Gold and silver stabilize after last week's sharp sell-off

OUTSIDE MARKET DEVELOPMENTS: Markets are starting the week on a cautious but slightly firmer note, with risk assets edging cautiously higher after tumultuous trading last week. Risk-off was triggered on Thursday amid rising inflation concerns, higher rate expectations, recurring AI/tech worries, and geopolitical tensions in the Middle East that pushed oil prices sharply higher.

Tech and AI-related names led equities lower after Meta sparked renewed concerns about heavy AI capital spending, financing needs, and potential returns on investment. While Meta reported better-than-expected Q3 results, elevated capex drove free cash flow to -$2.12 billion — the first negative print since its 2012 IPO. The company also raised the low end of its 2026 capital spending guidance to $135-145 billion, implying the cash-flow pressure could continue in the near term.

Focus this week is squarely on the two-day FOMC meeting that begins on Tuesday, with the rate decision and statement due at 2:00pm ET on Wednesday, followed by Chair Kevin Warsh’s press conference at 2:30pm. The trade overwhelmingly expects a hold this week (near 90% probability). With no new economic projections scheduled, markets will try to get a better read on the likelihood of a rate hike in December. Fed funds futures currently put that probability at 81.6%.

The ECB and BoJ will also announce policy this week. Each is is expected to deliver a hawkish pause that leaves the door open for further tightening as soon as December, pending more data on inflation and growth.

Once the monetary policy decisions are behind us, market attention will pivot quickly toward the U.S. midterm elections on 3-Nov, which will determine control of Congress and influence fiscal and regulatory outlooks for the second half of President Trump's final term. The October employment report, due Friday, 6-Nov, will provide a key update on labor-market strength and feed into December Fed expectations. Other notable releases in the intervening period include the advance Q3 GDP estimate and September PCE inflation data on 29-Oct.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$19.30 (+0.48%)
5-Day Change: -$115.17 (-2.78%)
YTD Range: $3,945.52 - $5,595.02
52-Week Range: $3,887.03 - $5,595.02
Weighted Alpha: -5.96

Gold starts the week with a modest bid, though activity remains confined to Friday’s range. The yellow metal fell more than 4% last week — its biggest weekly decline since June — marking a second consecutive lower weekly close and the seventh drop in the past nine weeks.

Deleveraging added to the pressure as the tech and AI stock sell-off triggered margin calls, prompting leveraged investors to liquidate assets such as gold to raise cash. Risk-aversion positioning primarily favored Treasuries, but the retreat in yields did little to stop the slide in gold. "Gold tested $4,000 on long liquidation, not fresh shorts," according to Marex.

Friday's low at $3,976.53 now provides an intervening barrier ahead of this year's low at $3,945.52 (30-Jun), but the downside remains vulnerable. The market is going to be tempted to look for stops below the latter and find that official- sector bid. Whether they are inclined to do that before the Fed decision remains to be seen.

New lows for the year would shift focus to the rising 100-week moving average at $3,870.59. If that level were to give way as well, a 50% retracement of the dramatic rally from the post-COVID low at $1,616.14 would have to be considered, highlighting $3,605.58. However, that strikes me as a low probability at this point.

Initial resistance is marked by Friday's high at $4,033.01. Above that, the previous lows at $4,067.07/$4,073.90 provide a more formidable barrier. The falling 20-day MA at $4,131.12 really needs to be regained on a close basis to truly ease pressure on the downside.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$0.044 (+0.08%)
5-Day Change: -$2.873 (-5.03%)
YTD Range: $53.046 - $121.630
52-Week Range: $45.563 - $121.630
Weighted Alpha: -6.77

Silver set a new low for the year on Friday and notched a second consecutive lower weekly close, weighed primarily by broad cross-asset deleveraging, as the tech-led market sell-off triggered margin calls. Safe-haven flows favored U.S. Treasuries rather than bullion, adding to the downward pressure.

The rising 100-week moving average comes in at $53.251 today, and this technical indicator has generally contained the downside thus far. Nonetheless, the new lows for the year leave the downside vulnerable to further tests. A convincing breach of the 100-week MA would favor a downside extension to the $50.337 Fibonacci level.

On the upside, Friday's high at 54.725 stands in front of more formidable resistances marked by the July low at $54.778 and the mid-October lows at $55.409/498. Above the latter, last week's high at $58.571 and the falling 20-day MA above $60 look pretty well protected at this point.


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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