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6/12/2024

Gold and silver firm in early U.S. trading on unch CPI print

OUTSIDE MARKET DEVELOPMENTS: The precious metals caught a bid in early U.S. trading after May CPI came in unchanged, just below expectations of +0.1%. However, price action remains broadly consolidative in the wake of last Friday's sharp sell-off.

Annualized CPI edged down to 3.3%, from 3.4% in April. Core CPI was +0.2% in May on expectations of +0.3%; +3.4% y/y, versus 3.6% in April.

These data will likely reinforce the notion that the Fed is making progress on inflation and will have room to cut rates later this year, even amid persistent strength in the labor market. The prospects for a rate cut in September are back on the rise and currently stand at 59.9% based on Fed funds futures.

The 2-day FOMC meeting ends today and policy will be announced at 1:00PM CDT this afternoon. Steady policy is widely expected. The statement and Powell's presser will be closely monitored for clues as to the likely policy path in H2.

PPI comes out tomorrow. Median expectations are +0.1%. Core PPI is expected to come in at +0.3%.

GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$3.09 (-0.13%)
5-Day Change: -41.67 (-1.77%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34

Gold was under modest pressure at the beginning of the U.S. session, but jumped in reaction to the below-expectations CPI print. The yellow metal is up for a third consecutive day, and more than half of Friday's plunge has now been retraced.



Earlier this week, I had deemed that 50% retracement level at $2,337.27 as important short-term resistance. Focus now shifts to the 61.8% retracement level at $2348.98.

A measure of confidence has been returned to the underlying uptrend, but the market is unlikely to prosecute the breach of $2,337.27 until after Fed policy is announced. Softer-than-expected consumer inflation is already pulling rate-cut expectations back toward the present, but the Fed could temper those expectations with a more hawkish tenor later today.

There is also PPI to worry about tomorrow.

Reuters reports that demand for gold remains strong in Asia, despite near-record high prices. Asian buyers are primarily seeking to hedge geopolitical and economic uncertainty, which has led to lower confidence in other investments such as stocks and real estate.

"The trend in the market has been that if the consumer wants to buy gold, they will. The price doesn't matter." – Albert Cheng, CEO of the Singapore Bullion Market Association

India remains an exception, due to price sensitivity. Indian gold demand has fallen to a 3-year low, although the recent setback in the price of gold has seen some buyers return.

Wells Fargo and UBS have reiterated their bullish outlook on gold. Buy the dips is the strategy according to UBS.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.111 (+0.38%)
5-Day Change: -0.591 (-1.97%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379

Silver rallied to new highs for the week in reaction to the CPI print. Trades back above $30 are encouraging, but unlike gold, the midpoint of Friday's range in silver at $30.331 remains protected at this point.



The 61.8% retracement level of the decline from Friday's high to Tuesday's low at $29.098 comes in at $30.592. A minor chart point is noted at $30.825.

I suspect the intraday range has been set at this point. Barring a dovish surprise from the Fed later today, further tests of the downside can not be ruled out.

The underlying trend remains decidedly bullish, with the fundamentals broadly supportive. Therefore recent losses are considered corrective in nature. What is in doubt is whether the corrective low is in place at $29.098 or not.

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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.

6/11/2024

Gold continues to consolidate Friday's sharp losses

OUTSIDE MARKET DEVELOPMENTS: The precious metals market continues to assess the implications of Friday's news that the PBoC did not buy any gold in May. While China had added to official reserves for 18 consecutive months through April, buying in April was only 2 tonnes. That was well below their average purchase of 18 tonnes going back to Nov 2022.



Based on the chart above, it's obviously not uncommon for China to hold steady on gold reserves for extended periods. The market will eagerly anticipate June data to see if China's reserves remain at 2264 tonnes.

A number of central banks have been participating in the gold-buying spree so far this year. Turkey has actually been leading the charge. China was number 2 in terms of YTD volume through April. India, Kazakhstan, and Singapore round out the top 5.

With or without PBoC participation, central bank buying is likely to remain an important theme with regard to the underlying bull trend in gold.

Conservatives made gains in the recent EU Parliamentary elections, based in large part on voters' growing concerns about mass immigration. French President Macron reacted by dissolving the General Assembly and calling for a snap election. This may be an attempt by Macron to re-consolidate his power, but there is a risk that it will backfire. 

There is growing speculation that gains by the right in Europe could be a harbinger ahead of U.S. elections in November. Political uncertainty may provide some support for gold in the months ahead.

Look for choppy consolidative trading to prevail – with a bearish bias – ahead of Wednesday's FOMC decision and CPI data. PPI data comes out on Thursday.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -2.94 (-0.13%)
5-Day Change: -18.58 (-0.80%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34

Gold continues to consolidate the sharp losses seen on Friday, with a bit of a bid emerging in early U.S. trading that has taken the yellow metal into positive territory for the session.



Initial resistance at $2,315.47/$2,318.36 has been slightly exceeded, leaving $2326.73 vulnerable to a test. The more important level to watch is the midpoint of Friday's range at $2,337.27. Penetration of this level would set a more favorable short-term tone, shifting focus to $2348.98 (61.8% retrace) and then $2,386.90.

However, it seems unlikely in the wake of last week's collapse that the bears won't try and take the market lower again. Today's intraday low at $2,298.90 protects the lows of the previous 2 sessions at $2,289.43/$2,287.64. Key support is marked by the low from 01-May $2,281.97.  


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.481 (-1.62%)
5-Day Change: -0.165 (-0.56%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379

Silver eked out a new 4-week low of $29.103 in overseas trading, sightly exceeding Friday's low at $29.146. The magnitude of the total decline off the 11-year high at $32.379 (21-May) is now 10.1%.



The lack of downside follow-through is perhaps mildly encouraging, yet further attacks on the downside seem likely. Another round of new lows would confirm potential to $28.467 (61.8% retracement of the leg-up from $26.049 to $32.379).

Initial resistance defined by Monday's high at $29.805 has been reinforced by today's price action. Penetration is needed to call for further retracement of Friday's losses to the midpoint of that range at $30.764.

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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 lower in early U.S. trading.

U.S. calendar features NFIB Small Business Optimism Index, FOMC 2-Day meeting begins.

6/10/2024

Gold and silver have recovered somewhat from Friday's rout

OUTSIDE MARKET DEVELOPMENTS: The precious metals rebounded modestly in overseas trading on Monday, but the sharp losses seen on Friday leave the downside vulnerable.

Gold was initially pressured on Friday by news that China's central bank did not buy any gold in May as the yellow metal reached record highs. China's gold reserves held steady at 2264 tonnes.

The PBoC had bought just under 2 tonnes of gold in April, well below its average of 18 tonnes since they resumed reporting in Nov 2022. Nonetheless, the end of the PBoC's 18-month buying spree caught the market by surprise.

Is this just a pause in PBoC buying, or does this signal a significant policy shift? My bet is on the former as I see reserve diversification remaining a persistent theme in China.

The precious metals were hit again on Friday when U.S. nonfarm payrolls beat expectations. Resilience in the jobs market further reduced the likelihood of a Fed rate hike in September. 

The Fed's 2-day FOMC meeting begins on Tuesday and policy will be announced on Wednesday. Steady policy is widely expected. Investors will be paying close attention to the policy statement, economic projections, and Powell's presser for clues as to when the Fed will start to ease.

U.S. CPI for May comes out on Wednesday and PPI on Thursday. Median expectations are +0.1% for both. The Fed is likely to note progress on inflation, but not enough to warrant a rate cute any time soon.

GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +4.39 (+0.19%)
5-Day Change: -50.69 (-2.16%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34

Gold is up modestly from Friday's 5-week low at $2,287.64. Friday's plunge of more than $80 (nearly 3.5%) was the biggest 1-day drop since November 2020. The range on Friday was just shy of $100!



News that China had bought no gold in May combined with a U.S. payrolls beat weighed heavily on the yellow metal. While the May low at $2,281.97 was approached, this important support level remains intact thus far.

The intraday climb back above $2300 eases the immediate pressure on the downside. However, momentum on today's bounce is not terribly impressive, so further tests of the downside must be considered.

Former supports at $2,315.47/$2,318.36 and $2326.73 now provide resistance. These levels protect the more important halfway back point of Friday's range at $2,337.27. A breach of this level would offer some encouragement to the bulls.

While Friday's move and the sharp losses in late May were certainly dramatic, the retreat off the all-time high at $2,449.34 on 20-May to Friday's low is "just" 6.6%. These losses are considered corrective within the longer-term uptrend. 

However, if $2,281.97 (01-May low) gives way, a more protracted corrective phase with potential to $2.204.41/$2,200.00 would become likely.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.547 (+1.88%)
5-Day Change: -0.962 (-3.13%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379

Silver is trading at the low end of Friday's large $2.37 range. The sharp losses realized on Friday leave focus squarely on the downside. Intraday upticks have been lackluster in terms of momentum, but they have relieved the short-term oversold condition somewhat. Further tests of the downside are likely. 



The magnitude of the retreat off the 11-year high at $32.379 (21-May) is now almost exactly 10%. Fresh lows would shift focus to the $28.467 (61.8% retracement of the leg-up from $26.049 to $32.379).

A convincing rebound above $30 might encourage the bulls, but I suspect the bears will be sellers ahead of this level. More important resistance at $30.764 (halfway back point of Friday's range) must be cleared to set a more favorable short-term tone. 

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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.

6/07/2024

Gold tumbles on news that the PBoC didn't buy any gold in May

OUTSIDE MARKET DEVELOPMENTS: Official data from the People's Bank of China (PBoC) revealed that the central bank had not added any gold to official reserves in May as the yellow metal was making record highs. This apparently ended a buying spree that had lasted 18 consecutive months.

May U.S. nonfarm payrolls significantly beat expectations with a print of +272k. Median expectations were +195k, but there had been whispers of a weaker number based on soft jobs market data that came out earlier in the week. Back-month revisions totalled -15k.

The unemployment rate ticked up to 4.0%, largely due to a 250k drop in the labor force. Hourly earnings rose 0.4%, above expectations of +0.3%, versus +0.2% in April. The average workweek held steady at 34.3 hours.

These generally robust data downgraded rate cut hopes for July and September, putting additional pressure on the precious metals. Fed funds futures continue to suggest that the first Fed rate cut is most likely to come in November.

With the BoC and the ECB having cut rates this week, and hopes for a 'sooner rather than later' Fed cut dashed for the time being, the dollar index rebounded to new highs for the week. Prevailing interest rate differentials should help to underpin the greenback and pose a headwind for the precious metals.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -41.61 (-1.75%)
5-Day Change: -5.23 (-0.22%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34

Gold fell sharply in overseas trading as the market was surprised to learn that the PBoC had not bought any gold in May. This understandably rattled the gold market and the weekly gains that had accumulated through early Asian trading were quickly erased.



Of course, the PBoC is rather opaque when it comes to policy matters, including its gold holdings. Is the central bank really on pause? Was May just a one-off aberration? Are they still accumulating gold by other means? There will be much speculation on all these questions in the week ahead.

Net central bank gold purchases had picked up in April, but China was the second-biggest buyer behind Turkey. Without China in the mix, we could see net central bank sales of gold for the first time in a year.

The better-than-expected U.S. jobs report added further weight to gold, as Fed rate cut hopes dimmed and the dollar rose. The yellow metal tumbled to a new low for the week. Not only do we have an outside trading day, but an outside trading week as well.

If gold closes lower today, which seems likely, it will be the third consecutive lower weekly close since the record high of $2,449.34 was established on 20-May. None of this is terribly encouraging from a technical perspective, but keep in mind that gold is only off 5.7% from its all-time high. I still see the losses as corrective in nature.

Focus returns to chart support at $2,307.65 down to $2,300.00. More important support is defined by the May low at $2,281.97. Should this level give way, a more protracted corrective phase becomes more likely.

First resistance is marked by a minor intraday pre-jobs-data high at $2,337.28. The halfway back point of today's range at $ 2,348.40 is a more significant technical level.

One potential bright spot today was news that global ETFs registered inflows in May for the first time in 12 months. I say "potential" because one month does not a trend make.


European and Asian buyers provided the boost, while outflows from North America and other regions were relatively small.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.986 (-3.15%)
5-Day Change: -0.573 (-1.88%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379

Silver is displaying a bearish outside day and appears poised to register a weekly loss. At the time of this writing, Monday's low at $29.413 was being challenged, but was intact.


A new low for the week would further erode the short-term technical picture, shifting focus to a retracement level at $29.214 (50% retracement of the rally from $26.049 to the $32.379 high). The 61.8% retracement level comes in at $28.467. Losses since the 21-May 11-year high are just over 9%.

The halfway back point of today's range thus far is $30.469 which corresponds closely with a minor intraday chart point. A minor intervening barrier is noted at $29.710.

It's been a wild roller coaster ride in the white metal this week. Such is the nature of the silver market. Nonetheless, I continue to see the underlying trend as bullish.

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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.