1/8/2025

Gold and silver are better within their ranges on heightened risk aversion and dovish FedSpeak

OUTSIDE MARKET DEVELOPMENTS: Increasingly bellicose rhetoric from President-elect Trump is contributing to heightened risk aversion. While it's sometimes difficult to judge whether Trump is being bombastic or truly threatening, his comments have set markets on edge.

At a Mar-a-Lago press conference on Tuesday, Trump was asked if he could assure the public that he would not use the military against Greenland or Panama. “No, I can’t assure you on either of those two, but I can say this, we need them for economic security,” Trump responded.

When asked about recent gibes about making Canada the 51st state, he said military force was not on the table, only "economic force." Canada is in some political turmoil following Justin Trudeau's resignation and proroguing of Parliament until late March.

FedSpeak from Governor Christopher Waller this morning tempered recent hawkishness somewhat. Waller – one of the more ardent hawks on the Board of Governors – acknowledged that the decline in inflation has stalled above the 2% target, but favors more rate cuts in 2025. "The pace of those cuts will depend on how much progress we make on inflation, while keeping the labor market from weakening," Waller said.

The Fed is widely expected to hold steady on rates at the upcoming January FOMC meeting. Fed funds futures are leaning toward a hold in March as well, although prospects for a 25 bps cut edged higher today to 39.7% versus 36.1% yesterday. Today's release of the minutes from the December FOMC meeting will hopefully reveal additional cues as to the likely policy path.

Despite Waller's somewhat dovish comments and some mixed labor market data, yields at the long end of the curve remain elevated near cycle highs. Helped by favorable interest rate differentials and some haven interest, the dollar index has moved to new highs for the week and is back within striking distance of last week's more than two-year high at 109.53.

MBA Mortgage Applications fell 3.7% in the 3-Jan week, versus -12.6% in the previous week. It was the fourth consecutive weekly decline as the 30-year mortgage rate rose to a 26-week high of 6.99%.

ADP Employment Survey saw private sector jobs rise 122k in December, below expectations of 138k, versus 146k in November. The soft print implies some risk for an NFP undershoot on Friday.

Initial Jobless Claims fell 10k to a 45-week low of 201k in the week ended 4-Jan, below expectations of 220k, versus 211k in the previous weeks. Continuing jobless claims rose to 1,867k in the 28-Dec week versus a downward revised 1,834k in the previous week.

Wholesale Sales rose 0.6% in November, above expectations of +0.3%, versus a negative revised -0.3% in October. Wholesale inventories fell 0.2%, versus a negative revised unch in October.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$3.14 (+0.12%)
5-Day Change: +$50.09 (+1.92%)
YTD Range: $2,607.16 - $2,664.53
52-Week Range: $1,986.16 - $2,789.68
Weighted Alpha: +26.74

Gold rose to four-week highs, spurred by risk-off sentiment and modestly dovish FedSpeak from Waller. The yellow metal has moved into the upper half of the $2,789.68/$2,541.42 range since mid-December.



With gold back above all the major moving averages, scope is now seen for probes above $2,700. The $2,691.13 high (13-Dec) corresponds closely with the upper boundary of the symmetrical triangle pattern and provides an intervening barrier.

Penetration of this level would target $2,723.70 (12-Dec high) initially, which must be cleared to set up a retest of the record high at $2,789.68. New all-time highs would lend credence to a measuring objective around $2936, with potential to the previously established $3,000 target.

On the downside, I'm watching the 50-day moving average at $2,651.97 on a close basis. A pivot point at $2,648.18 and the intraday low at $2,645.74 bolster this support zone.

Silver is holding on to gains above $30 after reaching a three-week high of $30.347 on Tuesday. The white metal is being helped by today's strength in gold, but a firm dollar, rising trade tensions, and persistent uncertainty about China's growth prospects limit the upside.



The $30.347 level marks an intervening barrier ahead of the 50- and 100-day moving averages which are at $30.788 and $30.812. A push above $31 is needed to set a more neutral tone within the range, while $32 must be regained to reinvigorate the bull camp.

A close below the 200-day MA at $29.900 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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