1/7/2025

Gold continues to coil within its range, while silver struggles above $30

OUTSIDE MARKET DEVELOPMENTS: Markets still seem to be giving some credence to yesterday's WaPo article that suggested President-elect Trump would take a more measured approach to trade and tariffs, despite Trump himself dismissing the story as "fake news." These hopes have bolstered the currencies of some U.S. trading partners and weighed on the greenback.

The dollar index has backed off the more than two-year high set last week at 109.53, but these losses are seen as corrective. The downside in the dollar is limited with U.S. yields at the long end of the curve approaching their cycle highs.

The generally favorable interest rate environment in the U.S. will continue to attract capital flows, providing support for the dollar. The comparatively robust economy has major U.S. stock indexes near record highs and will continue to be an attraction for overseas capital as well.

Today's U.S. job openings and services ISM data reinforce the notion that the U.S. economy remains on a good growth trajectory, but inflation has not been completely tamed. The Fed is expected to hold steady on rates at the January FOMC meeting and prospects for a March hold are on the rise.

The Canadian Parliament is in prorogue (suspense) until 24-Mar following yesterday's resignation of Justin Trudeau. While Trudeau dodges a confidence vote, it effectively leaves Canada with a lame-duck PM and no Parliament just as Trump's second presidency is about to begin.

With potentially crippling tariffs looming, Canada is without leadership to try and mitigate the damage. I suspect Trump will be disinclined to negotiate with Trudeau given the current circumstances.  

The Liberal Party and the Social Democrats are going to have to distance themselves from Trudeau in the weeks ahead and try and rebrand themselves to avoid a lambasting in the October national election. That seems like a tall order, setting the stage for Conservative Party leader Pierre Poilievre to become PM this fall.

Today's visit by Donald Trump Jr. to Greenland is an interesting storyline. At a minimum, it feels like President-elect Trump is trying to pull Greenland away from Denmark and Europe and into the U.S. sphere of influence. Greenland has huge untapped reserves of natural resources, including oil, natural gas, strategic metals, and precious metals that any number of countries view as desirable.

Trade Balance widened to $78.2 bln in November on expectations of $78.1 bln, versus a revised $73.6 bln in October. The surge in imports is likely attributable to frontloading ahead of Trump's tariffs and may have an adverse impact on Q4 GDP.

Services ISM rose two points to 54.1 in December, above expectations of 53.0, versus 52.1 in November. It was the sixth consecutive month of expansion. Prices paid surged 6.2 points to a ten-month high of 64.4. 

JOLTS Job Openings jumped 259k to a six-month high of 8,089k in November, above expectations of 7,740k, versus an upward revised 7,839k in October. There are 1.1 job openings for each job seeker, indicative of a robust labor market.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$12.61 (+0.48%)
5-Day Change: +$54.98 (+2.11%)
YTD Range: $2,607.16 - $2,664.53
52-Week Range: $1,986.16 - $2,789.68
Weighted Alpha: +27.10

Gold approached last week's high in overseas trading, but subsequently retreated on strong U.S. data that further dimmed Q1 rate cut prospects. The yellow metal continues to coil within the well-defined $2,789.68/$2,541.42 range with firmness in yields and the dollar limiting the upside.



Ongoing political and geopolitical uncertainty remain supportive factors. News that global central banks bought a net 53 tonnes of gold in November provides additional encouragement to the bull camp.

"The gold price dip in November, following the US election, may have provided some central banks with added impetus to accumulate," suggested the World Gold Council.

Poland was the largest buyer, adding 21 tonnes to reserves. The data confirmed that China is back in the market after a six-month hiatus. The PBoC added 5 tonnes to its holdings.

The COT report for the week ended 6-Jan revealed a modest 0.3k dip in net speculative long positions from 247.6k contracts in the previous week to 247.3k. While minimal it was the third straight week of contraction in spec long positioning.

I continue to watch the 50-day moving average ($2,653.54) on the upside and the 100-day ($2,626.35) on the downside. More important resistance is clearly defined by $2,664.53/65.55, where last week's high corresponds closely with the midpoint of the range.

A move into the upper half of the range would bode well for fresh tests above $2,700. Such a move would constitute an upside breakout of the symmetrical triangle pattern, but chart resistance at $2,723.70 (12-Dec high) must also be cleared to put gold back on track for new record highs above $2,789.68.

The next target would be the $2936 zone based on a measuring objective. However, the $3,000 psychological barrier remains a valid target as well.

A close back below the 100-day MA would set a weaker tone within the range, highlighting $2,607.16 initially. Below that, recent lows at $2,597.53 and $2,585.51 would be vulnerable to tests.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$0.282 (+0.94%)
5-Day Change: +$1.340 (+4.63%)
YTD Range: $28.946 - $30.316
52-Week Range: $21.945 - $34.853
Weighted Alpha: +24.39

Silver edged to a three-week high in early U.S. trading before strong yields and a rebound in the dollar sparked intraday selling interest. The white metal is having some difficulty sustaining gains above the 20-day moving average, despite yesterday's confirmation of the small double-bottom at $28.802/$28.783.



Encouraging U.S. economic data are at a minimum limiting the downside potential of silver. However, growth risks elsewhere in the world and the threat of heightened trade tensions pose a headwind.

Chinese policymakers have repeatedly pledged fiscal and monetary stimulus. Just last week China said it would increase funding via ultra-long treasuries to spark the economy.  However, investors remain hesitant.

A short-term close above the 20-day MA ($30.085) would bode well for an upside extension to challenge the convergence of the 50- and 100-day MAs just below $31. I still think it will take gains back above $32 to revive the bull camp's confidence.

The COT report for last week showed that net speculative long positions fell 2.3k to 37.9k contracts, versus  40.2k in the previous week. It was the fourth straight weekly decline.

A close below the 200-day MA at $29.874 and a subsequent breach of a pivot point at $29.899 would leave Monday's low at $29.442 vulnerable to a retest. Below the latter, the $28.802/783 lows 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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