6/17/2024

The precious metals start the week easier after notching higher closes last week

OUTSIDE MARKET DEVELOPMENTS: Consolidative trading prevails for the precious metals as the market awaits a host of FedSpeak this week. Minneapolis Fed President Kashkari said over the weekend that a single rate cut this year was a “reasonable prediction.”

Additional FedSpeak is due from Williams, Harker, and Cook today. The calendar is chock-full of Fed speakers this week. I suspect the message will be largely consistent: One rate cut this year, probably in November, but it's all data-dependent.

Policy decisions are on tap this week for the BoE, SNB, RBA, PBoC, and Bank Indonesia. While the global bias is toward easing, timing remains dependent on perceived progress toward taming inflation and maintaining jobs growth.

U.S. calendar highlights include May retail sales (+0.3% expected) and IP (+0.4% expected) on Tuesday. Flash PMIs come out on Friday. Initial jobless claims will also be closely watched on Thursday, given the 10-month high of 242k seen in the last report. 

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -12.56 (-0.54%)
5-Day Change: +8.41 (+0.36%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34

Gold ended higher last week, breaking a string of three consecutive lower weekly closes. Price action was choppy, but confined to the previous week's range, leaving the $2,287.64 low from 07-Jun intact.



The yellow metal begins this week on its back foot and still appears vulnerable to further tests of the downside with the dollar holding firm. Gold may be forming a base here, or staging for another leg down. The low from 13-Jun at $2.296.92 protects more important support marked by the  $2,289.43/$2,287.64 lows.

First resistance is marked by Friday's high at $2,334.92, which stands in front of last week's high at $2,339.48. Penetation of the latter would highlight $2348.98 initially, but such a move would make the 07-Jun high at $2,386.90 look attractive.

RBI data revealed that India's forex reserves reached a record $655.8 bln in the week ended 07-Jun. Gold reserves rose by $481 million to $57 bln.

The sharp sell-off on 07-Jun was triggered by news that China's central bank hadn't bought any gold in May. Central bank gold buying is expected to remain a major source of demand, even if the PBoC has paused its buying.

The latest COT report for the week ended 14-Jun shows that net spec positions in gold dipped to 233.9k, versus 237.3k in the previous week. 


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.322 (-1.09%)
5-Day Change: -0.473 (-1.59%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379

Silver closed higher last week, but not before setting a 4-week low at $28.719. The lower low and higher close result in a simple reversal on the weekly chart, but the white metal is defensive early in the new week. Price action remains confined to Friday's range thus far.



Recent losses are still seen as corrective within the longer-term uptrend. While dips below $29 have generated some buying interest, momentum on the upside has failed to impress, suggesting that the low is not in yet.

Geopolitical tensions surrounding China's EV exports may be damping demand amid worries of a trade war. Additionally, the recent lurch right in the EU parliament may temper aggressive low-carbon benchmarks in Europe, which currently include banning ICE vehicle sales by 2035.

A less aggressive push toward EV and solar adoption could somewhat lessen the demand for silver, but I doubt it will materially alleviate the current supply deficit. This could however be a positive for platinum and palladium, which are used in the catalytic converters of ICE vehicles to reduce emissions.

U.S. Mint data show that demand for silver coins remained robust in May. A total of 1.75Moz of silver coins were sold in May, a rise of 9.7% y/y. Year-to-date sales now stand at 12.6Moz. +52% versus this time last year.

The latest COT report for the week ended 14-Jun shows that net spec positions in silver dipped to 51.7k, versus 56.4k in the previous week. 


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