1/6/2025

Gold and silver retreat from earlier gains weighed by firm yields and dollar

OUTSIDE MARKET DEVELOPMENTS: It's a new week and the political turmoil continues. Canadian Prime Minister Justin Trudeau has resigned and requested that the Governor General prorogue (suspend) Parliament until March 24. Additionally, Austrian Chancellor Karl Nehammer said over the weekend that he would resign after attempts to form a government failed.

Since taking office in 2015, Trudeau has presided over a striking stagnation of living standards attributed to overspending, over-taxation, unrestrained immigration, and a hamstringing of Canada's natural resource industry. Canadian per capita GDP is now on par with the poorest states in America.

After taking office, Trudeau famously postulated that Canada was the world's first “post-national state." He claimed, “There is no core identity, no mainstream in Canada.”

The mainstream Canadians that Trudeau believed no longer existed were/are going to deliver a crushing defeat to the Liberal Party in October. Seeing the writing on the wall, and fearful of a no-confidence vote this week, Trudeau has resigned as his party leader and PM. He will remain in office until his replacement is named.

Many Canadians believe that Trudeau overreached with COVID policies, amplifying the detrimental economic impact. Trudeau's use of the Emergencies Act in 2022 to break up the truckers' protest also contributed to the stunning plunge in his popularity.

Negotiations collapsed in Austria after Nehammer's People's Party and the Social Democratic Party were unable to find common ground over a record deficit. The decision to end talks "is not a good decision for our country” said SPO leader Andreas Babler. 

Austria's deficit stems from weak investment and demand for capital goods. The fact that the country's largest trading partner – Germany – is teetering on the brink of recession is certainly a contributing factor that seems unlikely to be resolved any time soon.

Congress is meeting to certify the 2024 election results that will set the stage for Donald Trump's inauguration on 20-Jan. President Biden has reiterated his commitment to the peaceful transfer of power.

A report in the Washington Post said that Trump would take a softer approach on trade and tariffs initially roiled markets. Trump was quick to refute the story via the Truth Social platform.

The Philippines is objecting to the presence of a large Chinese coast guard vessel, deemed "the monster," that is operating within its exclusive economic zone. The Chinese ship has thus far refused to leave the area so the Phillipino military has deployed assets to monitor the ship's activity.

This is just the latest in a long string of provocative actions in the region perpetrated by both China and Russia leading to heightened geopolitical risks. Along with the Philippines, Taiwan, South Korea, and Japan have also seen increased incursions into their airspace and claimed territorial waters.

S&P Global Services PMI was revised down to 56.8 in December, versus a 58.5 flash reading, paring the rise from 56.1 in November. The final Dec reading was still a 33-month high. "The improved performance of the service sector has more than offset a continued drag on the economy from the manufacturing sector, meaning the survey data point to another robust expansion of the economy in the fourth quarter after the 3.1% GDP growth seen in the third quarter," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

Factory Orders fell 0.4% in November, in line with expectations, versus a positive revised +0.5% in November (was +0.2%). Inventories rose 0.3%, versus -0.1% in November.  


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$5.85 (+0.22%)
5-Day Change: +$22.28 (+0.85%)
YTD Range: $2,607.16 - $2,664.53
52-Week Range: $1,986.16 - $2,789.68
Weighted Alpha: +25.94

Gold continues to consolidate within the $2,789.68/$2,541.42 range. The yellow metal is being squeezed between the rising 100-day moving average and the declining 50-day as the market awaits further clarity on the Fed's intentions for 2025 and the Trump inauguration.



Gold was bolstered ahead of the U.S. open by a WaPo article indicating Trump would take a more measured approach to trade and tariffs. The article initially sparked buying in the currencies of U.S. trading partners, knocking the dollar index back to last week's low.

After Trump dismissed the reporting as "fake news," the dollar firmed and gold gave back those early gains.

FedSpeak from Governor Lisa Cook reinforced expectations that the central bank will proceed more cautiously on rate cuts this year. The 10-year yield is back above 4.6%, within striking distance of the cycle highs around 5.0%. Rising yields are a headwind for gold.

The 100-day MA comes in at $2,624.94 today and has been tested. A close below this indicator would suggest a more vulnerable tone with potential back to the range low at $2,541.42.

On the upside, the midpoint of the range at $2,665.55 was reinforced by last week's high at $2,664.53. Today's intraday high at $2,647.38 now provides an intervening barrier. A breach of $2,664.53/$2,665.55 is needed to set a more favorable tone within the range. Such a move would favor renewed tests above $2,700 with potential to challenge the 12-Dec high at $2,723.70.

Silver jumped to a three-week high above $30, heartened by hopes of less aggressive trade policies from incoming President Trump. While those hopes were dashed by Trump, the white metal remains higher on the day.



The breach of resistance at $29.885 (27-Dec high) confirmed the small double-bottom at $28.802/$28.783. While the move back above the 200-day moving average and the probe above the 20-day offer some additional encouragement to the bull camp, the downside still appears vulnerable.

It would take a rebound above $32 to re-instill a measure of confidence in the longer-term uptrend. Formidable resistance is marked by the December highs at $32.255/306. This level is reinforced by the halfway-back point of the decline off the $34.853 cycle high at $31.818.

Intervening barriers are defined by today's earlier high at $30.308, and the convergence of the 50- and 100-day MA just below $31.

A close back below the 200-day MA at $29.849 and a subsequent breach of a pivot point at $29.667 would set up renewed attacks on the $28.802/783 lows.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.