8/20/2024

Silver buoyed by fresh record highs in gold

OUTSIDE MARKET DEVELOPMENTS: The dollar has fallen to new 7-month lows on high expectations that the Fed will begin easing at next month's FOMC meeting. This week's market focus is on tomorrow's release of the minutes from the July FOMC meeting and the KC Fed's Jackson Hole Symposium.

At least a 25 bps rate cut is fully priced in for September, but investors are still seeking clarity on the central bank's policy intentions for the remainder of the year. They're hopeful that the minutes and/or Chairman Powell's speech at Jackson Hole on Friday will provide that clarity.

FedSpeak from Bistic and Barr is on tap for today.

As ceasefire talks continue in the Middle East, the bodies of six Israeli hostages were recovered in Gaza. U.S. Secretary of State Antony Blinken said earlier in the week that Israel had agreed to a ceasefire for hostages deal. Hamas has not signed on yet and it's not clear at this point if the deaths of the six hostages have changed the mood of the Israelis.

The Democratic National Convention is underway in Chicago, with President Biden taking a victory lap and passing the reigns to Kamala Harris. Harris's recent policy proposal to curtail inflation with price controls didn't go over so well, leaving many to wonder if she'll back away from that position when she speaks before the party faithful on Thursday evening.

The Philly Fed Nonmanufacturing Survey suggests the services sector remains weak. The current regional activity index fell 6 points to -25.1, the lowest reading since December 2020.


GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +18.40 (+0.73%)
5-Day Change: +$61.70 (+2.50%)
YTD Range: $1,986.16 - $2,527.10
52-Week Range: $1,812.39 - $2,527.10
Weighted Alpha: +34.15

Gold extended to the upside in early U.S. trading to establish a new record high at $2,529.57 before retreating into the range. The yellow metal is getting a boost from lower rates, a weaker dollar, and burgeoning speculative interest.



Gold ETFs saw solid net inflows of 8.5 tonnes last week, 7.4 tonnes of which were attributed to North American investors. European investors added 1.1 tonnes, while Asian investors accounted for 1.6 tonnes of outflows.

The COT report showed that net speculative long positions rebounded 28.6k to 267.3k contracts last week. Most of the declines from the previous two weeks have been retraced and I suspect long positions will continue to build this week. 

CFTC Gold speculative net positions

The World Gold Council expects India's "pro-gold policy measures" to bolster demand by 50 tonnes or more in H2. The slashing of import duties effectively resulted in a 6% reduction in the price of gold, making for an attractive buying opportunity. The WGC also sees the RBI continuing with its gold-buying campaign.

Upside potential in gold based on Fibonacci and measuring objectives remain highlighted at $2,539.77 and  $2,597.15/$2,600.00. 

Initial support is noted at $2,500.00/$2,498.32. This level protects Monday's low at $2,488.19.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.309 (+1.05%)
5-Day Change: +$1.904 (+6.84%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +26.52

Silver has garnered some buoyancy from the latest round of new all-time highs in gold, reaching a 5-week high of $29.877 in early U.S. trading. However, upticks faltered ahead of $30 and the white metal retreated to trade lower on the day.



Nonetheless, price action this week has improved the technical picture significantly.  Notably, silver has now retraced more than half of the nearly $6 decline since the May high at $32.379, and is back above the 20-, 50-, and 100-day moving averages.

I'd still like to see a convincing move above $30.00/$30.14 to return additional credence to the underlying uptrend. Any signs of heightened growth risks – such as today's Philly Fed survey – are likely to weigh on industrial metals such as silver.

While scope for further retreats into the range should not be ruled out, the new record highs in gold have me fairly confident the low is in for silver. I'll be more confident with a trade above $30.14.

Today's low at $29.24 corresponds closely with the 50-day moving average, marking initial support. Secondary support is at $29.02 (100-day SMA) down to yesterday's low at $28.781.

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