1/16/2025

Gold and silver rally to 5-week highs on the modest revival of rate-cut expectations

OUTSIDE MARKET DEVELOPMENTS: Israel is claiming that Hamas is already trying to renege on parts of the ceasefire deal. Israel has delayed a cabinet vote on the agreement, suggesting the deal is in jeopardy. Meanwhile, Israel struck targets in Gaza overnight.

Hopes for the ceasefire somewhat dialed down global geopolitical tensions. However, "massive" exchanges of missiles and drone attacks between Russia and Ukraine this week were an offsetting factor.

President-elect Trump's cabinet picks continue to be grilled on Capitol Hill. Given the GOP majority in the Senate, Trump's team is expected to be confirmed.

Firefighters continue to battle two large wildfires in California. Moderating winds provide some hope that the teams will make some progress on containment.

This week's U.S. inflation data were benign enough to garner a modest uptick in Fed rate cut expectations for H1. While Fed funds futures suggest that won't happen until May or June, yields and the dollar have retreated from their recent highs.

Economic weakness elsewhere in the world suggests further easing from other central banks is likely. As a result, interest rate differentials will continue to underpin the dollar.

Retail Sales rose 0.4% in December, below expectations of +0.6%, versus an upward revised +0.8% in November. Ex-auto +0.4% on expectations of +0.5%, versus +0.2% in November.

Initial Jobless Claims rose 217k in the week ended 11-Jan, above expectations of +214k, versus an upward revised +203k in the previous week. Continuing jobless claims fell 18k in the 4-Jan week to 1,859k from 1,877k in the previous week.

Import Price Index +0.1% in December, above expectations of -0.3%, versus +0.1% in  November.

Export Price Index +0.3 in December, above expectations of +0.1%, versus unch in November.

Philly Fed Index surged 55.2 points to a 45-month high of 44.3 in January, well above expectations of -9.0, versus an upward revised -10.9 in December (was -16.4). It was the largest monthly gain since June 2020. The prices paid index rose 5 points to a 25-month high of 31.9.

Business Inventories rose 0.1% in November, in line with expectations, versus unch in October.

NAHB Housing Market Index ticked up to 47 in January from 46 in December.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$10.00 (+0.37%)
5-Day Change: +$41.33 (+1.55%)
YTD Range: $2,607.16 - $2,712.04
52-Week Range: $1,986.16 - $2,789.68
Weighted Alpha: +30.86

Gold is trading above $2,700 for the first time in over a month.  The yellow metal is higher for a third straight session after benign U.S. inflation data revived H1 rate cut hopes.



Yields and the dollar continue to trade off their recent highs providing some lift for gold. This week's upside extension constitutes a convincing breakout of the symmetrical triangle pattern, which lends credence to the previously established measuring objective at $2,933.76.

The December high at $2,723.70 has been approached but remains intact thus far. A breach of this level would bode well for a short-term challenge of the $2,789.68 record high. However, for now, the $2,789.68/$2,541.42 range that was established in October and November remains intact.

Initial support is at $2,700.00/$2,697.07 and protects the overseas low $2,691.47. Additional chart support at $2,657.28/$2,656.10 stands in front of the convergence of the 20-, 50-, and 100-day moving averages at  $2,643.76/$2,638.40.

Silver is up for a third straight session, buoyed by a softer dollar. The white metal is trading at five-week highs and pressuring the 100-day moving average.



The $28.802/783 double bottom is a bullish chart feature, and yesterday's close above the 50-day MA offered further encouragement to the bull camp. I maintain that a rise above $31 is needed to relieve pressure on the downside, and $32 must be regained to return a measure of credence to the underlying uptrend.

On the bearish side of the equation is the fact that silver remains below the 100-day MA at this point and the 50-day MA crossed below the 100-day last week. These mixed technical signals warrant continued caution.


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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