7/19/2024

Gold and silver lower on the week as yields and the dollar correct

OUTSIDE MARKET DEVELOPMENTS: Donald Trump accepted the Republican Party's presidential nomination last night in Milwaukee. Trump talked about last weekend's assassination attempt and his speech had a softer tone that resonated with some voters.

The former president promised to secure the border, defeat inflation, and boost fossil fuel production. Trump also pledged to protect U.S. manufacturing jobs by imposing tariffs on trading partners. He hit all the talking points, but the speech was short on policy details.

Trump also warned that "our planet is teetering on the edge of World War III," pointing to the war in Ukraine, the Israel/Hamas conflict, and tensions with China regarding Taiwan. He implied that his strong leadership could calm global tensions.

Meanwhile, it seems increasingly likely that President Biden will step aside and not seek reelection. The burning question is will his unpopular VP Kamala Harris be elevated to the top of the ticket, or will Democrats try to bring in someone else?

China's economy slowed to a 4.7% annualized pace in Q2, down from 5.3% in Q1. This was below expectations and weighed heavily on commodities.

The ongoing property crisis is adversely impacting household wealth and confidence, causing consumers to reduce spending. Chinese leaders have gathered to discuss reforms and modernization plans that could give the sluggish economy a boost.

The U.S. economic calendar is empty today, save for FedSpeak from Williams (centrist) and Bostic (dove).


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$32.53 (-1.33%)
5-Day Change: -$15.33 (-0.64%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +24.58

Gold came under more intense corrective pressure in overseas trading on Friday as U.S. yields and the dollar rebounded. The yellow metal is at risk of a lower weekly close after setting a record high at $2,481.63 on Wednesday.



A close above $2,411.66 is needed to avert a reversal on the weekly chart. However, sub-$2400 intraday prices could attract buying interest ahead of the weekend.

Initial support is marked by the 12-Jul low at $2,394.20, which should help keep the 50% retracement level of the most recent leg-up at $2,384.64 protected. Today's downside extension also leaves gold oversold intraday.

The market has priced in a September rate cut, so I suspect the rebound in yields and the greenback are corrective in nature. Even after yesterday's strong Philly Fed data, Fed funds futures continue to put the probability of a Sep cut at 98%.

I think investors will continue to view setbacks in the range as buying opportunities. FedSpeak from Williams and Bostic could provide some underpinnings for the market. Next week, focus will be on the latest PCE inflation reading out on Friday.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.649 (-2.18%)
5-Day Change: -$1.664 (-5.40%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +23.06

Silver extended losses on Friday to trade below $29. The white metal is poised for a second consecutive lower weekly close.



Concerns about the Chinese economy have contributed to three consecutive daily declines in silver. However,
given the oversold condition that has developed, important support at $28.618 (26-Jun low) looks to be well protected.

In accepting the Republican presidential nomination last night, Donald Trump pledged to roll back the Biden administration's efforts to combat climate change. He also said he would strive for U.S. energy independence by increasing domestic oil and gas production.

Less federal funds for alternative energy sources such as solar, could dampen industrial demand for silver.  

A rebound above $30 would ease short-term pressure on the downside. Price action since May has the makings of a continuation pattern within the dominant uptrend.

I'm leaning toward a symmetrical triangle if the $28.618 low holds. If that's the case, look for further choppy consolidation within the defined range culminating with an eventual upside breakout.


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