6/06/2024

The rate-cut cycle accelerates with easing moves by the BoC and ECB this week

OUTSIDE MARKET DEVELOPMENTS: The much anticipated rate-cut cycle appears to be well and truly underway after the Bank of Canada eased on Wednesday and the ECB cut their refi rate by 25 bps today. Both moves were widely anticipated.

The Swiss National Bank cut back in March and may ease further when they meet later this month. The central banks of Sweden, Czech Republic, and Hungary have also cut rates recently. The BoJ on the other hand hiked rates in March for the first time in 17 years amid low inflation, after more than 13 years at or below 0%.

The market is still desperate for clues as to when the Fed will make its first cut. Yesterday's Services ISM print was better than expected, offsetting some of the growth worries raised by the Manufacturing ISM miss earlier in the week.

U.S. yields and the dollar firmed in reaction as hopes for a 'sooner rather than later' move by the Fed ebbed.

Focus remains squarely on May jobs data, which will be released tomorrow. Median expectations are for a payrolls gain of 195k. However, the ADP survey miss and the rise in initial jobless claims to a 4-week high have some concerned that payrolls will undershoot.

GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +6.19 (+0.26%)
5-Day Change: +21.40 (+0.91%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34

Gold rallied to new highs for the week and then proceeded to take out nearby resistance at $2,361.54/81. The market seemed to be encouraged by the BoC and ECB rate cuts, although both were very much anticipated. Gains may be attributable to position squaring ahead of Friday's jobs report.



Fed funds futures are little changed, still showing November as the most likely timing of the Fed's first rate cut. The market will hope for a clearer picture to emerge after the payrolls data is out.

The next resistance to watch $2,382.41/2,383.24, marked by the halfway back point of the correction off the all-time high and the high from 23-May. While a degree of confidence has been returned to the underlying uptrend, I /don't envision $2,383.24 being taken out ahead of payrolls.

The highs from earlier in the week along with today's overseas low at $2,355.01 now mark initial support. Let's call support $2,355.01/$2351.75. A retreat below this area would suggest potential for further attacks on the downside, putting Monday's low at $2,315.47 back in play.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.289 (+0.96%)
5-Day Change: -0.585 (-1.88%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379

Silver surged to new highs for the week early in the U.S. session. The white metal is currently trading nearly 4% higher on the day.



The market seems disinclined to be short going into the jobs report. Analysts seem to be leaning toward a payrolls miss tomorrow.

The rebound above $31 is indeed encouraging, as noted in previous commentary this week. Additionally, just over 61.8% of the 1-week decline from $32.254 (29-May high) has now been retraced.

This is a good indication that the recent corrective phase may be over, but I'm inclined to wait for some confirmation from tomorrow's price action.

Previous resistance at $30.733/825 now defines initial support.

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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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