7/1/2024

Gold and silver consolidate within Friday's ranges with focus still on Fed intentions

OUTSIDE MARKET DEVELOPMENTS: The year's second half begins with heightened political uncertainties. The top of the ticket for the Democratic Party is suddenly in doubt for the U.S. election in November after incumbent Joe Biden's dismal debate performance on Thursday.

Post-debate polling is perpetuating the angst among Democrats, having swung in favor of former President Donald Trump. A CBS News/YouGov poll showed that 72% of registered voters surveyed do not believe Biden has the “mental and cognitive health necessary to serve as president.” Nonetheless, at this point, Biden remains the presumptive nominee.

It appears that French President Macron's gamble to call snap elections following the swing to the right in European Parliamentary elections in June has failed. In the first round, Marine Le Pen's National Rally party received over 33% of the vote, while the far-left Popular Front got 28%. Macron's centrist alliance came in third at 20.8%.

The PBoC has announced they will intervene in the bond market "in the near future." The goal is undoubtedly to halt the bond rally that has driven China's 10-year yield to 2.18%, its lowest level since 2002.

U.S. bases in Europe went on heightened alert over the weekend amid possible terrorist threats. Force Protection Condition “Charlie” is the second highest alert status and reportedly hasn't been seen "in at least 10 years" according to a U.S. official cited by CNN.

U.S. manufacturing PPI rose to 51.6 in Jun, versus 51.3 in May and 51.7 flash. Manufacturing ISM fell to 48.5 in Jun on expectations of 49.1, versus 48.7 in May. ISM prices fell to 52.1 from 57.0 in May.

Construction spending fell 0.1% in May, below expectations of +0.3%, versus a revised +0.3% in Apr (was -0.1%).

Taken in conjunction with last week's soft inflation data, this morning's economic reports perhaps give a slight boost to sooner-than-later Fed rate cut expectations. Fed funds futures put the prospect of a Sep rate cut at 58.2% this morning.


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$5.51 (+0.24%)
5-Day Change: +$2.09 (+0.09%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34
Weighted Alpha: +22.58

Gold starts H1 in neutral territory despite heightened political uncertainty and worries about a potential terrorist attack in Europe. Price action has been contained by Friday's range thus far.



Gold achieved a higher close last week, but ended the month of June with a slight loss (-$1.31). It was the first lower monthly close in five. The yellow metal posted a 4.2% Q2 gain and was up 12.8% for H1.

The corrective low from 07-Jun at $2,287.64 has held for over three weeks now, adding some degree of confidence to the notion that the low is in. A breach of short-term chart/Fibonacci resistance at $2,338.03/$2,339.36 would offer further encouragement to the bull camp and favor a retest of the 21-Jun high at $2,367.22.

On the other hand, a retreat below Friday's low at $2,319.85 would call for more consolidation in the lower half of last week's range with some heightened risk to key support at $2,287.64.

The COT report showed that net speculative long positions rose to 246.2k contracts last week, versus 243.2k in the previous week. That's the highest since Apr 2022 and suggests the $2,300 zone continues to draw bids. 

Central banks reported 10 tonnes of net gold buying in May, despite record-high prices at the time. Top buyers were Poland (10 tonnes), Turkey (6 tonnes), India (4 tonnes), and the Czech Republic (3 tonnes). Kazikstan was the biggest seller at -11 tonnes.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.098 (+0.34%)
5-Day Change: -$0.271 (-0.92%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +30.95

Silver is trading higher for a third session but price action is well contained within last week's range. The white metal notched a second consecutive lower weekly close on Friday and ended June with a decline of 4.2%. It was the first lower monthly close in four.

 

Silver rose 16.8% in Q2 and posted a 22.5% gain for H1. Despite the June losses, the dominant trend is still bullish.

Last week's range of $28.618 to $29.714 defines short-term support and resistance.

The COT report showed that net speculative long positions rose to 56.0k contracts last week, versus 51.9k in the previous week. That's the highest since the first week of June.

Heraeus notes that increased solar power manufacturing in the U.S. and the expansion of EV charging infrastructure bodes well for domestic silver demand. The U.S. is also expected to announce new tariffs aimed at Chinese solar panels. 


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
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