Gold jumps to 11-week highs, while silver edges back toward $31

OUTSIDE MARKET DEVELOPMENTS: With an empty economic calendar today, markets are keeping a wary eye on Trump 2.0. President Trump signed dozens of executive orders on Monday and more are in the offing today.

Trump's second term begins with the U.S. economy on sound footing, certainly compared to other major economies. The President's "America first" agenda has arguably stoked some level of additional optimism and hence risk appetite. However, there's also a fair amount of uncertainty associated with Trump's policies, driving some hedging of bets.

The trade is particularly keen to discern the inflationary implications of Trump's trade policies and weigh that against the potentially disinflationary impact of his energy policies. Oil prices fell more than 1% on Monday and are off another 1% today.

Trump indicated he would not impose tariffs immediately but would direct federal agencies to first study existing trade policies before making decisions. While he did target Canada and Mexico for 25% tariffs beginning 01-Feb, this may primarily be to illicit help in controlling the borders.

Trade policies that seek to make the U.S. less dependent on imports are undoubtedly prompting our trading partners to find ways to be less dependent on U.S. consumers. That's a heavy lift to be sure, but it may ultimately accelerate the ongoing de-dollarization trend.

Less trade with the U.S., fewer dollars in foreign hands, and less overseas demand for Treasuries. That could provide an additional lift to interest rates.

Post-inauguration focus is shifting to next week's FOMC meeting and PCE data. Fed funds futures currently suggest the next rate cut won't happen until June. That may change when the Fed's favored measure of inflation comes out on 31-Jan.

Russian President Putin said he's open to discussions with President Trump on Ukraine. "We are also open to dialogue with the new US administration on the Ukrainian conflict," Putin said. "I want to emphasize that its goal should not be a brief truce... but a lasting peace," he added.

In the Middle East, the ceasefire between Israel and Hamas is holding. The exchange of hostages and prisoners is ongoing.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$16.46 (+0.61%)
5-Day Change: +$49.45 (+1.85%)
YTD Range: $2,607.16 - $2,731.03
52-Week Range: $1,986.16 - $2,789.68
Weighted Alpha: +31.89

Gold has risen to 11-week highs helped by yields and the dollar which continue to trade off their recent highs. The yellow metal is trading higher for a fourth straight week. While overall risk appetite remains elevated, uncertainty about the implications of the Trump administration's policies is driving some haven interest.



The convincing breach of $2,723.79/$2,724.09 cleared the way for a challenge of the $2,736.55 Fibonacci level (78.6% retrace of the decline from  2,789.68 to $2,541.42). Today's penetration of the latter clears the way for a retest of the all-time high at $2,789.68.

The breakout of the symmetrical triangle pattern bodes well for the eventual attainment of the $3,000 objective. An intervening measuring objective is noted at $2.936.

The threat of tariffs has been straining the gold supply chain since last month. The potential for tariffs has led to millions of ounces of gold being transferred from London to CME warehouses. I've seen figures as high as 6Moz.  

Citing an "RBC expert," Umicore reports that "London vaults are emptier than they have been in living memory." That same expert noted the largest single-day Comex inflow in history.

The resulting liquidity squeeze in London has led to gold lease rates reaching levels not seen in decades. Such dislocations tend to be short-lived.

However, with little left in London's coffers and ongoing uncertainty about tariffs, the current conditions could persist for some time. If the millions of ounces already transferred to Comex are here to stay, the bullion banks may turn to the market to rebuild London stocks, providing additional bullish impetus.

The 14-day RSI is currently at three-month highs and the developing overbought condition could keep the high end of the range protected initially. However, setbacks are likely to be viewed as buying opportunities.

Silver is trading higher for a second day, buoyed by 11-week highs in gold and a soft dollar. Optimism about the U.S. economy stemming from President Trump's 'America first' agenda is counterbalanced by growth risks elsewhere in the world and heightened trade worries.



Resistance at $30.892/$31.00 remains intact thus far. This area is highlighted by the 100-day moving average and last week's highs. I've been maintaining for some time, that $31 must be regained to set a more neutral tone and $32 needs to be cleared to revive interest in the underlying bull trend.

The $32 level would become increasingly attractive with fresh record highs in gold.

Like with gold, large physical silver transfers from London to Comex have been seen to avoid potential tariffs. Estimates suggest those flows are in excess of 20Moz.

As I suggested in today's gold commentary the transferred ounces to the U.S. may be here to stay. If London seeks to rebuild stocks, it could provide a significant tailwind for the market.

Failure to sustain gains above the 50-day moving average at $30.392, would leave silver vulnerable to further tests below the 200-day at $30.025. Key support is well defined by the double bottom at $28.802/783.


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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