10/22/2024
Gold sets new highs once again as silver nears $35
OUTSIDE MARKET DEVELOPMENTS: Top secret documents leaked in the U.S. seemed to confirm that Israel is preparing for a retaliatory strike on Iran that will undoubtedly lead to another Iranian strike on Israel. The weekend attack by Iranian proxy Hezbollah on the residence of Israeli Prime Minister Benjamin Netanyahu further raises the stakes.
Israel continues to strike Hamas positions in Gaza and Hezbollah in Lebanon. Attacks on Hezbollah's financial network are a new twist designed to interdict the terrorist group's financing mechanisms that largely flow through Iran.
Israel and Iran seem to be hurdling toward a broader regional war, keeping markets on edge.
The IMF has trimmed its 2025 global growth outlook to 3.2% from 3.3% in July. The IMF has a brighter outlook for U.S. growth with an upgrade of 0.3% to 2.2%.
Nonetheless, the first sentence of the executive summary says it all: "Global growth is expected to remain stable yet underwhelming." The five-year forecast at 3.1% "remains mediocre compared with the prepandemic average."
Tepid growth prospects fortify global easing expectations, but the IMF warned that price risks persist: "Further disruptions to the disinflation process, potentially triggered by new spikes in commodity prices amid persistent geopolitical tensions, could prevent central banks from easing monetary policy, which would pose significant challenges to fiscal policy and financial stability," according to the report.
The resilience of the U.S. economy and risks of revived inflation has prompted the trade to reduce bets for an additional 50 bps of Fed easing into year-end. A 25 bps cut in November remains widely anticipated, but doubts are creeping in about December.
FedSpeak from Daly and Schmid reiterated the mantra of data dependency. Jeffrey Schmid, the new KC Fed president is a centrist and will be a voter in 2025. He said he favors a "cautious and gradual approach to policy," preferring to “avoid outsized moves.”
The Richmond Fed Composite Manufacturing Index rose 7 points to -14 in October, inside expectations of -17, versus -21 in September. The index has been in contraction territory for nearly a year.
"Of its three component indexes, shipments increased from −18 to −8, new orders rose from −23 to −17, and employment increased from −22 to −17," according to the Richmond Fed.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$19.12 (+0.70%)
5-Day Change: +$76.85 (+2.89%)
YTD Range: $1,986.16 - $2,743.84
52-Week Range: $1,812.39 - $2,743.84
Weighted Alpha: +39.85
Gold has set new record highs once again. The yellow metal has set all-time highs for four sessions in a row, driven by rising geopolitical risks and intensifying political uncertainty in the U.S. just two weeks out from the election.
A Reuter's reporter asked me this morning how gold will react based on who wins the U.S. presidential race. I believe gold is agnostically bullish. Half the population will be incredibly disappointed by the outcome regardless of the winner.
This disappointment has the potential to morph into political unrest as the results are questioned, and almost certain legal battles play out. It seems the U.S. is destined to remain bitterly divided politically for some time to come.
The next upside target at $2,810.38 remains highlighted based on a Fibonacci projection. The $2,800 level is deemed an intervening psychological attraction.
Short-term corrective downticks have attracted buying interest and that's likely to continue. A more protracted correction could be triggered by a Middle East cease-fire or signs that inflation is reigniting, which could cause a shift in easing expectations.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +0.605 (+1.79%)
5-Day Change: +$3.215 (+10.21%)
YTD Range: $21.945 - $34.711
52-Week Range: $20.704 - $34.711
Weighted Alpha: +43.76
Silver continues its march higher in the wake of last week's upside breakout above $32.700. The white metal has traded higher in eight of the past nine sessions and is up more than 10% over the last five.
The critical $35.217 Fibonacci level (61.8% retracement of the decline from $49.752 to $11.703) has quickly come within striking distance. A breach of this level would return considerable credence to the long-term uptrend and favor an eventual return to the $50 zone.
Contingent on a breach of $35.217, the $35.997/$36.000 level will become the next upside target based on a Fibonacci projection. Retreats back into the range should continue to be viewed as buying opportunities.
Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
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