's high), and $2,690.66 (halfway-back point of the decline).

Silver extended losses to trade briefly below the 100-day moving average, but has since bounced modestly to trade higher in the day. Weak gold, a strong dollar, and ongoing concerns about Chinese economic weakness continue to pose headwinds for the white metal. 



Enthusiasm about a potentially more robust U.S. economy may be counterbalancing the worries about China, at least to some degree. However, I think it's still going to be a while before the post-election dust settles.

A more convincing violation of support at $30.229 (9-Oct low) would shift focus to $29.705 (61.8% retracement of the leg up from 26.524 to $34.853). A minor intervening chart point is noted at $29.850.

Former support at $30.903/921 marks initial resistance. More substantial resistance is defined by yesterday's high at $31.503, which corresponds closely with the 50-day moving average. The halfway-back point of the decline thus far is well protected at $32.540.


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.

11/11/2024

Gold and silver remain under significant post-election pressure

OUTSIDE MARKET DEVELOPMENTS: Today is Veterans Day in the U.S. and Remembrance Day in Canada. Bond markets and central banks are closed in both countries. Stock and commodities markets are open.

Thank you to those who served.

The U.S. Republican Party edged closer to a majority in the House of Representatives over the weekend. The GOP needs four of the remaining 18 uncalled races to break their way to secure majorities in both Houses of Congress.

Full control of Congress will make it easier for the Trump administration to enact its policy agenda. Markets are optimistic with the prospect of lower taxes and less regulation leading to risk-on flows into shares at the expense of safe-haven assets like gold.

The market is however concerned Trump's policies, particularly his trade policies, will increase inflationary pressures. This may prompt the Fed to become less dovish…and potentially even hawkish.

The Fed cut rates by 25 bps last week, in line with expectations. The central bank steered clear of commenting on the election results in the policy statement. “In the near term, the election will have no effects on our policy decisions," said Fed Chairman Powell in the post-meeting presser.

Powell did acknowledge that there is a "fair amount of uncertainty" and the Fed doesn't think “it's a good time to be doing a lot of forward guidance.”  Fed funds futures still reflect expectations for another cut in December, but the outlook for future cuts has been trimmed.

A less-dovish Fed outlook, still dovish ECBSpeak, and hints of a more cautiously hawkish BoJ provide lift for the dollar. The dollar index reached a four-month high of 105.71.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$21.61 (-0.80%)
5-Day Change: -$121.35 (-4.43%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +30.48

Gold has extended to the downside to begin the new week, reaching a four-week low of $2,613.53. The yellow metal continues to be weighed by post-election risk-on flows.



Strong gains in stocks, dollar strength, and a less-dovish Fed outlook all conspire against gold at the moment. However, I believe these losses are corrective and the long-term uptrend remains intact.

Not surprisingly, there were 8.6 tonnes of net outflows from global ETFs last week. It was the biggest net outflow since the 26-Apr week. North American investors were the biggest sellers at -10.0 tonnes.

Spec longs in the futures market beat a retreat last week as well. The COT report showed that the net speculative long position was reduced by 23.4k to 255.3k contracts, versus 278.7k in the previous week.

CFTC Gold speculative net positions

A corrective/consolidative phase is likely as the market continues to hash out the implications of the election results. I am now less optimistic about new record highs before year-end.

Once the post-election dust settles, market focus will return to geopolitical tensions, concerns about the Chinese and European economies, central bank easing elsewhere in the world, soaring global debt levels, ongoing central bank gold buying, and the political uncertainty in Germany and Japan.

And if inflation is revived as many fear, gold is still the classic hedge. A number of bullish fundamentals remain aligned in gold's favor.

The next significant support level I'm watching is the October low at $2,606.62 (10-Oct). It corresponds closely with a trendline drawn off of the low for the year at $1,986.16.

With gold quite oversold on a short-term basis, we could see the bears ring up some profits and the bulls start testing the water ahead of this level. The 14-day RSI hasn't reached oversold territory, but it is the lowest it's been since February. Gold hasn't been oversold on the daily chart since October of 2023, a testament to the strength of the uptrend.

On the upside, I'm watching the 50-day moving average on a close basis as an important indicator. The 50-day MA is at $2,645.79 today and is bolstered by resistance marked by the 7-Nov low at $2,648.46.

However, a convincing move back above $2700.00 is needed to suggest the low for the range has been established. The halfway-back point of the correction thus far is at $2,701.16.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +0.025 (+0.08%)
5-Day Change: -$1.976 (-6.09%)
YTD Range: $21.945 - $34.853
52-Week Range: $20.704 - $34.853
Weighted Alpha: +26.13

Silver has followed gold lower, reaching a five-week low of $30.447. Many of the same factors that have hit gold are also impacting silver.



While there is heightened optimism about the U.S. economy, the trade continues to be disappointed by Beijing's efforts to stimulate the world's second-largest economy. Last week was no exception and over the weekend China's inflation data for October reflected heightened deflation risks.
 
Last week's CFTC COT report showed the net speculative long position fell 7.1k to 53.3k contracts, versus 60.4k in the previous week. It was the biggest weekly drop in net spec longs since the week ended 26-Jul. 

CFTC Silver speculative net positions

Good support is noted at $30.293/229, where the 100-day moving average corresponds closely with the low for last month (9-Oct low). While the market may try to run stops below this important level, the short-term oversold condition may make a sustained penetration difficult.

However, if $30.293/229 does give way, focus would shift to $29.705 (61.8% retracement of the leg up from 26.524 to $34.853).

Former support at $30.921 now defines initial resistance. More substantial resistance is marked by today's high and the still-rising 50-day moving average is at $31.431/503. The halfway-back point of the decline thus far is well protected at $32.650.


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.

11/7/2024

Gold and silver retrace some of Wednesday's sharp losses

OUTSIDE MARKET DEVELOPMENTS: Markets are continuing to digest yesterday's election results with control of the House yet to be decided. Today's focus is on the Fed's policy decision.

A 25 bps rate cut remains widely anticipated. The trade will be paying close attention to the guidance in the hope of discerning if there will be any significant change to the policy path.

An additional 25 bps of easing in December is still favored. While odds for a December hold continue to hover around 32%, Fed funds futures are suddenly reflecting a very slight change of a 50 bps cut at the last FOMC meeting of the year.

Yesterday the markets expressed heightened concern that the trade policies of the new Trump administration will stoke inflation and cause the Fed to become less dovish. However, I do not think the Fed will proactively adjust policy guidance based on campaign talking points.

I believe that Trump's tariff threats against China are likely a negotiating tactic to get Xi Jinping to pull back on direct subsidies to Chinese corporations that give them an unfair competitive edge. See China's 'hidden' subsidies fuel export onslaught. 

The current state of the Chinese economy probably makes ending any subsidies problematic. In fact, Beijing is currently contemplating additional measures to boost the flagging economy.

Today's 25 bps BoE rate cut was widely expected. There was a single lone dissenter on the MPC. Governor Bailey said the BoE will continue to take a gradual approach to further easing, 

Sweden's Riksbank trimmed rates by 50 bps and indicated further easing is in the offing. The policy statement said the move was to "provide further support to the economy and help inflation stabilise at the target".

Norway's Norgesbank left rates unchanged at a 16-year high of 4.5%. Governor Ida Wolden Bache indicated the central bank will likely stay on hold for the remainder of the year.

German Chancellor Scholz fired Finance Minister Christian Lindner on Wednesday creating political uncertainty in Europe's largest economy on the same day U.S. election results were coming in. Lindner's Free Democratic Party withdrew from the ruling coalition government forcing Scholz to call for a confidence vote to be held on 15-Jan with new elections likely by the end of March.

U.S. Q3 Productivity (preliminary) rose 2.2%, below expectations of +2.6%, versus a negative revised +2.1% in Q2 (was +2.5%). ULCs fell to a +1.9% pace, above expectations of +1.1%, versus a sharply upward revised +2.4% in Q2 (was +0.4%).

U.S. Initial Jobless Claims rose 221k in the week ended 02-Nov, below expectations of +225k, versus a revised +218k in the previous week (was +216k). Continuing jobless claims increased 39k to 1,892k in the 26-Oct week from 1,853k in the previous week.

U.S. Wholesale Sales rose 0.3% in September, above expectations of +0.1%, versus a positive revised +0.2% in August (was -0.1%). Wholesale inventories fell by 0.2%.

U.S. Consumer Credit is expected to print a $14.0 bln increase later today.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$7.67 (+0.29%)
5-Day Change: -$48.41 (-1.76%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +38.77

Gold is retracing some of yesterday's sharp losses, attempting to regain the $2,700 level. With U.S. election results behind us, the focus today is on the anticipated Fed rate cut and the forward guidance. Yields and the dollar have moderated from yesterday.



Rate cuts by the BoE and Riksbank today indicate that the overarching bias of the world's major central banks remains toward easing. This is a positive for gold.

Markets, including gold, will continue to make adjustments as the new Trump administration trots out its policy priorities in the weeks ahead. As of this morning, the Republican Party is seven seats shy of a majority in the House with 34 races yet to be called.

Even as political uncertainty in the U.S. moderates, uncertainty in Germany has spiked after the Finance Minister was sacked, fracturing the coalition government. The German government is now likely to be hamstrung until after a confidence vote in January which could lead to new elections in March.

Choppy consolidative trading is likely to prevail in the short term, although the underlying trend is still perceived to be bullish. A trade above $2,702.41 would clear the way for additional retracement to the halfway back point of the correction at $2,719.07. Penetration of the latter would bode well for a retest of the record high at $2,789.68.

While it's premature to suggest the corrective low is in place at $2,648.46 (today's Asian low), I like that Fibonacci support at $2,645.79 (78.6% retrace of the leg up from $2,606.62 to $2,789.68) and $2,639.70 (50-day moving average) remains intact. These are the levels to be watching on the downside.

Silver is trading higher in the lower half of yesterday's range. While the midpoint of yesterday's range was slightly exceeded the downside remains vulnerable as traders hash out the medium to longer-term potential in light of yesterday's seismic shift in the U.S. political picture.



With the presidential race designated as 'too close to call' into election day, a Trump victory was always a possibility. However, I think the odds for a Trump win plus Republican majorities in both houses of Congress were pretty long.

Commodities are likely to remain volatile as the market debates the merits and likelihoods of President-elect Trump's trade and fiscal policies.   

A close today back above the 50-day moving average at $31.338 would be mildly encouraging to the bull camp. Gains above $32 would bode well for a retest of the 20-day moving average and chart resistance at $32.805/860.

Penetration of the latter would return confidence to the underlying uptrend and call for renewed tests above $34 with potential back to the 12-year high at $34.853 (22-Oct).

Failure to sustain today's gains would mean the $30.856 low from 15-Oct remains vulnerable to a test. The recent lows at $31.921/903 provide an intervening barrier.

More substantial support is marked by last month's low and the 100-day moving average at $30.264/229.


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.

11/6/2024

Gold and silver break hard on U.S. election outcome

OUTSIDE MARKET DEVELOPMENTS: The U.S. election is over, and former President Trump won a decisive victory. Besides surpassing the 270 electoral vote threshold to secure the Presidency, Trump appears poised to win the popular vote. With no doubt about the outcome, VP Harris is expected to concede today.

With the Nation calm thus far, markets are unwinding the political uncertainty trade and shifting to a risk-on profile. U.S. stocks are surging in anticipation of a more business-friendly regulatory environment. Treasury yields are on the rise.

Concern that inflation could reignite if Trump follows through on plans to impose tariffs on some foreign goods may alter the Fed's easing path. The Fed began its two-day FOMC meeting today and is still expected to announce a 25 bps rate cut tomorrow.

While another 25 bps cut remains favored for December, the prospects for a hold increased to 32.4%, versus 22.0% yesterday, 26.7% a week ago, and 2.1% last month. Bets on additional rate cuts in 2025 were also trimmed.

The dollar index has surged to four-month highs buoyed by rising yields. The 10-year note has reached a five-month high of 4.467%. Some of the dollar gains are certainly attributable to foreign investors rotating into U.S. shares.

Oil fell nearly 2% on Trump's promise to "drill baby drill" would increase supply. Meanwhile, trade war risks could also sap demand. Lower energy costs would at least partially offset inflation risks.

With the Chinese economy already on the ropes, a second Trump term increases the likelihood that China will have to deploy much larger stimulus measures to offset negative market sentiment associated with a potential trade war. The National Peoples Congress is already in session and could make an announcement by the end of the week. 

U.S. Mortage Applications plunged 10.8% in the week ended 01-Nov, versus -0.1% in the prior week. The drop in refinances was even greater at -18.5%. Rising mortgage rates continue to pose a headwind with the 30-year mortgage rate reaching a 14-week high of 6.81%.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$44.23 (-1.61%)
5-Day Change: -$105.39 (-3.78%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +37.77

Gold has come under heavy selling pressure as haven bets associated with political uncertainty were unwound. The prospects for less-dovish Fed policy, rising yields, a higher dollar, and the rotation out of haven assets into risk assets are all weighing on the yellow metal.



Thus far, the correction from last week's record high at $2,789.69 to today's intraday low at $2,655.59 is less than 5%. It may take a week or more for the market to stabilize and buyers to step back in, but the longer-term trend is still unquestionably bullish.

There are a number of fundamental factors that remain bullish for gold:

While the Fed may have to adopt a less-dovish policy stance, the bias is still toward easing through 2025. The ECB, BoE, and BoC are likely to remain on their easing paths.

Geopolitical risks still abound. While there is some level of hope that Trump's foreign policies could ease global tensions, other hot spots may flare.

We remain in the midst of a period of heightened seasonal demand associated with the Indian wedding season. The Lunar New Year holiday in Asia is just around the corner. These lower prices are likely to be appealing.

Global central banks still have plenty of incentive to diversify reserve holdings. Gold is likely to remain a popular alternative to foreign currency, particularly the dollar.

The next support level I'm watching is the 50-day moving average at $2,636.32, which is bolstered by a minor chart point at $2,639.35 (15-Oct ow). Below that, October's low at $2,606.62 will correspond with the rising trendline early next week.

On the upside, minor intraday chart resistance is noted at $2,676.02. A rebound above the 20-day moving average at $2,714.32 would ease pressure on the downside and suggest the corrective low is in.

A breach of the $2,748.72/87 level would clear the way for a challenge of the $2,789.69 record high and return a measure of credence to the previously established $2,810.38 Fibonacci objective.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -0.876 (-2.68%)
5-Day Change: -$2.360 (-6.99%)
YTD Range: $21.945 - $34.853
52-Week Range: $20.704 - $34.853
Weighted Alpha: +38.07

Silver plunged to a three-week low of $30.903 as markets made significant adjustments in anticipation of a second Trump Presidency. The white metal now appears poised for a third consecutive lower weekly close.



The market is worried that restrictive trade policies particularly against China could weigh on demand for consumer electronics, solar panels, cars...and by extension silver. This same concern is what may prompt China to unleash new fiscal and monetary stimulus to support the economy.

Gold's weakness, a higher dollar, and higher yields are also contributing to the sell-off in silver.

With more than 78.6% of the rally from $30.229 to $34.853 already retraced, and the 50-day moving average violated, further attacks on the $30.856 low from 15-Oct seem likely. A breach of this level would leave last month's low and the 100-day moving average at $30.229/$30.253 vulnerable to a test.

Initial resistance is marked by the 50-day moving average and a minor intraday chart point at $31.290/$31.381. A close above the 50-day would be mildly encouraging but I suspect upticks will be viewed as selling opportunities for at least one more day.

It will take a short-term rebound above $33 to suggest the low is in place. At that point, I'd anticipate a period of choppy consolidation as the bulls and bears hash out the longer-term implications of the election outcome.


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