Gold hits record highs for a fifth straight day, silver at its highest since November

OUTSIDE MARKET DEVELOPMENTS: Ongoing uncertainty on the trade front continues to drive speculation about inflation. My news feed is chock full of one article after another about what will cost more due to the Trump tariffs.

While President Trump delayed tariffs on Canada and Mexico after some progress on border security issues, the drama is far from over. Canadian PM Trudeau has called a trade summit on Friday with the goal of building a "long-term prosperity agenda for Canada. One that is resilient, that breaks down barriers between provinces and territories, and that is diversified in global trade."

In seeking greater trade diversification, Trudeau seems to acknowledge that Canada had become too dependent on its neighbor to the south. Prior to the pause, Canada appeared ready to launch retaliatory tariffs, but with the reprieve comes the opportunity for both countries to seek an equitable trade deal.

Today's big ADP jobs survey beat creates upside risk for Friday's payrolls report and is suggestive of ongoing U.S. economic resilience. Fed funds futures continue to suggest midyear as the most likely timing for the next rate cut.

FedSpeak this week has centered on the "no hurry" to adjust policy messaging, amid ongoing uncertainty. "There is just a lot of uncertainty in the air," said Richmond Fed President Barkin (moderate hawk). However, with signs of economic growth and an expectation that inflation will ultimately continue to moderate, Barkin said he is leaning toward further cuts.

The dollar continues to ease from Monday's high after a measured response from China on tariffs. The PBoC chose not to devalue the yuan as an offset to U.S. tariffs, which also suggests some level of tolerance. 

Further weight was applied to the greenback after stronger-than-expected wage growth in Japan boosted prospects for more BoJ rate hikes, and lifting the yen. The USD-JPY rate slid more than 1% to an eight-week low of 152.119.

MBA Mortgage Applications rebounded 2.2% on stronger refinancing demand in the week ended 31-Jan, versus -2.0% in the previous week. The 30-year mortgage rate dipped back below 7%.

ADP Employment Survey +183k in January, above expectations of +142k, versus an upward revised +176k in December (was +122k). "We had a strong start to 2025 but it masked a dichotomy in the labor market. Consumer-facing industries drove hiring, while job growth was weaker in business services and production," said Nela Richardson, Chief Economist at ADP.

Trade Balance widened to a -$98.4 bln deficit in December, outside expectations of -$96.3 bln, versus a revised -$78.9 bln in November. It was the second largest deficit on record as imports surged 3.5% to $364.9 bln on tariff frontrunning.

S&P Global Services PMI edged up to 52.9 in January on expectations of 52.8, versus 52.8 in December.  "Service sector businesses reported a slowdown at the start of 2025, with activity levels growing at a reduced pace compared to the robust gains seen late last year," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

Services ISM fell to 52.8 in January, below expectations of 54.2, versus a revised 54.0 in December. Prices moderated from 64.4 to 60.4.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$26.26 (+0.92%)
5-Day Change: +$109.72 (+3.98%)
YTD Range: $2,607.16 - $2,880.41
52-Week Range: $1,986.16 - $2,880.41
Weighted Alpha: +40.09

Gold has now reached fresh record highs in five consecutive sessions. The yellow metal is being driven by ongoing trade uncertainties but received an additional boost over the last two days from a weaker dollar.



Arguably, concerns about an all-out trade war have moderated somewhat since the beginning of the week. Yen strength today is contributing to the weight on the dollar. The dollar index has retrace all of Monday's sharp gains and then some. The breach of support at 107.50 leaves last week's low at 106.97 vulnerable to a retest.

With the Fibonacci objective in gold at $2,857.21 exceeded, the $2936 measuring objective gains credence. The latter corresponds fairly closely with the next Fibonacci level at $2,943.10 (161.8% retrace of the decline from  $2,789.68 to $2,541.42).

The increase in upside momentum this week bodes well for attainment of the $3,000 psychological threshold. New corrective lows in the dollar should bring this level within reach.

Market dislocation associated with the movement of physical gold from global trading centers to Comex, both to avoid potential tariffs and to take advantage of the arbitrage opportunity presented, continues to roil the market. Liquidity issues in London and structural concerns about the LBMA – even if its just perception – add another level to the buying interest that could overshadow the developing overbought condition.

But has the pendulum swung too far? Ross Norman of MetalsDaily makes a good point: "[I]f 435 tonnes of kilobars are now in New York then surely the problem is as much about surpluses on one side of the Atlantic, as much as so-called 'shortages' on the other."

The last time we saw anything like this was during COVID. Ultimately that situation got unwound and the gold market returned to more-or-less normal operations. However, twice in five years may lead to erosion of trust in the paper claims on physical gold that have become such a big part of the market. 

Today's Asian low at $2,840.60 marks first support. Setbacks are likely to be viewed as buying opportunities with the $2,800 zone seen as well protected.

Silver remains well-bid above the $32 level, buoyed by yet another round of record highs and gold and a softer dollar. Some moderation of trade concerns may be helping the cause, but uncertainty prevails on that front.



The white metal has notched only one lower close (Friday) in the last seven sessions. Upside momentum has increased as confidence from the bull camp grows.

The $32.534 Fibonacci level has been pressured but remains intact thus far. A breach of this level would return additional credence to the longer-term uptrend, targeting $33.00 initially, and then the next Fibonacci tier at $33.554 (78.6% retracement).

The $32.00 level now defines first support and is reinforced by today's intraday low at $31.996. Secondary support is marked by Tuesday's low at $31.40.


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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