Gold and silver recover on Friday, but elevated yields and a strong dollar remain headwinds

Outside Market Developments: Fed Chairman Warsh participated in a fireside chat at the IMF/World Bank meeting in Bangkok, Thailand, last night. The trade was hoping for some reaction to this week's hot inflation data and perhaps a hint of forward guidance.

True to form, Warsh continues to play his cards close to the vest. He mentioned inflation only in general terms as a “common challenge” globally, adding that he does not “pre-judge” before FOMC meetings.

From his confirmation hearing onward, Warsh has maintained that he does “not believe in forward guidance” and does not think the Fed “should be signaling future decisions in advance.” He has yet to rein in the rest of the FOMC members, however, who have tilted hawkish in recent weeks.

Chicago Fed President Goolsbee called the CPI and PPI data "discouraging" on Thursday. He still holds “some optimism” that the inflation drivers may be temporary (tariffs, Middle East conflicts/supply disruptions) and could fade quickly. However, he has expressed some concerns recently that inflation is shifting from temporary supply shocks to more persistent demand-driven overheating that is partly linked to AI investment. The blackout period for the October 27–28 FOMC meeting begins tonight at midnight Eastern Time.

While annualized CPI reached multi-month highs, and PPI surged to multi-year highs, most of the inflationary pressure was attributable to energy. Perhaps reflecting some hope that energy pressures will soon moderate, Fed rate-hike expectations moderated late in the week.

Fed funds futures now put the odds of an October rate hike at 12.7%, versus  27.7% on Thursday. The implied Fed funds rate for year-end is 4.07%, implying just 19.5 bps of tightening.

It’s worth remembering that the current U.S. fiscal situation poses a meaningful constraint on further Fed tightening. Debt-servicing costs for FY 2026 (ended 30) exceeded $1 trillion, making net interest a larger budget item than both defense and Medicare – and second only to Social Security. A 25 bp rate hike would add roughly $18 billion to annual interest costs. Under current law, the CBO projects interest payments on the debt will continue rising, reaching about $2.1 trillion by 2036.

Iran-backed Houthi rebels launched missile strikes on Yemen’s presidential palace in Aden on Thursday, killing several people and wounding others, while Saudi Arabia intercepted additional missiles and drones targeting its territory. In an interview, President Trump ruled out using ground troops against Iran but left open the possibility of further conventional strikes, as tensions persist around the Strait of Hormuz and energy infrastructure. 

The Russia-Ukraine "energy ceasefire" that President Trump announced last weekend has collapsed...if it ever really existed. Ukraine resumed strikes on Russian refineries, claiming Moscow never refrained from hitting Ukrainian power and gas facilities. Brent crude retested the September high above $111.

Next week, markets will primarily focus on a heavy slate of major corporate earnings, led by high-profile reports from Netflix (Tuesday), Tesla and Meta (Wednesday), and Procter & Gamble (Thursday), which will offer fresh insights into consumer spending, tech/AI demand, and broader economic resilience. Oil prices will remain a key interest. Attention will also turn to U.S. housing data (starts and permits on Tuesday), and UofM consumer sentiment (Friday). This week's hot inflation readings will remain a significant backdrop, and the trade will continue to refine Fed policy expectations ahead of the October FOMC meeting.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$3.48 (+0.08%)
5-Day Change: -$19.77 (-0.47%)
YTD Range: $3,945.52 - $5,595.02
52-Week Range: $3,887.03 - $5,595.02
Weighted Alpha: -5.25

Gold rebounded to pressure $4,200 in early U.S. trading on Friday, buoyed by softer yields and a pullback in the dollar. A close above $4,194.29 today would confirm a second straight higher weekly close, with a potential double bottom already providing some technical encouragement for the bull camp.



Last week's low at $4,067.07 successfully contained tests of the downside earlier in the week, leading to that as yet confirmed double bottom. Confirmation would occur on a breach of resistance at $4,217.02 (12-Oct high). This level is bolstered by the 2-Oct high at $4,225.02, and the declining 100-day moving average will move into this zone next week as well.

Given the recent rejections above $4,200, there are likely significant buy stops above those highs that the bulls will be tempted to run if they are given the opportunity. Such a move would shift focus to the $4,307.44 Fibonacci level and the 50-day MA at $4,331.32. Above the latter, the more important 50% retracement level of the Aug/Oct decline at $4,381.69 would attract.

Hot inflation readings with a tempering of hawkish Fed expectations may also be allowing the yellow metal to reassert itself as the classic hedge against rising prices. Safe-haven demand provides additional underpinning amid persistent fiscal and geopolitical risks.

On the downside, today's Asian low at $4,147.59 and Thursday's low at $4,100.39 protect the recent lows at $4,073.90/$4,067.07. With the fortification of the downside, I'm feeling a little better about my belief that the low is in at $3,945.52 (30-Jun), but the relative weakness in silver is still troubling.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$0.282 (+0.49%)
5-Day Change: -$3.034 (-4.99%)
YTD Range: $54.778 - $121.630
52-Week Range: $45.563 - $121.630
Weighted Alpha: -2.95

Silver has lost about 6% this week and is poised for its sixth weekly loss out of the last eight. While the white metal is higher today on position squaring, the drop to a 13-week low on Wednesday suggests the summer low at $54.778 is vulnerable to a more serious challenge.



High yields and a strong dollar continue to provide a significant headwind. There's also growing concern about waning industrial demand. Part of that is attributable to rising financing costs that threaten to slow AI infrastructure expansion. 

Solar/photovoltaic sector demand has also cooled as the peak season wound down. Umicore noted that HSBC forecasts a decline in industrial demand from 642 Moz in 2026 to 618 Moz in 2027, due in part to cost-cutting and substitution in the solar sector.

A convincing move above $60 is needed to ease pressure on the downside somewhat, but the key 20-, 100- and 50-day moving averages are the more important levels to be watching. A breach above the 50-day at $63.974 would shift focus to the September highs above $68.


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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