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Gold $2,936.50 $1.6 0.05% Silver $32.48 $(0.06) -0.18% Platinum $983.52 $13.97 1.44% Palladium $976.40 $6.4 0.66%

Zaner Daily Precious Metals Commentary

Zaner Daily Precious Metals Commentary


Gold corrects after five-session win streak, silver attracts buying interest on dips below $32

OUTSIDE MARKET DEVELOPMENTS: White House spokesperson Karoline Leavitt indicated that Chinese President Xi tried to engage President Trump in trade negotiations earlier this week. "I will speak to him at the appropriate time. I'm in no rush," said Trump.

With tariffs on Canada and Mexico on hold for a month, there are concerns that Trump will turn his attention to Europe next. "We are ready to engage immediately and we hope that through this early engagement, we can avoid the measures which would bring a lot of disturbance to the most important trade and investment relationship on this planet," said EU trade chief Maros Sefcovic.

World leaders are decrying President Trump's audacious proposal to "take over" and redevelop the Gaza Strip. The White House is already walking back the plan, but some think Trump was merely goading regional stakeholders to proffer their own ideas.

The BoE cut the bank rate by 25 bps to 4.5% in a widely expected move. The vote to ease was unanimous, but two committee members wanted a larger 50 bps cut.

“We expect to be able to cut bank rate further as the disinflation process continues. But we will have to judge meeting by meeting how far and how fast,” said BoE Governor Bailey. The expectation of further cuts prompted cable to retreat from four-week highs.

Challenger Layoffs rebounded 11k to 49.8k in January, versus 28.8k in December. "January was relatively quiet in terms of job cut announcements. However, we’ve already seen major announcements in the early days of February, so it seems this quiet is unlikely to last,” said Andrew Challenger.

Productivity (prelim) moderated to a 1.2% pace in Q4, below expectations of 1.8%, versus an upward revised 2.3% in Q3 (was 2.2%). ULCs jumped 3.3%, above expectations of +3.3%, versus +0.8% in Q3.

Initial Jobless Claims rose to 219k in the week ended 1-Feb, above expectations of 214k, versus a revised 208k in the previous week. Continuing Jobless Claims increased to 1,886k in the 25-Jan week, above expectations of 1,870k, versus a revised 1,850k in the previous week.

FedSpeak is due from Waller and Logan this afternoon.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$0.99 (-0.03%)
5-Day Change: +$68.33 (+2.45%)
YTD Range: $2,607.16 - $2,880.41
52-Week Range: $1,986.16 - $2,880.41
Weighted Alpha: +39.63

Gold has come under modest corrective pressure. It seems likely that the yellow metal will notch its first lower close in over a week. However, gold still appears to be on track for a sixth straight higher weekly close.



Wednesday's low was slightly exceeded, but price action has been largely confined to yesterday's range. After five successive days of record highs, a period of correction or consolidation would be welcomed by the bull camp as it would relieve the short-term overbought condition.

Upside targets at $2.936.00 (measuring) and $3,000 (psychological) remain valid. The all-time high from yesterday at $2,880.41 provides an intervening barrier.

On the downside, yesterday's low at $2,840.60 was reinforced by today's intraday low at $2,839.69. More substantial support is marked by the $2,808.92/2800.00 zone. Dips are likely to continue attracting buying interest.

The gold market continues to be roiled by the flow of metal from global trading centers to Comex vaults in America. What started as an attempt to preposition physical metal in the U.S. to avoid potential tariffs, turned into an arbitrage opportunity that’s taken on a life of its own.

Futures market premiums over spot are just too appealing to pass up. “There are challenges when the US is operating at this kind of premium, but it is something that the market is managing well,” said Ruth Crowell, CEO of the LBMA.

Comex inventories have risen 88% since November according to the FT, while London has been drained. "There is more gold in the U.S. than there should be under normal circumstance, and there is less gold in London than there should be," said John Reade of the World Gold Council.

"Dealers are quoting prices for gold at the BOE at discounts of more than $5 an ounce below spot in London," according to Bloomberg. Amid reports that it's taking up to eight weeks to get gold out of the BoE vault, dealers are inclined to sell those claims at a discount to spot to get gold in hand now. At this point, I think it's more about capitalizing on the higher U.S. price than dodging tariffs.

The turmoil has caused significant dislocation in lease rates and OTC market carry charges. In these market conditions, hedgers suddenly faced with having to pay a carry on short positions may choose to go un or under-hedged, adding additional impetus to the uptrend.

A word of caution though: The market is really out of balance right now. If the contango moderates to the point where it no longer makes sense to ship gold to the U.S. this thing could start to unwind with potentially volatile results.

 
SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$0.276 (-0.85%)
5-Day Change: +$0.379 (+1.20%)
YTD Range: $28.946 - $32.530
52-Week Range: $21.945 - $34.853
Weighted Alpha: +35.09

Silver probed repeatedly back below $32 intraday, but those downticks could not be sustained. While still lower on the day, the white metal is trading comfortably above $32 and appears likely to register a third consecutive higher weekly close.



Silver staged an unsuccessful challenge of the $32.534 Fibonacci level on Wednesday, resulting in a 13-week high of $32.530. A short-term breach of $32.530/534 would clear the way for tests of $33.00 and then the next Fibonacci level at $33.554 (78.6% retracement). Penetration of the latter would put the cycle high from October at $34.853 back in play.

Today's intraday low at $31.816 now provides a good intervening barrier ahead of secondary supports at $31.40 (Tuesday's low) and the 100-day moving average at $31.148. It would take a retreat below the $31.00 zone to take the wind out of the bulls' sails. Ongoing uncertainty on the trade front and global growth risks are the fundamental factors posing downside risks.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.

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