8/7/2024

Gold and silver higher on the day, but the downside remains vulnerable

OUTSIDE MARKET DEVELOPMENTS: Dovish comments from BoJ Deputy Governor Uchida have calmed markets somewhat. “We won’t raise interest rates when financial markets are unstable,” said Uchida.

This diminishes immediate concerns about the unwinding of the yen carry trade, but the relief is clearly meant to be temporary. The BoJ will do what it must to get Japan's inflation rate back to the 2% target.

The yen fell to new lows for the week, driving the USDJPY rate to an intraday high of 147.884. The rebound in the dollar has provided some relief for the precious metals and U.S. stocks are trading higher.

Israel continues to brace for a retaliatory strike from Iran and/or Iranian proxies. However, it's been nearly a week since Hamas political leader Ismail Haniyeh was killed in Iran, presumably by Israel. A Washington Post article suggests intense political pressure focusing on the risks of miscalculation may be making Iran think twice about its reaction.

In the wake of Haniyeh's death, Hamas has named Yahya Sinwar as its new leader. Sinwar is said to have plotted the October 7th attack on Israel. Such a defiant move may negatively impact prospects for a cease-fire. Geopolitical risks will remain elevated in the region for the foreseeable future.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$8.21 (+0.34%)
5-Day Change: -$47.45 (-1.94%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +25.82

Gold is trading modestly higher, enjoying a little relief from recent deleveraging pressure thanks to dovish comments out of the BoJ. However, price action remains confined to the lower half of Monday's range.



If the BoJ is on hold for the time being, intending to stabilize markets, it might allow investors to reconsider the value of gold as a hedge against market uncertainty. A climb back into the upper half of Monday's range would offer some encouragement to the bull camp.

While price action in the first part of the week was quite negative, keep in mind that a challenge of the all-time high was just seen on Friday. Gold is currently trading just over 3% off that low. The total magnitude of the retreat from Friday's high to Monday's low is just over 4%.

Perhaps most importantly, the previous corrective low at $2,354.48 (25-Jul) remains well protected. As long as this level is intact, I expect gold to form a consolidative, continuation pattern (symmetrical triangle?) favoring an eventual upside breakout and new all-time highs.

A serious escalation of the situation in the Middle East would likely see safe-haven buying overwhelm any lingering deleveraging pressures, shifting focus back to the dominant uptrend. A  breach of resistance at $2,416.86/$2,421.84 would put gold decisively back in the upper half of this week's range and return a measure of confidence to the uptrend.

A violation of the overseas low at $2,382.00 would leave Monday's low at $2,369.10 vulnerable to a retest. The key support level I'm watching is the 25-Jul low at  $2,354.48.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.198 (+0.73%)
5-Day Change: -$2.037 (-7.03%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +16.01

Silver remains consolidative at the low end of Monday's range. While intraday prices are higher, a second inside day (lower high, higher low) seems to be forming.



The white metal continues to be weighed by heightened growth risks in the world's two biggest economies, the U.S. and China. Silver is less impacted directly by the yen carry trade and less of a beneficiary of the safe-haven interest that has helped buoy gold comparatively.

The bottom line is that the downside remains vulnerable in silver. Upticks lack momentum and are likely to attract further selling interest.

First resistance is marked by the overseas high at $27.254. Secondary resistance is defined by yesterday's high at $27.492. The midpoint of Monday's range is $27.615.

While silver is presently trading higher on the day, a bearish pennant is evident on the hourly chart. A lower close today must be considered, which would set up a retest of Monday's low at $26.571.


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.