8/9/2024

Gold and silver stabilize after Thursday's solid gains

OUTSIDE MARKET DEVELOPMENTS: Ukraine continues to press its offensive within Russian territory. Fierce battles are reportedly underway in the Sudzhansky and Korenevsky districts in Russia's Kursk Oblast.

While Russia claimed the incursion was halted, reports from residents in the region suggest otherwise. Seemingly, Russia was caught completely off-guard by the offensive and is scrambling to respond.

Additionally, Russia's Lipetsk region has "been subjected to a massive [drone] attack” according to the regional governor there. A military airfield outside the city of Lipetsk appears to have been the target.

Recent seismic activity has prompted Japan to issue its first-ever megaquake advisory. A megaquake is defined as a magnitude 8 or higher, with the potential for significant structural damage and loss of life.

Wall Street had its best day since 2022 on Thursday, just days after its worst day for the same period. Yesterday's lower-than-expected initial jobless claims tempered labor market worries triggered by the July nonfarm payrolls miss, boosting sentiment.

However, I believe the optimism that was generated is overblown. The 3-month uptrend in initial and continuing claims remains intact, creating downside risk for August payrolls. Look for market volatility to remain elevated amid persistent uncertainty about inflation, growth risks, central bank policy, and the unwinding of yen carry trades.

Attention now turns to U.S. inflation data that comes out next week. The market is expecting a monthly rise of 0.2% for July PPI. Median expectations for July CPI are +0.2% m/m as well.

Ross Norman senses some frustration in the markets "that the higher-for-longer narrative is long beyond its sell-by date." Next week's data could intensify that frustration, or blow it up.

If inflation readings are hotter than expected, we could see some tempering of Fed rate cut expectations for September. That could lend itself to heightened market volatility on worries that the central bank is mismanaging efforts to orchestrate a soft landing.

Today's U.S. economic calendar is empty. We will hear FedSpeak from nonvoting KC Fed President Jeffrey Schmid this evening. Schmid is a centrist.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +3.80 (+0.16%)
5-Day Change: -$11.16 (-0.46%)
YTD Range: $1,986.16 - $2,481.63
52-Week Range: $1,812.39 - $2,481.63
Weighted Alpha: +28.09

Gold notched its first higher close in six sessions on Thursday as risk appetite returned. While modest upside follow-through has been seen today, a close above $2,446.00 seems unlikely so we should see a lower weekly close.



Nonetheless, more than 50% of this week's decline has been retraced and gold has moved back within 2% of its all-time high. The yellow metal also registered a close back above the 20-day moving average yesterday, another bullish signal. A breach of the $2,434.29 Fibonacci level (61.8% retracement of the decline from last week's high) would lend additional credence to the long-term uptrend.

While risk appetite recovered in the latter half of the week, I suspect prudent investors who were rattled by this week's market plunge are adding gold to their portfolios as a hedge against ongoing risks. An easier dollar is providing some underpinning for gold as well.

A retreat below the 20-day SMA at $2,415.92 would favor further consolidation within the range. Today's overseas low at $2,417.83 bolsters this support area.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.046 (+0.17%)
5-Day Change: -$1.058 (-3.71%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +19.27

Silver saw a key reversal on Thursday, but upside follow-through today has been disappointing thus far. The white metal is poised for its 8th lower weekly close out of the last 12.



The trend since the 11-year high was established at $32.379 on 21-May remains bearish amid ongoing global growth worries. The 20-day moving average is now below both the 50- and 100-day SMAs.

A climb back above $29 is needed to ease pressure on the downside, but right now it's questionable whether silver can reclaim the 28-handle before renewed selling interest emerges.

On the downside, the $26.124/$26.049 area may still be a short-term attraction. This zone is defined by the low from 02-May and the 200-day moving average. The lows from earlier in the week at $26.571/524 provide a good intervening barrier.


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