Gold hits record highs for a fourth straight day, as silver reaches 13-week highs above $32

OUTSIDE MARKET DEVELOPMENTS: News that tariffs against Mexico and Canada will be delayed has improved risk appetite. The two countries acquiesced to some demands on border enforcement, but President Trump also seeks to address trade imbalances moving forward.

China’s Ministry of Finance responded to U.S. tariffs by announcing retaliatory measures. The actions raise concerns about a potential trade war between the world's two largest economies.

While it appears Trump is using access to the U.S. consumer market as a cudgel to extract concessions from its trading partners, there are legitimate concerns that a cycle of tariffs and counter-tariffs could stoke inflation. That in turn could prompt more central banks to pause their easing campaigns.

The Fed is already on hold, despite pressure from the White House to ease further. There is "a ton of uncertainty in a ton of space," said Atlanta Fed President Bostic. Fed funds futures aren't pricing in another rate cut until July. and less than 50 bps in total through year-end.

Attention this week is also on U.S. jobs data. That culminates with January nonfarm payrolls on Friday. Median expectations are +165k jobs.

The Bank of England will announce policy on Thursday and is widely expected to cut by 25 bps to 4.5%. That would leave the BoE bank rate 175 bps higher than the ECB's refi rate. Given the worsening growth picture in the UK and the still restrictive policy, there is room for further easing.

Trade between the U.S. and UK is generally in balance, suggesting that they may be safe from tariffs. Nonetheless, the BoE is likely to strike a cautious tone in light of broader global trade uncertainties.

Factory Orders fell 0.9% in December, below expectations of -0.8%, versus a negative revised -0.8% in November (was -0.4%). Factory orders have contracted in four of the last five months.

JOLTS Job Openings fell 556k to 7,600k in December, below expectations of 8,000k, versus an upward revised 8,156k in November (was 8,098). Available jobs for unemployed job seekers are roughly in balance.

RCM/TIPP Economic Optimism Index edged up to 52.0 in February, below expectations of 53.0, versus 51.9 in January. “Americans' economic confidence improved slightly in February. However, fears of inflation and a slowdown persist," according to Real Clear Markets.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$1.23 (+0.04%)
5-Day Change: +$56.72 (+2.05%)
YTD Range: $2,607.16 - $2,828.55
52-Week Range: $1,986.16 - $2,828.55
Weighted Alpha: +36.84

Gold has reached new all-time highs for a fourth straight session as global trade uncertainty continues to drive safe-haven interest. That outweighs the headwinds of heightened risk appetite and an eight-session high in the dollar index.



The $2,857.21 Fibonacci target (127.2% retracement of the decline from $2,789.68 to $2,541.42) has come within striking distance. A breach of this level would clear the way for additional gains to the $2,936 measuring objective (triangle breakout) and the next 'big round number' at $3,000.

Last week's COT report showed that net speculative long positioning edged down to 299.4k contracts, versus the 17-week high of 300.8k in the previous week.

Gold futures continue to trade at a significant premium to the spot market perpetuating the arbitrage opportunity that is drawing gold to the U.S. Flows from London and Switzerland to Comex vaults have been the story in recent weeks but gold is also coming in from Asia and the Middle East. "The U.S. is like a gold magnet right now, pulling in gold from all over the world," said one expert in a Reuters article.

Arbitrage opportunities are typically fleeting, quickly getting offset as traders jump on the price dislocation. While Comex vaults are as full as they've been since the pandemic, futures premiums remain resilient.

ETF data flow data have not been published yet, but I'm expecting some of the North American outflows from the previous week to be recouped as gold set new record highs late last week.

The market is becoming overbought, with indicators reaching levels last seen in October. This could prompt some profit-taking given that gold is up 9% already this year. However, setbacks into the range are likely to be viewed as buying opportunities.

Today's intraday low at $2,808.92 marks first support. Below that, the previous highs at $2,789.68/84.96 come into play. 

Silver is trading above $32 for the first time since mid-December (13-week highs) buoyed by some optimism on trade stemming from forstalled tariffs against Mexico and Canada. The former is the world's largest producer of silver by a wide margin.



Since the push above $31, upside momentum has accelerated suggesting that the white metal may finally be playing some catch-up with gold. The inability of the gold/silver ratio to sustain gains above 90 bodes well for the catch-up scenario.

Now that silver has broken into the upper half of the $34.853/$28.783 range, a measure of credence has been returned to the longer-term uptrend. A close above $32 today would offer further encouragement to the bull camp. However, global growth risks are still seen as a headwind.

The COT report for last week showed a decrease in net speculative long positions of 3.1k to 44.4k contracts, versus 47.5k in the previous week. A more convincing breach of the 12-Dec high at $32.306 should draw more spec longs back into the market.

CFTC Silver speculative net positions

Such a move would highlight the 61.8% retracement level at $32.534. Beyond that, $33.554 (78.6% retracement) is the last significant Fibonacci level ahead of the $34.853 cycle high from October.

Keep an eye on $32 on a close basis. Secondary support is marked by the highs from late last week at $31.712/619.


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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