Gold and silver fail to sustain intraday gains, despite tamer inflation readings

OUTSIDE MARKET DEVELOPMENTS: The PCE price index – the Fed’s preferred inflation gauge – rose 0.3% in August, below expectations of +0.4%, versus +0.1% in July; 3.4% y/y, unchanged from July and below consensus of 3.7%. Annualized core inflation was steady at 3.0% on expectations of 3.4%. The softer-than-expected inflation readings were aided in part by the BEA’s annual methodological revisions.

Personal consumption expenditures rose a robust 0.9% ($190.8 billion), driven by gains in both goods and services spending, while real (inflation-adjusted) PCE increased 0.6% – the strongest monthly advance in about a year. Personal income grew 0.2% and disposable personal income rose 0.3%, leaving the personal saving rate at 4.1%.

The final revision to Q2 GDP showed the U.S. economy grew at a revised 2.2% annualized rate, up sharply from the prior 1.5% reading and above expectations of 1.5%. Stronger consumer spending, business investment, and exports drove growth. Q1 growth was also revised up to 2.5% from 2.1%, painting a more robust picture of economic activity in the first half of the year.

Private-sector employers added 90k jobs in September according to the ADP National Employment Report, above expectations of 70k and a sharp rebound from the downward-revised +36k in August. Strength was concentrated in education/health services and leisure/hospitality. The stronger-than-expected reading points to resilient private hiring and raises the odds that Friday’s BLS nonfarm payrolls report will meet or beat the consensus estimate of 82k.

Evidence of resilient growth alongside cooler inflation takes near-term pressure off the Fed, supporting a more patient policy stance even as inflation remains above the 2% target. Fed funds futures are now suggesting the probability of an October Fed rate hike is down to 37.1% from 50.9% yesterday and 70.9% a week ago. However, the likelihood of at least 25 bps of tightening by year-end, while lower, remains quite high at 88.2%.

Brent crude is trading more than 3% higher today as lingering geopolitical risk from the ongoing conflict with Iran and stalled efforts to reopen the Strait of Hormuz outweigh recent signs of a recovery in Middle East oil exports. Uncertainty around US-Iran negotiations – particularly after President Trump rejected reports of offering sanctions relief – has supported prices, keeping a war-risk premium in the market despite Saudi Arabia’s partial restart of its East-West pipeline and higher regional shipment volumes.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$2.94 (+0.07%)
5-Day Change: -$79.42 (-1.85%)
YTD Range: $3,945.52 - $5,595.02
52-Week Range: $3,820.24 - $5,595.02
Weighted Alpha: +1.79

Gold briefly probed above $4,200 in early U.S. trading, lifted by the softer-than-expected PCE inflation data that tempered market bets on another Fed rate hike in October. However, the intraday gains could not be sustained amid still-elevated Treasury yields and a firm dollar. Focus now shifts to Friday's jobs report.



The earlier high at $4,218.99 now provides an additional barrier, along with $4,235.99, ahead of the important 100-, 20-, and 50-day moving averages. Those MA's really need to be regained to ease short-term pressure on the downside and provide some encouragement to the bull camp.

Support is well defined by the $4,111.49/$4,106.19 chart/Fibonacci area. If this zone is violated, a challenge of the August low at $4,022.62 would have to be considered, with potential for tests below $4,000. That being said, I still think the June low at $3,945.52 is likely to contain the downside.

One under-appreciated dynamic in today’s gold market is the divergence between Western investment flows and official-sector demand. While gold is down roughly 25% from its January peak amid elevated real yields and a firm dollar – prompting caution among ETF and speculative investors – central banks have kept buying aggressively.

China alone has reported purchases for 22 consecutive months (with actual buying likely higher than official figures), and global central-bank demand remains well above pre-2022 averages. This sovereign accumulation, driven more by reserve diversification and geopolitical risk management than by short-term rate expectations, is quietly providing a structural floor for the market.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$0.674 (-1.10%)
5-Day Change: -$3.314 (-5.14%)
YTD Range: $54.778 - $121.630
52-Week Range: $45.563 - $121.630
Weighted Alpha: +10.77

Silver has fallen to fresh eight-week lows, despite more moderate inflation readings this morning, as the broader macro backdrop (high yields, strong dollar) continues to dominate. Higher borrowing costs can slow manufacturing, capital spending, and investment in silver-intensive sectors such as solar, electronics, and EVs, thereby weighing on industrial demand for the metal.



With silver setting new lows and below key moving averages, tests below $60 are increasingly likely. Such a move would encourage a challenge of the $58.272 Fibonacci level. Below that, the 4-Aug low at $58.01 would be in play. Last month's low at $56.583 provides a decent intervening barrier ahead of July's cycle low at $54.778.

Today's earlier high at $61.703 now protects the previous range lows at $62.331/346. A move back into the range that held for most of September would bode well for a challenge of the key moving averages (50, 20, 100), which are converging above $64.


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.