Gold and silver higher as dollar and oil weaken ahead of this week's inflation data

OUTSIDE MARKET DEVELOPMENTS: U.S. markets are trying to claw back some of last week’s AI-driven losses to start the week, as bargain hunters step in after the post-midterm tech sell-off. Investors continue to digest the Democratic midterm gains and the resulting uncertainty around potential AI regulation and tech oversight.

Nvidia is the clear outlier, sliding on news that its board has opened an independent investigation into CEO Jensen Huang, after reports surfaced alleging he had a relationship with a woman linked to Chinese intelligence efforts. The company has stated it has no reason to believe any company secrets were compromised and continues to express confidence in Huang’s leadership while the probe continues.

Oil prices remain under pressure after President Trump indicated further U.S. attacks on Iran were “highly unlikely” while diplomatic talks continue, reducing fears of fresh supply disruptions. The decline is helping ease broader inflation concerns, providing a modest tailwind for equities and supporting gold’s rebound as markets weigh the implications for the Fed's policy path.

Key U.S. inflation data takes center stage this week, with the October CPI due Tuesday and PPI on Friday. Markets will scrutinize the numbers closely after last week’s solid jobs report raised December rate-hike odds, as any signs of cooling – or persistent stickiness – could reshape expectations for the Fed’s next move.

With the market anticipating warmer headline CPI and PPI readings, Fed funds futures currently put the probability of a 25 bps rate hike in December at 82.2%. About 33 bps of tightening is implied through March 2027.

This week also features a busy slate of Federal Reserve speakers, including Chicago Fed President Austan Goolsbee, Richmond Fed President Thomas Barkin, Governor Christopher Waller, and Vice Chair for Supervision Michelle Bowman, set to deliver remarks. Their comments mark the first major public appearances after the October FOMC meeting, the midterm lurch to the left, and Friday’s strong jobs report. Markets will be listening closely for any hints of forward guidance.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$42.56 (+1.05%)
5-Day Change: +$171.94 (+4.36%)
YTD Range: $3,870.47 - $5,595.02
52-Week Range: $3,870.47 - $5,595.02
Weighted Alpha: -4.02

Gold begins the week with a bit of a bid at the high end of last week's range. The yellow metal is being buoyed by weakness in the dollar and oil, despite more hawkish Fed expectations.



Last week's high at $4,058.97 has yet to experience a true retest. A breach of this level is needed to open the door to probes of the $4,200 zone, where the 38.2% retracement level of the recent leg down corresponds closely with the falling 100- and 50-day moving averages.

A series of daily highs going back to late September above $4,200 is probably the more important resistance. If gold can muster six-week highs above $4,217.02/4,225.02, considerable credence would be lent to the scenario that suggests a significant low is in place at $3,870.47.

Global gold ETFs experienced a net outflow of 8.7 tonnes ($1.1 billion) last week—marking the second weekly contraction in three weeks. While recent price correction has prompted some unwinding of speculative long positioning and cross-asset deleveraging, the relatively modest scale of the outflows underscores underlying investor resilience.

Further stoking the tailwind for gold, central banks and other official institutions added 321 tonnes in the third quarter according to the World Gold Council – surpassing the five-year quarterly average of 227 tonnes by 42% and pushing year-to-date purchases to 675 tonnes. While disclosed country-level buying was led by China (63 tonnes) and Poland (40 tonnes), sustained central bank demand at historically elevated price levels underscores a broader, ongoing structural shift toward strategic reserve diversification.

In a comment last week, Johan Palmberg of the WGC identifies three key historical indicators that signal when a gold sell-off in a bear regime is reaching an interim bottom: gold trading well below its 200-day moving average (measuring market dislocation), a sharp rally in the U.S. dollar, and a washout of speculative futures positioning. Historically, when all three conditions were met, subsequent three-month gold returns were positive in every instance.

Currently, two of these three conditions are in place: gold is trading well below its trend, and the dollar has rallied. However, "speculative froth has not yet been fully cleared," according to Palmberg.  He believes a final shake-out may be needed before the recovery setup is fully complete.

Today's Asian low at $4,054.63 marks initial support and protects Friday's low at $4,030.51. A short-term retreat below $4,000 would leave the recent low at $3,870.47 vulnerable to further attacks.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$0.727(+1.40%)
5-Day Change: +$2.107 (+4.16%)
YTD Range: $48.624 - $121.630
52-Week Range: $48.335 - $121.630
Weighted Alpha: -12.26

Silver is higher today, riding a softer dollar and falling oil prices that eased inflation worries. The metal is tracking gold higher ahead of Tuesday’s CPI report, which will shape near-term Fed expectations.



Last week's high at $53.474 remains intact thus far, with a minor retracement level at $53.924 and the falling 20-day moving average at $54.184 conspiring to block the upside. A short-term close above the 20-day is needed to embolden the bull camp and put the $58 zone in play.

However, concerns that a Democrat-controlled Congress will move early next year to limit AI development, thereby curbing near-term industrial demand for silver, pose a headwind. At the same time, heightened regulatory uncertainty and any resulting market volatility could support silver’s safe-haven appeal, proving some offsetting support.

Today's low so far at $51.419 provides initial support. A breach of Friday's low at $51.200 would suggest potential for a retest of last week at $48.624. Penetration of the latter would favor a downside extension to the $48 zone initially, although a push to the $45.563 low from last October would have to be considered.


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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