1/15/2025

Gold firms to new highs for the week, silver to four-week highs on softer dollar

OUTSIDE MARKET DEVELOPMENTS: Israel and Hamas have reportedly agreed to a ceasefire and hostage release deal according to the AP. An Israeli official confirmed the deal, but there has not been word from the PMs office yet. 

Russia launched a "massive" missile and drone attack against critical infrastructure in Ukraine, causing the power grid to be taken down. This was in response to a Ukrainian missile and drone attack on Tuesday that struck targets within Russia.

The Russian attack prompted Poland – a NATO member – to place its air defenses in the "highest state of readiness." Fighter jets were reportedly scrambled as Russia struck targets in Ukraine close to the Polish border.

There have been some indications that Putin is eager to talk with President-elect Trump soon after his inauguration. The Trump campaign had said finding a negotiated solution to the Ukraine conflict was a diplomatic priority.

German GDP fell 0.2% in 2024. That's the second year in a row that Europe's largest economy has contracted. With the machinery and auto sectors continuing to struggle and potential Trump tariffs looming, the prospects for this year aren't any better.

As goes Germany, so goes the rest of Europe. Growth risks should keep the ECB under pressure to continue easing. Banque de France Governor Villeroy said today that he thought the neutral rate was 2%, suggesting another 100 bps of cuts could be seen by summer. 

Today's headline CPI beat somewhat offsets yesterday's PPI miss. Annualized CPI rose to 2.9% in December, the highest since July. Revived hopes for an H1 Fed rate cut that emerged on Tuesday have been pared somewhat today, prompting a rebound in the dollar from new lows for the week.

MBA Mortgage Applications surged 33.3% in the week ended 10-Jan despite high mortgage rates. It was the first positive print in five weeks. 30-year mortgage rates rose for a fifth straight week to a 36-week high of 7.09%. Perhaps buyers and refinancers have simply resolved that mortgage rates aren't coming down any time soon.

CPI rose 0.4% in December, above expectations of +0.3%, versus +0.3% in November; 2.9% y/y, versus 2.7% y/y in November. Core +0.2% in December, below expectations of +0.3%, versus +0.3%; 3.2% y/y, versus 3.3% in November.

Empire State Index tumbled 12.8 points to a six-month low of -12.6 in January, below expectations of -1.4, versus 0.2% in December. "Both input and selling price increases picked up. Firms grew more optimistic that conditions would improve in the months ahead," said the NY Fed.

The Beige Book for the January FOMC meeting comes out this afternoon.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$9.44 (+0.35%)
5-Day Change: +$25.92 (+0.97%)
YTD Range: $2,607.16 - $2,697.10
52-Week Range: $1,986.16 - $2,789.68
Weighted Alpha: +29.24

Gold eked out a new high for the week, helped by a modest improvement in the prospects for a Fed rate cut in H1. The dollar index fell to a new low for the week providing some lift for the yellow metal.

 

While the $2,789.68/$2,541.42 range remains intact, I'm mildly encouraged by the fact that gold is holding above the midpoint of the range as well as the 20-, 50-, and 100-day moving averages. A breach of Friday's high at $2,697.10 should allow for tests above $2,700.

A short-term penetration of the December high at $2,723.70 would clear the way for a challenge of the all-time high at $2,789.68. Above the latter, $3,000 would be back in play.

In the latest monthly Gold Compass, Incrementum makes note of gold's stellar performance in 2024. "For the year, gold soared by 27% in USD terms and 35.6% in EUR, fueled by economic uncertainties, inflation fears, and central banks' gold accumulation." 

Incrementum has a price projection of $4,821 for 2030. They also note that gold's market capitalization is approaching $20 trillion and the comparison with BitCoin makes for an interesting chart.

Today's intraday low at $2,670.32 provides a new tier of support ahead of more substantial chart support at $2,657.28/$2,656.10. These levels protect the convergence of the 20-, 50-, and 100-day moving averages at $2,644.22/$2,636.44.

Silver has jumped to a four-week high with the breach of resistance at $30.59. The probe above the 50-day moving average is mildly encouraging, suggesting scope for a test of the 100-day at $30.841.



Amid persistent global growth risks, it seems that gains are technical in nature. The small double-bottom at $28.802/783 remains the dominant technical feature, but $31 must still be regained to ease pressure on the downside. More significantly, a move back above $32 is needed to truly reinvigorate the bull camp.

A failure to register a close above the 50-day MA at $30.485 would leave silver vulnerable to a move back below $30. A breach of Fibonacci/chart support at $29.473/442 would set up another run at the $28.802/783 cycle lows.


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

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