9/12/2024

Gold and silver surge following today's PPI and claims data

OUTSIDE MARKET DEVELOPMENTS: U.S. PPI rose 0.2% in August, in line with expectations, versus +0.1% in July. The annualized rate of producer inflation fell to 1.7%, versus 2.2% in July.

Core PPI came in at +0.3% on expectations of +0.2%, versus UNCH in July; +2.4% y/y, unchanged from July.

Initial jobless claims rose 2k to 230k in the week ended 07-Sep, which was in line with expectations, versus a revised +228k in the previous week. Continuing jobless claims increased by 5k in the last week of August to 1,850k from a revised 1,845k the previous week. 

With the important inflation data in the rearview mirror, the market is confident that the Fed will ease by just 25 bps next week. Fed funds futures put the probability at 87% this morning. That's a tick higher than yesterday, but 27 percentage points higher than last week and 37 points higher versus 12-Aug.

August import/export prices come out tomorrow but are less important. Median expectations for both are -0.1%.

The ECB cut rates by 25 bps as was widely expected. The central bank noted, "Recent inflation data have come in broadly as expected." 

However, the ECB upped its 2024 forecast for core inflation to 2.9% but then expects a drop to 2.3% in 2025 and 2.0% in 2026. The central bank trimmed its growth projections to 0.8% for 2024, 1.3% for 2025, and 1.5% for 2026. The downward revisions were attributed to expectations of " weaker contribution from domestic demand over the next few quarters."


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$1.44 (+0.06%)
5-Day Change: +$5.33 (+0.21%)
YTD Range: $1,986.16 - $2,548.477
52-Week Range: $1,812.39 - $2,548.47
Weighted Alpha: +31.90

Gold has surged to new all-time following this morning's PPI release. The market now feels confident that a 25 bps Fed cut is in the offing for next week and that all the potential surprises are behind us. The yellow metal has exceeded my long-standing Fibonacci objective at $2,539.77, trading as high as $2,548.47 thus far.



The next upside target is the measuring objective at $2,597.15/$2,600.00. It may take until next week to get there as the market is already becoming a bit overextended. Also, be aware of a potential "sell the fact" event once the Fed announces policy on Wednesday.

Former resistance at $2,529.57/$2,527.97 now defines first support. Secondary support is the overseas low at $2,511.35 and there's congestion around the $2,500.00 level.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.417 (+1.47%)
5-Day Change: +$0.012 (+0.04%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +24.41

Silver surged to 2-week highs above $29 after the release of this morning's inflation and claims data. Everything was in line with expectations and the market now seems clear that the Fed will announce a 25 bps rate cut next week.



Upside momentum is strong this morning and the white metal seems on track for tests back above $30. A word of caution though, rallies have been consistently failing in recent weeks.

A minor chart point at $29.635 (29-Aug high) has been tested and penetration would clear the way for a challenge of the late August highs at $30.082/164. A breach of the latter would target $30.584 initially, with potential to the July high at $31.652.

Former resistance t $29.125 now offers support. Minor intraday support is noted at $28.731, which protects today's low at $28.557.

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