9/10/2024

Gold and silver remain rangebound ahead of inflation data later this week

OUTSIDE MARKET DEVELOPMENTS: Fed funds futures are steady today with prospects for a 50 bps rate cut holding at 27%. The market awaits tomorrow's CPI report and Thursday's PPI data, which will bring us within a week of the FOMC policy announcement. A 25 bps rate cut is the most likely outcome.

The ECB will announce policy on Wednesday this week. A 25 bps cut is widely expected as worries about persistently slow growth override lingering inflation risks.

Germany – Europe's largest economy – contracted by 0.1% in Q2 and is threatening to slip back into recession. Annualized growth this year is a scant 0.2%.

Former ECB President Mario Draghi is pitching a new coordinated industrial policy for Europe to boost competitiveness and lift the EU out of its doldrums. Draghi recognizes that productivity is "very weak" and a significant investment of up to €800bn a year will be needed to keep the Continent from falling further behind the U.S. and China.

According to a Bloomberg article, the BoJ reportedly sees little need to raise rates again next week. Officials are still monitoring lingering market volatility in the wake of the July hike and are keen to see how markets react to the anticipated first easing move by the Fed in more than four years.

U.S. NIFB small business optimism tumbled 2.5 points to 91.2 in August, versus 93.7 in July. Fewer firms are planning to hire as those expecting a better economy plunged to -13% from -7% in July. The uncertainty index rose 2 points to 92, the highest since October 2020.

Fed Vice Chair Michael Barr (centrist) is slated to speak on Basel III later this morning. 


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$1.03 (+0.04%)
5-Day Change: +$14.33 (+0.57%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +30.84

Gold is pushing higher but remains confined to Friday's range for a second session. Consolidative trading is likely to prevail ahead of U.S. inflation data later this week.



The yellow metal continues to hold the 20-day moving average on a close basis, which is encouraging for the bull camp. The all-time high at $2,529.57 (20-Aug high) defines the upper boundary of the range.

A move to new record highs would reestablish the uptrend and confirm potential to the $2,539.77 Fibonacci objective. Beyond that, the $2,597.15/$2,600.00 zone.

Initial support is at $2,501.33/$2,500.63, where the 20-day SMA corresponds closely with today's overseas low. More substantial support at $2,487.11/06 protects the short-term range lows at $2,474.31/08.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.117 (+0.41%)
5-Day Change: +$0.395 (+1.41%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +22.12

Silver edged higher within Friday's range into early U.S. trading. Just over 50% of the decline from $29.125 (5-Sep high) to $27.732 (6-Sep low) was retraced, but the white metal came under renewed pressure and has since fallen to fresh intraday lows.

  
A minor chart point is noted at $28.079 which stands in front of the recent lows at $27.791/732.

Choppy trading within the range is likely to prevail through Thursday's PPI release. Market expectations for both CPI and PPI are +0.2%. It would take something significantly hotter than expectations to get the market to believe the Fed will hold steady next week. 

A short-term close back above the 20-, 50-, and 100-day moving average complex is needed to return a measure of credence to the underlying uptrend and call for another run at $30. Those are out of reach today at $28.884, $29.052, and $29.174 respectively.

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