7/22/2024

Gold and silver remain defensive for fourth consecutive session

OUTSIDE MARKET DEVELOPMENTS: President Biden announced on Sunday that he would not seek reelection. This comes less than a month before the DNC and just over 100 days ahead of the general election.

Biden endorsed Vice President Kamala Harris and she is considered the front-runner for the top of the Democratic Party ticket. However, a fair amount of uncertainty remains as Ms. Harris is not particularly popular. The Democratic National Committee Chair Jaime Harrison promised "a transparent and orderly process to move forward.”

China's PBoC cut its 7-day reverse repo rate by 10 bps to 1.7%. It was the first reduction in nearly a year and came as a bit of a surprise. In addition, 10 bps cuts were made by Chinese banks to their 5-year and 1-year prime loan rates. The yuan dropped in reaction.

The moves comes on the heels of weaker-than-expected Q2 economic data last week. China is trying to stimulate the economy and get back on track to achieve its 2024 growth target of 5%. That may be a challenge without more direct stimulus.

Today's U.S. economic calendar is light with just the Chicago Fed National Activity Index. The index fell to 0.05 in June, versus a revised 0.23 in May. According to the report, "Three of the four broad categories of indicators used to construct the index decreased from May, and three categories made negative contributions in June."


Focus this week falls on Friday's PCE data for June, most notably the chain price index. The Fed's favored measure of inflation is expected to come in unchanged which would further heighten expectations for a September rate cut. The FOMC meets next week, with steady policy expected for July.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$6.38 (+0.27%)
5-Day Change: -$26.63 (-1.10%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +24.28

Gold rose modestly in Asian trading on the Biden news but gains could not be sustained. Some short-term technical damage was done to the chart last week when new record highs were followed by a lower daily close and a lower weekly close.



With minor chart support at $2,394.20 (12-Jul low) now negated, the halfway back point of the most recent leg-up at $2,384.64 is vulnerable to a test. Below that, $2,371.16 (11-Jul low) protects the 61.8% retracement level at $2,361.74.

At this point, losses are still considered to be corrective. Gold hasn't seen four consecutive lower closes since February. A close above $2,400.39 today would prevent that. A move back above today's overseas high at $2,411.65 would offer some encouragement to the bull camp.

Gold ETFs saw their fifth consecutive weekly net inflows last week, led by North American and European interest. Net inflows were 11.1 tonnes (~$913M). Global AUM rose to $243 bln.

Gold ETF flows by region

The latest COMEX long positioning data as of 16-Jul saw gold interest jump to 897.39 tonnes. Market sentiment based on the COT remains broadly supportive.

Comex Net Long Positioning

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.168 (+0.55%)
5-Day Change: -$1.824 (-5.95%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +22.12

Silver remains on the defensive, trading lower for a fourth consecutive session. The white metal hasn't seen four consecutive lower daily closes since January.



While it seems unlikely silver will close higher today (above $29.215), the oversold condition has thus far prevented a true test of important support at $28.618 (26-Jun low). With this level intact, the medium and longer-term trends are still neutral to favorable.

A rebound above $30 is needed to lend some encouragement to the bull camp. The overseas high at $29.420 and Friday's high at $29.835 offer intervening barriers.

The COT report for silver shows net speculative long positions as of 16-Jul were steady at 61.1k contracts versus the previous week. While that's somewhat encouraging, based on last week's price action I suspect next week's COT data will reflect a deterioration of sentiment.

CFTC Silver Speculative Net Positions

If support at $28.818 gives way, it will likely trigger some stops with initial potential to challenge the 100-day moving average at $28.302. Below the latter, $28.00 and $27.404 would be the levels to watch.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.