7/23/2024

Gold rebounds modestly while silver remains defensive

OUTSIDE MARKET DEVELOPMENTS: Democrats have rallied behind Kamala Harris as their presumptive nominee. She has reportedly secured the support of enough delegates to clinch that nomination, but it's still nearly 4 weeks until the DNC and I would categorize the situation as fluid. The fact that Harris raised a record-setting $81 million yesterday is further evidence of coalescing support.

There has been speculation that President Biden's health is deteriorating rapidly, stoking concerns that he won't be able to complete his term. Political uncertainty remains high.

Secret Service Director Kimberly Cheatle has resigned after yesterday's relentless grilling before Congress.

Recent U.S. political turmoil has had little impact on the greenback. The dollar index edged to a 7-session high in overseas trading but remains just about the midpoint of this year's range. 

ECB Vice President Luis de Guindos hinted at a September rate cut as inflationary pressures continue to moderate. ECB projections see inflation falling to their 2.0% target in Q4. The euro slid to an 8-session low providing some lift for the dollar.

The Richmond Fed Index tumbled to a 4-year low of -17 in June, versus -10 in May. Prices paid moderated to 3.00%, down from 3.58% in May. Prices received fell to 1.31% from 2.35%. Cooling prices and an uptick in contraction risks arguably lend credence to Sep rate cut expectations.

The Philly Fed Services Index plunged to -19.1 in July. That's a 4-year low right after hitting a 2-year high of 2.9 in June. Weakness in business activity was broad-based. Employment fell to -4.9. Prices paid rose 30.4 from 24.4. "Everything is so broken," quipped Zerohedge on X.

U.S. existing home sales fell 5.4% to 3.890M in June, below expectations of 3.990M, versus 4.110M in May. The sales trend remains right around the 13-year low from 2010 as mortgage rates continue to pose a considerable headwind.

The median sale price rose 2.33% to a record high $426,900. That price is above new home prices for the first time since COVID and the price differential is at a new record.


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$11.28 (+0.47%)
5-Day Change: -$61.27 (-2.48%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +25.16

Gold has rebounded modestly from the last four sessions of losses. While upside momentum has not been terribly impressive, bulls can be encouraged by the fact that the yellow metal has held above the 20-day moving average.



Support marked by the halfway back point of the most recent leg-up at $2,384.64 was approached yesterday but remains intact. This level is now reinforced by yesterday's low at $2,385.50.

So far today, price action has been contained by yesterday's range. A breach of yesterday's high at $2,411.65 would encourage the bulls and likely shake out some of the shorts. Secondary resistance is at $2,433.56 which is defined by the 50% retracement level of the decline off last week's record high at $2,481.63.

India slashed import duties on gold and silver today to 6% from 15% ostensibly to help reduce smuggling. The move is likely to boost retail demand in India, which is the second-largest consumer of gold behind China. Jewelry demand in particular has been stymied by record-high prices.

The move is not without cost as it will likely cause India's trade deficit to widen and put additional pressure on the rupee. The rupee fell to a record low against the dollar of 83.69 after stocks slid on a proposed hike to capital gain taxes.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.053 (-0.18%)
5-Day Change: -$2.191 (-7.01%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +23.41

Silver remains defensive, having set a new 4-week low at $28.723 in overseas trading. However, the previous corrective low from 26-Jun at $28.618 remains intact thus far.



Silver hasn't recorded 5 consecutive lower closes since December, so I'm cautiously optimistic that the existing oversold condition will generate a little short covering today. But even if the white metal manages to close above $29.122 the downside remains vulnerable.

I'd like to see silver climb back above $30 to ease pressure on the downside. The 20- and 50-day moving averages at $30.103 and $30.212 respectively are arguably the more important short-term levels to be watching.

If support at $28.618 gives way, the 100-day moving average at $28.358 would be vulnerable to a test. Below the latter, $28.00 and $27.404 would be in play.


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