10/31/2024

Gold and silver turn corrective ahead of month-end

OUTSIDE MARKET DEVELOPMENTS: Senior White House negotiators are in Israel today in a new push to broker cease-fires in both Lebanon and Gaza. A deal with Hamas would include at least a partial hostage release.

The Times of Israel reports that Prime Minister Netanyahu believes a "ceasefire in Lebanon is appropriate so long as it fulfills the objective of returning northern residents safely to their homes." A deal with Hamas seems less likely.

U.S. stocks are under pressure after warnings from tech companies about rising AI costs and election uncertainty stoked risk aversion. 

The BoJ held steady on policy, which was widely expected, particularly given the political turmoil ignited by last weekend's snap election. Moderating growth risks leave the door open for more rate hikes and Governor Ueda took a less-dovish tone in his comments. Ueda also noted receding risks in the U.S.

The yen rallied to new highs for the week against the dollar based on expectations that the BoJ would continue its tightening campaign. I do expect the upside in the yen to remain limited, at least until a new government is formed.

U.S. Challenger Layoffs fell 17k to 55.6k in October, versus 72.8k in September. Announced hirings plunged -137.2k to 266.7k. “Job openings have fallen and hiring is pretty flat at the moment. Companies appear to be in a holding pattern as we await election results and the potential regulatory and market environment that follows,” said Andrew Challenger, Senior Vice President and workplace expert for Challenger, Gray & Christmas, Inc.

U.S. Initial Jobless Claims fell 12k to 216k in the week ended 26-Oct, below expectations of 233k, versus a revised 228k in the previous week. Continuing jobless claims dropped 26k to 1,862k.

U.S. Q3 Civilian ECI rose 0.8%, above expectations of +0.9%, versus +0.9% in Q2. Annualized ECI moderated to a 3.9% pace from 4.1% in Q2.

U.S. Personal Income rose 0.3% in September, below expectations of +0.4%, versus +0.2% in August.

U.S. PCE rose 0.5% in September, above expectations of +0.4%, versus an upward revised +0.3% in August. The chain price inflation gauge rose 0.2% on expectations of +0.1%; 2.1% y/y. Core inflation +0.3%; 2.7% y/y.

Chicago PMI tumbled 5.0 points to a 5-month low of 41.6 in October, well below expectations of 46.2, versus 46.6 in September. Of the five subcomponents, only Supplier Deliveries rose. Nearly 40% of respondents reported lower production.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$6.25 (-0.22%)
5-Day Change: +$16.57 (+0.61%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +40.76

Gold has turned corrective after successive record highs on Tuesday and Wednesday. A new push for a cease-fire in the Middle East and perhaps some month-end profit-taking weigh.



While gold is currently trading lower on the week, a ninth consecutive higher monthly close is likely. The yellow metal is up more than 4% in October and +32.6% YTD. The last lower monthly close was in January.

The breach of Tuesday's low at $2,740.53 leaves the low for the week at $2,725.94 vulnerable to a challenge. However, setbacks are still likely to be viewed as buying opportunities.

More substantial support is found at $2,715.51/$2,711.17. The important 20-day moving average comes in at $2,696.05.

A rebound above $2,757.95/$2,762.22 would ease short-term pressure on the downside and bode well for a retest of yesterday's record high at $2,789.68. Beyond that, the $2,810.38 Fibonacci objective remains valid.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.310 (-0.92%)
5-Day Change: -$0.879 (-2.61%)
YTD Range: $21.945 - $34.853
52-Week Range: $20.704 - $34.853
Weighted Alpha: +43.01

Silver inability to sustain recent tests above $34 has led to a corrective plunge below $33 as markets adopted a risk-off posture ahead of month-end and next week's election. Despite today's retreat of more than 3%, the white metal still appears poised for a second straight higher monthly close.



Yesterday's commentary suggested there was scope for a challenge of Monday's low at $33.627. With that level negated in overseas trade, focus shifted to the $32.700/$32.542 zone, where previous chart resistance, the 20-day moving average, and the halfway back point of the most recent leg higher all converge.

This is a pretty substantial support area, so I suspect the downside is limited from here. A rebound above $33.000/109 would take some of the pressure off the downside. 

The midpoint of the decline comes in at $33.708. A climb back above this level would clear the way for renewed tests above $34 and another run at the cycle high at $34.853.


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