11/27/2024

Gold edges higher on increased odds for a December rate cut and softer dollar

OUTSIDE MARKET DEVELOPMENTS: The ceasefire between Israel and Hamas took effect last night and appears to be holding. Over the next 60 days, Hezbollah will withdraw at least 25 miles from the border and Israel will pull out of Lebanon. 

In the meantime, negotiations will continue to craft lasting peace. The Biden administration now turns its attention to a ceasefire between Israel and Hamas. That may be harder to achieve.

The minutes from the November FOMC meeting were released yesterday afternoon. While the bias remains toward normalization, the committee acknowledged that recent FedSpeak has been "interpreted as signaling a more gradual pace of policy easing than previously thought."

The minutes reiterated that the policy path remains data-dependent. Perhaps not surprisingly the members studiously avoided discussion of the election results.

The minutes didn't really move December rate cut expectations, but this morning's pre-Thanksgiving rush of data saw the potential for a 25 bps cut edge up to 70.0%, versus 59.4% yesterday and 55.7% a week ago.

U.S. Durable Orders rose 0.2% in October, below expectations of +0.3%, versus a positive revised -0.4% in September (was -0.8%). Ex-transportation was +0.1%. Shipments -0.6%.

U.S. Advance Indicators International Trade Deficit narrowed 8.8% to -$99.1 bln in October, inside expectations of -$102.0 bln, versus -$108.7 bln. Wholesale inventories rose 0.2% to $905.1 bln. Retail inventories rose 0.1% to $824.7 bln.

U.S. Q3 GDP (2nd report) unchanged at 2.8% in line with expectations. The chain price index was also unchanged and in line at +1.8%.

U.S. Initial Jobless Claims fell 2k to a 30-week low of 213k in the week ended 23-Nov, below expectations of +217k, versus a revised 215k in the previous week. Continuing claims rose to 1,907k in the 16-Nov week, versus a revised 1,898k in the previous week.

U.S. Personal Income rose 0.6% in October, above expectations of +0.3%, versus +0.3% in September.

U.S. PCE rose 0.4% in October, in line with expectations, versus a revised +0.6% in September. The chain price index rose 0.2% m/m and the annualized rate accelerated to 2.3%, versus 2.1% in September. Core +0.3% m/m and 2.8% y/y, up from +2.7% in September.

U.S. Pending Home Sales Index rose 1.98% to 77.4 in October, versus 75.8 in September. Despite the recent rebound, the index remains at weak levels with 30-year mortgage rates near 7%.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$19.05 (+0.72%)
5-Day Change: -$8.77 (-0.33%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +27.19

Gold is trading higher for a second session, buoyed by an uptick in December rate cut expectations and a modestly firmer dollar. The yellow metal remains just below the midpoint of the $2,789.68/$2,541.42 range ahead of the holiday.



I continue to watch the 20- and 50-day moving averages which are at $2,655.49/$2,667.77 today and have successfully capped the upside thus far. The midpoint of the aforementioned range is at $2,665.55.

A push through this zone would bode well for renewed tests above $2,700. Monday's high comes in at $2,719.75 and protects the 78.6% retracement level at $2,736.55.

On the downside, the overseas low at $2,627.83 protects yesterday's low at $2,609.76. The 100-day MA comes in at $2,568.67 and stands in front of the $2,541.42 cycle low.

Silver continues to struggle on upticks above the 100-day moving average. While the range from the 11-Nov week remains intact, the downside looks vulnerable.



If yesterday's low at $30.087 gives way a retest of the $29.736 low from 14-Nov becomes likely. Below the latter, the rising 200-day moving average at $29.044 attracts.

The key resistance level for silver is 32.294, which is the halfway back point of the decline from $34.853 (22-Oct high) to $29.736 (14-Nov low). This level must be exceeded to return some credence to the longer-term uptrend, but it's well protected by multiple tiers of resistance.


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