1/14/2025

Gold and silver stabilize after yesterday's retreats

OUTSIDE MARKET DEVELOPMENTS: Optimism about a potential ceasefire for hostages deal between Israel and Hamas is contributing to improved risk appetite this morning. Qatari mediators said that Hamas has accepted a draft agreement.

The deal must now be agreed to by Netanyahu and his security cabinet. Israel conducted strikes within Gaza overnight, killing 31.

Offsetting the potential de-escalation in the Middle East; Ukraine fired U.S. and British-supplied missiles into Russia today. While Russia claimed all were shot down, the defense ministry vowed the attacks "will not go unanswered."

Bloomberg reports that the Trump team is exploring a gradual phasing-in of threatened tariffs. The plan proposes 2%-5% monthly increases as a means to mitigate inflation risks. This story seemingly has reduced market angst centered on President-elect Trump's trade policies.

China appears to be announcing new accommodations daily. The latest will allow institutional investors to access PBoC funding for stock purchases. China's yuan-denominated loan program continues to expand as well.

Yields and the dollar have eased today and stocks are mostly better on risk-on sentiment. Weaker-than-expected producer inflation in December has helped the cause. However, recent evidence of a strong U.S. economy has raised worries of revived inflation and led to scaled-back Fed rate cut expectations.

NFIB Small Business Optimism Index rose 3.4 points to a six-year high of 105.1 in December, versus 101.7 in November. “Small business owners feel more certain and hopeful about the economic agenda of the new administration. Expectations for economic growth, lower inflation, and positive business conditions have increased in anticipation of pro-business policies and legislation in the new year,” said NFIB Chief Economist Bill Dunkelberg.

PPI rose 0.2% in December, below expectations of +0.4%, versus +0.4% in November; 3.3% y/y versus 3.0% in November. Core was unchanged, below expectations of +0.3%, versus +0.2% in November; 3.5% y/y, up from 3.4% in November.

RCM/TIPP Economic Optimism Index fell 3.9% to 51.9 in January, a retreat from a 40-month high of 54.0 in December. RCM notes that "fears of inflation and a slowdown persist."


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$5.78 (+0.22%)
5-Day Change: +$18.45 (+0.70%)
YTD Range: $2,607.16 - $2,697.10
52-Week Range: $1,986.16 - $2,789.68
Weighted Alpha: +27.87

Gold has stabilized after starting the week on its back foot.  The yellow metal is hovering around the midpoint of the $2,789.68/$2,541.42 range amid mixed geopolitical signals and a softer dollar.



However, the elevated yield environment should continue to underpin the dollar and pose a headwind for gold. The dollar index set a more than two-year high of 110.18 yesterday.

Umicore reports rising physical demand in Asia ahead of the Lunar New Year holiday. Gold is considered an auspicious gift throughout much of Asia that signifies wealth, prosperity, and good fortune for the new year. The Lunar New Year falls on January 29.

Global central banks were net buyers of gold in 2024 for a fifteenth consecutive year. While we await finalized data for December, it appears China was a buyer for a second straight month after a six-month pause that ended in November. Standard Chartered Bank notes that gold as a share of total reserves is the highest it has been since 1996. I expect official sector interest in gold to remain robust in 2025.

Chart support at $2,656.10 (9-Jan low) has been reinforced by yesterday's low at $2,657.28. More substantial support is marked by the 7-Jan low at $2,633.26 and the convergence of the 20-, 50-, and 100-day moving averages.

On the upside, the overseas high at $2.674.46 protects Friday's high at $2,697.10, which in turn provides an intervening barrier ahead of the December high at $2,723.70. The latter must be exceeded to clear the way for a challenge of the all-time high at $2,789.68. 

Silver has recouped some of yesterday's losses, but has been unable to regain the 200-day moving average thus far. This leaves the downside vulnerable to further tests of the downside.



The inability of the white metal to clear the trendline on the upside, the 50-day moving average's drop below the 100-day, and the 20-day below the 200-day, are all bearish technical signals. A breach of Fibonacci/chart support at $29.473/442 would set up another run at the $28.802/783 lows.

Those cycle lows are still seen as a small double bottom, but $31 must be regained to return some credence to that chart pattern. Last week's high at $30.59 marks intervening resistance.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com

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.