1/13/2025
Gold and silver slide on dimmed rate cut hopes and strong dollar
OUTSIDE MARKET DEVELOPMENTS: Friday's payrolls beat further eroded Fed rate cut expectations for 2025 amid rising concerns about revived inflation. Fed funds futures now suggest the Fed is on hold through May. June is close to a 50/50 proposition.
Late last week the U.S. and UK announced harsh new sanctions directed at Russia's energy industry. Oil prices have surged to four-month highs above $81. Natural gas prices reached two-year highs last week, just as the northern hemisphere enters the heart of winter.
Worries that the policies of the incoming Trump administration will further stoke inflation persist. Trump has pledged sweeping tariffs that could launch a global trade war.
Key U.S. inflation data are out this week. Median expectations for December PPI (tomorrow) are +0.4%. Expectations for CPI (Wednesday) are +0.3%. The annualized rate for both are likely to rise. Import and export prices will be released on Thursday.
The 10-year yield remains well bid just below 5%. Elevated long yields are contributing to the uptrend in the dollar. The dollar index has traded with a 110 handle for the first time since Nov'22.
The PBoC has announced new measures to defend the yuan as the Chinese currency approached record lows ahead of Trump's inauguration. The central bank is also pivoting toward providing support for Chinese consumers in an effort to ward off disinflation and boost growth.
California is bracing for another day of high winds and heightened fire danger. The death toll from the LA fires has reached 24.
Today's economic calendar has just the December Treasury Budget. The market is expecting a deficit of -$30 bln.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$13.46 (-0.50%)
5-Day Change: +$27.11 (+1.03%)
YTD Range: $2,607.16 - $2,697.10
52-Week Range: $1,986.16 - $2,789.68
Weighted Alpha: +27.60
Gold has dipped back into the lower half of the $2,789.68/$2,541.42 range after last week's gains faltered just shy of the $2,700 level. The yellow metal is being weighed by dimmed Fed rate cut expectations, strong yields, and new two-year highs in the dollar. Ongoing political uncertainty and geopolitical risks are likely to limit the downside.
Umicore suggests Trump's tariff threats prompted the trade to ship physical gold to the U.S. in December to cover short positions here. "This led to a liquidity shortage, higher EFP and therefore extremely high leasing rates on the market in London and Zurich," according to Umicore's daily report.
This further explains gold's resilience in the face of yield and dollar strength into year-end 2024. Ongoing central bank demand is another significant supportive factor.
Global ETFs saw 6 tonnes of inflows in the week ended 10-Jan. It was the first net inflow in three weeks with buying by North American and European investors exceeding the 3.9 tonnes of outflows from Asia.
The CFTC reported that net speculative long positions in gold futures edged lower by 0.3k to 247.3k contracts in the 06-Jan week, versus 247.6k in the previous week. It was the third straight weekly decline in spec long positioning.
CFTC Gold speculative net positions
Minor chart support at $2,656.10 (9-Jan low) has contained the downside thus far. The 20-, 50-, and 100-day moving averages are converging modestly lower near the 7-Jan low at $2,633.26. Last week's low at $2,621.42 looks to be pretty well protected at this point.
On the upside, Friday's high at $2,697.10 now provides a good intervening barrier ahead of the December high at $2,723.70. The latter is the key to unlocking a challenge of the all-time high at $2,789.68. An eventual upside breakout of the range remains favored.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$0.54 (-1.78%)
5-Day Change: -$0.318 (-1.06%)
YTD Range: $28.946 - $30.590
52-Week Range: $21.945 - $34.853
Weighted Alpha: +22.43
Silver was unable to sustain last week's gains above $30 after upticks stalled ahead of the 50-day moving average. When the 50-day dropped below the 100-day last week, it was a troubling technical signal for the bull camp.
Today's plunge back below the 200-day moving average suggests further vulnerability. More than 50% of the rally off the $28.802/$28.783 double-bottom has already been reatraced. The 61.8% retracement level of that rally comes in at $29.473 and corresponds closely with last week's low at $29.442.
The CFTC's COT report for the 6-Jan week showed that net long positioning fell 2.3k to 37.9k contracts, versus 40.2k in the previous week. It was the fourth consecutive weekly decline.
CFTC Silver speculative net positions
I continue to believe that $31 must be regained to set a more neutral tone within the range. More importantly, silver needs to recapture the 32-handle to reinvigorate the bull camp. Both of those levels now appear well protected with Friday's high at $30.59 marking intervening resistance.
Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
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