Gold and silver correct ahead of the weekend, but downside remains vulnerable
Outside Market Developments: U.S. markets showed notable divergence this week amid ongoing tech-sector pressure and shifting macroeconomic signals. The tech-heavy Nasdaq faced repeated selling, logging multiple down days as investors rotated out of high-valuation names amid AI monetization concerns, monetary policy uncertainty, and despite Micron's blowout quarterly earnings.
The broader S&P 500 posted modest net declines, while the Dow Jones Industrial Average proved more resilient with small gains on several sessions, highlighting strength in non-tech sectors. Key influences included a more hawkish Fed stance, still accelerating inflation in May, easing geopolitical tensions that drove sharp declines in oil prices, and mixed economic data. Overall, the week reflected a risk-off mood with continued rotation from mega-cap growth into more defensive and cyclical areas.
The trade continues to digest last week's more hawkish rotation of the Warsh-led Fed and the resulting higher yields and stronger dollar. However, the trade is probably anticipating some inflation relief in the short-term, thanks to the tumble in oil prices.
The probability of a 25 bps rate hike at the July FOMC meeting has declined to 29.9% from 38.5% a week ago. Fed funds futures are pricing just 28 bps of tightening by year-end, and 32 bps into next June.
While the trade is positioning for higher-for-longer rates, arguably, they overreacted to the Fed's vow last week to deliver "price stability." FedSpeak this week highlighted that inflation indeed remains the primary concern and that current policy is appropriate, but the speakers avoided signaling imminent rate hikes or cuts.
The market is curious to know what the Warsh Fed's communication policy will look like. During his post-FOMC presser, Warsh said something that I strongly agree with: “I think financial markets perform best when they react to incoming data. I think the financial markets work less efficiently when they ask the question: ‘How will the Federal Reserve react to that incoming information?’” Trade off the data, not on what you think the Fed might think of the data.
We'll likely have further clarity on what the new Fed will look like once Warsh's five task forces deliver their findings this Fall and into year-end. Details of the task forces are as follows:
- Fed Communications: Reviewing how the Fed conveys information to markets and the public (including the dot plot and press conferences).
- Fed’s Balance Sheet: Examining the size, composition, and policy around the Fed’s ~$6.7 trillion balance sheet and the ample reserves regime.
- Use and Reliance on Existing Data Sources: Looking for better, more timely, and market-driven data to inform policy decisions.
- Productivity and Jobs: Studying productivity trends (including the impact of AI) and the labor market in the current economy.
- Fed’s Inflation Frameworks: Re-examining the Fed’s approach to understanding inflation and achieving price stability.
This week’s US-Iran talks continued to drive optimism about a potential peace deal. The parties reportedly agreed on a roadmap to reach a comprehensive deal within the next 60 days, including working groups on nuclear issues, oversight, sanctions relief, de-escalation in Lebanon, and stability in the Strait.
Iran reportedly carried out a drone attack on a cargo ship in the Strait of Hormuz today, which President Trump described as a "foolish violation" of the ceasefire agreement. Calmer heads seem to be prevailing, with peace talks expected to resume next week.
Besides Middle East headline, markets will focus mainly on housing data, labor market signals, and early-June employment indicators in the week ahead. Key releases include the S&P Case-Shiller home price index and consumer confidence on Tuesday, followed by JOLTS job openings, ADP private payrolls, and ISM manufacturing PMI mid-week.
These reports will help investors gauge the health of the housing market, consumer sentiment, and labor demand amid ongoing Fed uncertainty and the recent tech-led pullback in shares. Overall, it’s a moderately busy week for data that could influence rate expectations heading into the 250th anniversary of Independence Day. Most U.S. markets will be closed on Friday, July 3rd, although it is not a Fed/bank holiday.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$28.23 (+0.70%)
5-Day Change: -$110.71 (-2.66%)
YTD Range: $3,960.16 - $5,595.02
52-Week Range: $3,256.02 - $5,595.02
Weighted Alpha: +10.83
Gold is rebounding ahead of the weekend, buoyed by some profit-taking and perhaps some heightened haven interest amid rotation out of high-valuation stocks and the Iranian ceasefire violation. A tempering of hawkish Fed expectations has also knocked the dollar off the 13-month highs set on Wednesday. Nonetheless, the yellow metal is poised for its fourth straight lower weekly close – and likely its fourth consecutive monthly decline – a streak not seen since 2022.
Upticks over the last two sessions have been limited to Wednesday's range, suggesting downside risk remains. This week's tests below $4,000 continue to suggest potential to chart/Fibonacci support at $3,887.03/86.02. Intervening supports are marked by recent lows at $3983.74 and $3,964.23/$3,960.16.
If initial resistance at $4,114.73 gives way first, look for follow-through corrective activity to the $4,200 zone. The falling 20-day moving average should reinforce the latter in the week ahead.
In advance of the return of cyclical gold strength later this summer, evidence that central banks are taking advantage of the price drop to ramp up reserve building is probably the bull camp's best hope in the near term. The World Gold Council will report central bank purchase data for May early in July.
Investors were almost assuredly liquidating ETF positions this week. If confirmed, it would be the eighth week of outflows out of the last ten. Global investors are unlikely to return in force until we start seeing some price strength.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$0.634 (+1.10%)
5-Day Change: -$6.737 (-10.40%)
YTD Range: $55.666 - $121.630
52-Week Range: $35.610 - $121.630
Weighted Alpha: +30.23
Silver is trading higher within Wednesday's range on short-covering ahead of the weekend and a holiday-shortened but data-heavy week ahead. The setback in the dollar is providing some additional support. The white metal will post its seventh straight weekly decline.
This week's plunge below $58 and the 4-Dec’25 low at $56.509 leaves two important Fibonacci levels at $53.695 and $53.340 vulnerable to tests. The ongoing rotation out of tech/AI stocks is heightening concerns about sector capex and its impact on industrial silver demand.
That said, sector pessimism has historically been short-lived, as underlying technological progress continues at a rapid pace. Micron’s strong earnings helped ease some of the negativity, but next week’s light earnings calendar offers little near-term catalyst to rekindle optimism.
Short-term upticks are likely to attract further selling interest ahead of the previous lows at $61.036/533 and Wednesday's high at $62.350. The declining 20-day MA at $66.804 looks to be well protected and should keep the high for the week at $67.023 at bay.
Silver's long-term outlook remains structurally bullish over the next 5-10 years. Persistent global supply deficits, combined with surging industrial demand from solar energy, electric vehicles, AI data centers, and electronics, are expected to support significantly higher prices.
Most analyst consensus points to $80-$140+ per ounce by 2030, with base-case targets around $100, though forecasts vary widely depending on the pace of green energy adoption and monetary conditions. Short-term volatility from macro factors like interest rates and tech sector sentiment is likely, but the fundamental tailwinds favor the underlying uptrend.
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.