1/17/2025

Gold consolidates above $2,700, while silver retreats from in front of $31

OUTSIDE MARKET DEVELOPMENTS: Israel and Hamas reportedly have finalized the ceasefire and hostage release deal. This dials back geopolitical risks in the region, but have no illusions, this is not a peace deal.

Geopolitical tensions overall remain high in the Middle East with Israeli hawks worried that the ceasefire will allow Hamas to regroup. Iran and its various proxies, along with the political upheaval in Syria, are seen as destabilizing.

The war between Russia and Ukraine intensified this week with Ukraine firing more U.S. and UK-supplied advanced missiles into Russia. The Kremlin retaliated with its own "massive" missile and drone attacks that targeted Ukrainian infrastructure.

China continues to act aggressively toward its neighbors in the South China Sea. A Philippine security official said this week that Chinese aggression is "pushing us to the wall."

President-elect Trump said he spoke with President Xi of China earlier today and covered many topics. While China's antagonism of Taiwan, the Philippines, Japan, South Korea, and others was not specifically mentioned, Trump said that he and Xi "will do everything possible to make the World more peaceful and safe!"

Time will tell if Trump can work with world leaders to further mitigate geopolitical tensions. I feel like there's some optimism on that front.

China claims it met its 5% growth target in 2024, led by exports. The threat of tariffs prompted many U.S. companies to accelerate their purchases of Chinese goods to build inventory. However, the ongoing property crisis leaves domestic demand weak and many Chinese feel worse off.

The IMF nudged up its 2025 global growth rate projection to 3.3% from 3.2% based largely on bullish expectations for the U.S. economy. They forecast the U.S. economy will grow at a 2.7% pace, +0.5% from their previous forecast.

The BoJ is widely expected to raise rates next week. This expectation has added some weight to the dollar.

This week's focus was on U.S. inflation data and the implications for Fed policy. The data were mixed, but the market assessed that inflation is sufficiently benign to allow for 50 bps in additional easing this year. Fed funds futures suggest that the next cut likely won't happen until June.

Next week's highlight is going to be Trump's inauguration on Monday and his initial raft of executive orders. Inauguration Day corresponds with the Martin Luther King Jr. Day holiday. U.S. markets and banks will be closed.

Housing Starts surged 15.8% to 1.499M in December, above expectations of 1.320M, versus a positive revised  1.294M in November (was 1.289M). Permits slipped 0.7% to 1.483M. Completions eased 3.6% to 1.544M.

Industrial Production rose 0.9% in December, above expectations of +0.3%, versus a positive revised +0.2% (was -0.1%). Cap utilization accelerated to 77.6%, above expectations of 77.0%, versus 77.0% in November,


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$5.59 (-0.21%)
5-Day Change: +$18.62 (+0.69%)
YTD Range: $2,607.16 - $2,724.09
52-Week Range: $1,986.16 - $2,789.68
Weighted Alpha: +30.60

Gold has retreated from Thursday's ten-week highs, consolidating gains registered earlier in the week. Nonetheless, the yellow metal is poised for a third consecutive higher weekly close and is up nearly 4% year-to-date.



Gold was helped this week by revived rate cut expectations, which knocked yields and the dollar off their recent highs. Ultimately, a ten-week high was established at $2,724.09.

A more convincing breach of the previous high at $2,723.79 (12-Dec) would bode well for a short-term challenge of the all-time and range high at $2,789.68. The $2,736.55 Fibonacci level offers an intervening barrier.

Further out, there is a measuring objective off the symmetrical triangle breakout at $2.936. Beyond that, I still think we could see $3,000 before the end of Q1.

Gold outperformed all major asset classes in 2024 at +27.2%. Its closest competitor was U.S. large-cap shares at +23.3%. While BitCoin rose 120.8% last year, its market cap and total number of investors remain relatively small.

It would be good to see confirmation of revived ETF inflows and an increase in net spec long positioning on Monday. For now though, that $2,789.68/$2,541.42 range remains intact.

Initial support at $2,700.00/$2,697.07 has contained the downside thus far. Additional support tiers are noted at $2,691.47 and $2,657.28/$2,656.10. The convergence of the 20-, 50-, and 100-day moving averages at  $2,648.53/$2,644.55/$2,640.35 is considered a key area.

Silver was unable to regain the $31 level this week, leaving the short to near-term tone vulnerable. The white metal retreated from Thursday's five-week high and appears that the string of higher weekly closes will end at two.



I have maintained for some time now that silver must regain the 31-handle to set a more neutral tone. More importantly, it has been my view that a move back above $32 was needed to provide confidence to the bull camp.

Apparently, the bulls were not heartened by China attaining its growth goal in 2024, nor the IMF's upgrade to U.S. growth expectations for this year.

Silver appears poised to close back below the 50-day moving average today ($30.431), which would leave the 200-day at $30.00 vulnerable to a test. Penetration of the latter would shift focus to this week's low from Monday at $29.553. Key support is defined by the $28.802/783 double bottom.


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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