11/18/2024

Gold and silver bounce on revived geopolitical risks, softer dollar

OUTSIDE MARKET DEVELOPMENTS: President Biden has given Ukraine permission to use U.S. long-range missiles to strike military targets within Russia. Vladimir Putin had previously warned that such an attack would mean the U.S. and Russia are at war.

“Today, there is a lot of talk in the media about us receiving a permit for respective actions. Hits are not made with words. Such things don’t need announcements. Missiles will speak for themselves,” said Ukrainian President Zelensky.

After 1000 days of war, the Russian military is depleted – to the point of using North Korean troops on the frontline – and it seems unlikely they would seek direct conflict with the U.S. and NATO. However, Putin has already threatened to use nuclear weapons.

This is a rather significant escalation. After nearly two weeks of post-election repositioning, there has been a realization that geopolitical risks persist.

Israel conducted a targeted strike in Beirut on Sunday that killed a key Hezbollah spokesman. The terrorist group responded by firing more than one hundred rockets into Northern Israel.

China's Xi Jinping spoke with President Biden on the sidelines of the APEC conference in Lima, Peru. "China is ready to work with the new U.S. administration, to maintain communication, expand the cooperation and manage differences, so as to drive forward a steady transition of the China-U.S relationship for the benefit of the two peoples," said Xi.

The two leaders also agreed it was better for human beings rather than AI to control their nuclear arsenals. That's reassuring!

U.S. NAHB Housing Market Index rose three points to a seven-month high of 46 in November from 43 in October.  The future sales component was the driving force, defying the rebound in mortgage rates that began in October.

TIC Data for September comes out this afternoon.

Chicago Fed President Austin Austan Goolsbee warned that clearing in the $28 trillion US Treasury market has become much more concentrated in recent years. He views this as a risk.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$31.90 (+1.24%)
5-Day Change: -$15.28 (-0.58%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +28.32

Gold rebounded nearly 2% as market focus returned to geopolitical risks. The yellow metal appears poised for its first higher daily close in seven sessions, helped by a setback in the dollar.



The move back above $2,600 is encouraging following last week's bounce off the 100-day moving average. However, additional gains are needed to return confidence to the longer-term uptrend.

Initial resistances are at $2,614.77 (13-Nov high) and $2,625.32 (12-Nov high). More important levels to watch this week are $2,636.26 (38.2% retrace), $2,653,93 (50-day MA), and $2,655.65 (50% retrace).

Penetration of the latter would signal that the corrective low is in place. At that point, I expect choppy consolidative trading to prevail into year-end.

If tensions between Russia, the U.S., and NATO flare, the uptrend could certainly re-exert itself more quickly. A rebound above $2,700 would put the record high from 30-Oct at $2,789.68 back in play.

Initial support is marked by a minor intraday chart point at $2,582.71, which protects today's Asian low at $2,563.06 and Friday's low at $2,556.18. More important supports are noted at $2,548.47 (100-day MA) and $2,541.42 (14-Nov low).

There were 23.7 tonnes of net outflows from global ETFs last week. European investors were the leading sellers at -18.2 tonnes. It was the biggest net weekly outflow in more than a year. Interestingly, in the first full post-election trading week, there were 0.8 tonnes of inflows from U.S. investors.

Last week's COT report revealed net speculative long positions in gold futures contracted by 18.8k to 236.5k contracts. It was the third straight weekly drop and the lowest since the 14-Jun week.

Silver rebounded to a five-session high above $31, boosted by a higher gold price, a weaker dollar, and revived geopolitical risks. The white metal is up nearly 3% intraday.



The net speculative long position in silver futures declined by 5.7k to 47.6k last week according to the latest CFTC COT report. It was the third consecutive weekly decline and the lowest reading in nine weeks.

CFTC Silver speculative net positions

Silver still needs to regain the $32 level to ease pressure on the downside and to suggest that the low is in. Intervening resistance is noted at $31.664/691, where the 50-day MA corresponds closely with the 38.2% retracement level of the three-week decline.

On the downside, former resistances at $31.021/000 and $30.773 now offer support. Today's overseas low and the low from Friday at $30.260/200 now protect the cycle low at $29.736 (14-Nov low).


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