1/10/2025

Gold and silver poised for solid weekly gains, despite higher yields and a strong dollar

I'm on the road at the FUN Show in Orlando, so today's commentary will be brief.

OUTSIDE MARKET DEVELOPMENTS: U.S. nonfarm payrolls bested expectations by more than 100k jobs. Labor market strength intensifies concerns of revived inflation and bolsters expectations that the Fed will be much less aggressive with rate cuts in 2025.

Nonfarm payrolls rose 256k in December, above expectations of +150k, versus a revised +212k in November (was +227k). The unemployment rate ticked down to 4.1% on expectations for a steady reading of 4.2%.

Hourly earnings rose 0.3%, in line with expectations, versus +0.4% in November. The average workweek was steady at 34.3 hours.

Markets are increasingly convinced that the Fed is on hold through H1 with a 25 bps cut now not fully priced in until September. Prospects for a March hold rose to 70.1% this morning, versus 56.2% yesterday and 30.3% a month ago.

Shifting Fed expectations have kept long yields elevated near the 2023 cycle highs. The 10-year yield reached a 15-month high just shy of 5%.

The strong yield environment is underpinning the greenback. The dollar index surged to new 26-month highs, just shy of 110. I see potential to reach the 111.53 Fibonacci level next.

The preliminary Michigan sentiment reading for January comes out later this morning. Median expectations at 74.0, unchanged from December.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$10.94 (+0.41%)
5-Day Change: +$37.38 (+1.42%)
YTD Range: $2,607.16 - $2,682.77
52-Week Range: $1,986.16 - $2,789.68
Weighted Alpha: +28.17

Gold initially sold off on the NFP beat, weighed by dimming rate cut expectations for H1, strong yields, and a strong dollar. However, political and geopolitical uncertainties continue to overwhelm the headwinds.



The yellow metal not only recovered all the post-NFP losses but went on to set new four-week highs. Gold is on track for its second straight weekly gain and the largest in seven.

The upper boundary of the symmetrical triangle pattern is under attack at $2,685.50. A convincing breach of this level and $2,691.13 high (13-Dec) would establish a measuring objective at $2,933.76. Store that away for now, as gold remains well-contained within the $2,789.68/$2,541.42 range.

Tests above $2,700 will meet solid chart resistance defined by the 12-Dec high at $2,723.70. Above that, the all-time high at $2,789.68 would be back in play.

Today's post-NFP low at $2,671.27 reinforced the overseas low at $2,669.46. I had been watching the 50-day moving average this week as an important support on a close basis. That indicator is now considered fairly well protected with an additional tier of support noted at $2,656.10 (9-Jan low).

Silver rebounded from early losses triggered by stronger-than-expected jobs growth in December, which elevated yields and the dollar. The white metal jumped to fresh three-week highs and appears on track for an eighth straight higher close, and the second consecutive higher weekly close.



The 50- ($30.635) and 100-day ($30.827) moving averages remain intact at this point, keeping chart resistance at $31.00/088 at bay. The trendline off the October peak at $34.853 comes in at $30.664.

I believe the $32 level must be regained to fully reengage the bull camp. Given the developing overbought condition and ongoing uncertainty about the industrial demand prospects for silver, such a move is likely to prove difficult in the short-term.

However, the performance of silver has exceeded my expectations this week. Perhaps there is a growing belief that Chinese stimulus measures are going to finally provide the desired boost to the world's second-largest economy. 

The fact that the 20-day moving average fell below the 200-day this week remains a troubling technical feature. A retreat below $30 from here 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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