8/8/2024

Gold and silver firm intraday, helped by a weaker dollar

OUTSIDE MARKET DEVELOPMENTS: Market focus seems to have returned to Fed easing expectations after a BoJ official indicated yesterday that the central bank would not tighten further "when financial markets are unstable."

I suspect the BoJ is primarily concerned with price stability within Japan. If Japanese markets are relatively stable by the next BoJ meeting on September 19-20, they very well could resume their efforts to bring down inflation by hiking rates again.

With that in mind, unwinding of yen carry trades is likely to continue. Setbacks in the yen provide a more appealing opportunity to do so than when the Japanese currency is surging.

The next FOMC meeting will precede the BoJ meeting by two days. Fed funds futures are now pricing in a 50 bps rate cut. This has caused U.S. yields and the dollar to soften today, providing a boost to risk appetite.

ECB Governing Council member Olli Rehn said this week's market volatility "was an overreaction of market forces in the conditions of uncertainty and thin market liquidity during holiday season, not so much due to issues arising from fundamentals of the economy."Barkin  Rehn also noted that the U.S. economy remains "relatively strong."

U.S. initial jobless claims were 233k in the week ended 03-Aug, below expectations of 240k, versus an upward revised 250k in the previous week. Continuing claims rose to 1,875k from 1,869k in the previous week.

Wholesale sales for June come out later this morning. Median expectations are +0.4%.

We'll also hear FedSpeak from Thomas Barkin. The Richmond Fed President is a moderate hawk.


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$22.61 (+0.95%)
5-Day Change: -$37.47 (-1.53%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +26.49

Gold was unable to sustain yesterday's early gains and ended up notching a fifth consecutive lower daily close on Wednesday. The yellow metal is trading higher again today, but this time displaying better upside momentum, helped by a weaker dollar.



The breach of yesterday's high at $2,405.17 is an encouraging sign. Given that yesterday's low was slightly exceeded as well, we have an outside day.

Now let's see if gold can sustain gains for the remainder of the session. A higher close would be good. A close above $2,405.17 would constitute a key reversal and would be better yet, suggesting that the corrective low is in place at $2,369.10.

A breach of resistance at $2,416.86/$2,421.84 would put gold back above the 20-day moving average and into the upper half of Monday's range. This would be a positive technical signal as well, although short-term conditions are likely to remain choppy.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.348 (+1.31%)
5-Day Change: -$1.519 (-5.33%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +16.15

Silver has rebounded modestly after setting a fresh 13-week low in overseas trading. While the downside remains vulnerable amid global growth risks, a higher close after a new cycle low would be at least short-term bullish.



Yesterday's bearish pennant formation played out as expected, culminating with a retest of the $26.571 low. The chart looks a little more constructive today, but resistances at $27.254 (yesterday's high) and $27.492 (Tuesday's high) must be negated to favor a rebound into the upper half of Monday's range above $27.615.

Upticks are still likely to be viewed as selling opportunities within the medium-term downtrend off the May high at $32.379. Silver has fallen 18% since that high. With the 200-day moving average intact, we could still see the long-term uptrend re-exert itself.

It would take a move back above $29 to garner some confidence in such a call. Until then, choppy trade with a downside bias is most likely.

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