6/04/2024

A significant slowdown in PBoC gold buying in April weighs  

OUTSIDE MARKET DEVELOPMENTS: Today's U.S. calendar features April factory orders. Median expectations are for a 0.6% rise, down slightly from a revised +0.7% in March. The market has already displayed some concern about growth risks in light of recent data, so a miss on factory orders could further reinvigorate rate-cut bets.

For now, those growth risks are pressuring stocks and yields.

The ECB may cut rates as soon as this week's meeting (June 6). ECB President LaGarde has signaled a "strong likelihood" of a 25 bps cut. The ECB's Stournaras said early last month that the central bank now sees "three interest rate cuts in 2024 as the most likely scenario."

Analysts at Heraeus speculate that a weaker euro could spark European investment in gold as a devaluation hedge. European outflows from gold ETFs have been pretty consistent this year. It would be encouraging to see that trend reversed.

News that the PBoC added less than 2 tonnes of gold to reserves in April is weighing on the yellow metal. Aside from that, The World Gold Council's latest report was largely upbeat, showing an eleventh consecutive month of net purchases and a rebound from March.

Oil and copper losses may be weighing on the broader commodities complex amid demand worries. At the same time, a drop in oil prices just as the summer driving season begins reduces inflation pressures and bodes well for the Fed rate cut scenario.

The market will be paying close attention to the jobs data on Friday to see if the labor market remains resilient.

GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$21.56 (-0.917%)
5-Day Change: -33.42 (-1.42%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34

Gold formed a simple reversal day on Monday (lower low, higher close), but was unable to sustain the gains. Price action remains confined to yesterday's range (inside day).

Monday's low at $2,315.47 has not been challenged, leaving the more important $2,307.65/$2,300.00 zone protected. While the short-term corrective tone remains bearish, I don't believe the May low at $2,281.97 is in jeopardy, at least not before Friday's jobs report. Look for some base-building price action over the next several sessions.

I'd still like to see good chart resistance at $2,361.54/81 exceeded to return a measure of confidence to the underlying uptrend. Yesterday's high at $2,351.75 along with last Friday's high at $2,357.11 now provide intervening barriers.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$1.01 (-3.29%)
5-Day Change: -$2.365 (-7.37%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379

Silver tumbled in overnight trading, retracing all of Monday's rebound and setting a new cycle low at $29.699. These were the first trades below $30 in more than 2-weeks.

Short-term focus remains squarely on the downside, with the next level of support at $29.214, which is marked by the halfway back point of the leg-up from $26.049 (May 2 low) to the recent cycle high at $32.379 (May 21 high).

I'd like to see silver trade convincingly back above $31 to return some confidence to the uptrend. Suddenly that level is quite a ways away with the overseas high at $30.825 marking intervening resistance.

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Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
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