12/5/2024

Gold and silver remain generally consolidative ahead of tomorrow's NFP report

OUTSIDE MARKET DEVELOPMENTS: While South Korea's period of martial law was short-lived, the repercussions are still being felt. Calls for President Yoon Suk Yeol to resign continue to echo even as lawmakers prepare for impeachment amid rumblings of treason charges.

The Korean won has rebounded somewhat after plunging to a more than a two-year low against the dollar on Tuesday. Korean stocks remain under pressure due to the ongoing political instability.

Finance Minister Choi Sang-mok attempted to reassure investors by pledging to do whatever was necessary to stabilize financial markets and the currency. That included a vow to provide "unlimited liquidity" if necessary.

French President Macron will address the nation this evening presumably to address the political turmoil stemming from the collapse of the government. Prime Minister Barnier resigned following Wednesday's vote of no confidence. His three-month tenure as PM was the shortest in modern history.

Bitcoin extended gains after topping $100,000 on Wednesday. The cryptocurrency is being boosted by President-elect Trump's promises of a lighter regulatory approach and a pledge to make America “the crypto capital of the planet.” Trump also tapped crypto-friendly Paul Atkins to be the next chairman of the SEC.

Meanwhile, Fed Chairman Powell said the central bank's role in regulating cryptocurrencies is limited. He also made some comments about Bitcoin that may have stoked the legitimacy of the asset (see the gold comment below).

Powell expressed some optimism about the U.S. economy, stating it's in "remarkably good shape." This allows the Fed to be "a little more cautious" moving forward.

The Fed's Beige Book showed economic activity "rose slightly" in most districts, providing some backing for Powell's statement. According to the report, "expectations for growth rose moderately across most geographies and sectors. Business contacts expressed optimism that demand will rise in coming months."

Fed funds futures continue to reflect a 70%+ probability of a 25 bps rate cut this month, while the likelihood of a January hold is currently 58.9%. Incoming data and the policies enacted by the incoming Trump administration will impact the policy path in the new year.

ECB President Christine Lagarde told the European Parliament that the central bank would continue with rate cuts. A 25 bps cut is widely expected next week, although a more aggressive 50 bps cut will likely be considered.

U.S. Challenger Layoffs rose 2.1k to 57.7k in November, versus 55.6k in October. “November saw downstream cuts to Automotive suppliers and parts manufacturers, as well as ongoing cuts in Consumer and Industrial Manufacturing. Technology also saw a high number of layoff announcements, as that sector continues to undergo significant changes,” according to Andrew Challenger.

U.S. Initial Jobless Claims rose 9k to 224k in the week ended 30-Nov, above expectations of 215k, versus a revised 215k in the previous week. Continuing jobless claims gell 25k to 1,871k in the 23-Nov week from 1,896k in the previous week.

U.S. Trade Deficit narrowed 11.9% to -$73.8 bln in October, inside expectations of -$75.2 bln, versus a revised -$83.8 bln in September.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$5.05 (+0.19%)
5-Day Change: +$9.39 (+0.34%)
YTD Range: $1,986.16 - $2,789.68
52-Week Range: $1,812.39 - $2,789.68
Weighted Alpha: +30.07

Gold continues to trade in a consolidative manner in the lower half of last week's range. Upticks above $2,650.00 have once again attracted selling interest even though the dollar is trading lower today.

 

This week's highs at $2,650.65/$2,655.48 have turned into a formidable barrier ahead of last Friday's high at $2,665.16 and the 50-day moving average at $2,668.12.

Upticks since the 25-Nov drop have lacked momentum, suggesting that another run at the downside may be in the offing, although I don't expect the market to press the issue ahead of tomorrow's payrolls report. 

Fresh weekly lows below $2,623.31 would clear the way for a retest of last week's low at $2,609.76. Below the latter, the 100-day moving average at $2,580.90 would attract.

Fed Chairman Powell speaking at the DealBook Summit in New York said Bitcoin is "just like gold, only it’s virtual, it’s digital. People are not using it as a form of payment or as a store of value. It’s highly volatile. It’s not a competitor for the dollar, it’s really a competitor for gold.”

However, he also said, “People use Bitcoin as a speculative asset.” That's clearly true, but he loses me when he makes the comparative statement about gold and Bitcoin.

First, gold is substantially less volatile than Bitcoin, and even less so than stocks. Second, I don't think most people see gold as a speculative asset, but rather as a hedge and a complimentary asset within a well-diversified portfolio.

That being said, I do think Powell inadvertently bestowed some legitimacy on Bitcoin by comparing it to an asset with over 4,000 years of history. That could pull some investment demand away from gold.

However, I think many of the new investors rushing into crypto will be equally quick to rush to the exits if Bitcoin's legendary volatility rears its ugly head again. You may recall that on March 12, 2020, Bitcoin plunged nearly 40% in a single day, from $7,935 to $4,826. On that same day, gold fell just 3.5% during a bout of pandemic-related deleveraging.

 

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$0.052 (+0.17%)
5-Day Change: +$1.067 (+3.53%)
YTD Range: $21.945 - $34.853
52-Week Range: $20.704 - $34.853
Weighted Alpha: +32.40

Silver is consolidating at the upper end of yesterday's range after failing to clear resistance marked by the 19-Nov high at $31.465. Today's weakness in gold is likely limiting the upside in the white metal and preventing confirmation of the potential double bottom at $29.736/$29.703.



While silver set a two-week high on Wednesday, buoyed by more favorable global growth prospects, further gains are needed to restore confidence in the longer-term uptrend. A breach of $31.465 would highlight $31.691/709(Fibonacci/50-day MA) initially and set up renewed probes above $32. 

A retreat below the downtrending 20-day moving average at $30.740 would leave chart support at $30.509/485 vulnerable to a challenge. Below the latter, the lows at $29.736/$29.703 would be back in play.


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