Gold and silver reach multi-week highs as fiscal concerns boost haven interest and dollar weakens

Outside Market Developments: America’s national debt exceeded the $40 trillion mark this week, a stark milestone that underscores how rapidly borrowing costs and fiscal pressures are mounting. With interest payments already devouring a growing share of federal revenue, the threshold is a flashing warning that the bill for decades of profligate borrow-and-spend policy is coming due.

This news, along with the U.S. Treasury’s surprise announcement on Wednesday that it will at least double the size of buybacks of longer-dated Treasuries over the next quarter, dominated this week's trading. "It could be more than the $4 billion per issue,” said Treasury Secretary Bessent.

Yields on the 30-year bond traded as high as 5.34% early in the week, a level not seen for nearly two decades. “All we’re trying to do is get people to focus on the fundamentals and not trade the headlines during a quiet period in a thin market,” he explained.

Treasury contends it's merely providing liquidity support at the long end of the yield curve during thin summer trading, but  I would suggest that the underlying fundamentals are pretty damning. As the debt has surged, so too has the supply of Treasuries, while demand has weakened. Investors are simply requiring higher yields (more compensation) to absorb the growing supply of longer-dated debt.

Private foreign net purchases of Treasuries have declined sharply in recent months, and official foreign holdings represent a much smaller share of the expanding market than in prior years. Competing high-yielding options, particularly from tech superscalers, are certainly sapping demand for Treasuries.

However, central banks – especially those in geopolitically sensitive or non-aligned countries – have become leary of Treasuries given the U.S. ability to freeze or sanction assets. This has become a growing concern since the 2022 Russian reserve freezes and asset seizures in the wake of the Ukraine invasion.

President Trump has declared an “Economic D-Day” of unprecedented economic warfare and isolation against Iran, aiming to sever its remaining oil, banking, and trade lifelines after stalled peace deal talks. The campaign threatens severe secondary sanctions and consequences on any country or entity that continues providing financial or commercial support to Tehran.

I’m not claiming the sanctions on Russia or Iran are unwarranted, yet other countries still weigh the potential risks of falling out of favor with the United States. Recent tariff measures and other pressure on allies for limited involvement in the Iran conflict or for falling short on NATO financial commitments only reinforce that caution.

July’s weak retail sales print (-0.6% m/m) signaled emerging consumer caution amid persistent affordability pressures, and this week’s retailer earnings largely reinforced that picture through Walmart’s notably soft U.S. comparable sales growth, the weakest in years despite overall revenue and earnings beats. At the same time, stronger results from Target (aided by tariff refunds), Ross Stores, Home Depot, and Lowe’s suggested the pullback is uneven, with value-oriented and selective categories holding up better than the broad government data implied.

Next week, markets will closely watch Wednesday’s key U.S. data releases – including the second estimate of Q2 GDP, personal income and spending, and the PCE price index – for fresh clues on growth and inflation. Attention will then shift to the Jackson Hole Symposium later in the week, where Fed Chair Kevin Warsh and other central bankers will hopefully provide policy cues amid elevated oil prices and geopolitical risks.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$69.33 (+1.53%)
5-Day Change: +$217.87 (+4.98%)
YTD Range: $3,945.52 - $5,595.02
52-Week Range: $3,322.00 - $5,595.02
Weighted Alpha: +28.01

Gold has climbed to fresh 14-week highs and is on track for its third consecutive weekly gain. The rally is being driven by falling long-term yields, a softer dollar, growing fiscal concerns that are stoking haven demand, and intensifying bullish seasonal influences.



Targets marked by the 200-day moving average at $4519.34 and Fibonacci/chart resistance at $4,584.68/$4,594.43 have been satisfied and exceeded. This returns additional confidence to the longer-term uptrend and bodes well for further retracement to the midpoint of this year's range at $4,777.59.

As noted above, concerns about dollar-denominated reserve assets are likely to perpetuate the rotation to supremely liquid hard assets like gold. Official-sector gold demand is widely expected to remain structurally elevated beyond 2030, as most central banks anticipate a rising share of gold in global reserves amid ongoing diversification away from the dollar and persistent geopolitical and fiscal risks.

It's worth noting that the yellow metal is now the most overbought it's been since late January during the push to record highs. Hotter-than-expected PCE inflation next week and/or hawkish musings from Warsh in Jackson Hole could trigger a setback in gold, but a retreat would likely attract further buying interest.

The early U.S. low at $4,563.82 marks initial support and protects the overseas low at $4,509.51. The latter is bolstered by the 200-day MA. Below that, watch the 100-day MA at $4,379.65. Next week, the rising 20-day MA will correspond closely with the lows from the past two weeks at $4.325.73/$4,311.40, providing a formidable downside barrier. 


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$1.413 (+2.08%)
5-Day Change: +$5.216 (+8.06%)
YTD Range: $54.778 - $121.630
52-Week Range: $37.705 - $121.630
Weighted Alpha: +56.56

Silver has traded above $70 for the first time in nine weeks, and like gold, is poised for a third straight higher weekly close. Weakness in longer-term yields and the dollar are the primary drivers.

 

Tests above the 100-day moving average offer further encouragement to the bull camp, and focus is now on the 200-day MA at $72.252. I continue to think $80 must be regained to truly return confidence to the underlying uptrend. This zone is highlighted by the 38.2% retracement level of this year's plunge at $80.315.

Today's early U.S. low at $68.931 defines initial support. Secondary support at $68.451 (100-day MA) protects today's low at $67.954. More substantial support is well defined by this week's low at $62.574, which corresponds closely with the rising 20-day MA.

Silver remains supported by a sixth consecutive year of structural supply deficit (projected at around 46 Moz in 2026), as inelastic mine production continues to lag robust industrial demand from solar, electronics, EVs, and AI infrastructure. Any short-term setbacks are likely to attract buying interest. 


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

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