2/14/2025

Gold and silver retreat on retail sales miss, but higher weekly closes still seem likely 

OUTSIDE MARKET DEVELOPMENTS: Data this week revealed that inflation is back on the rise. However, retail sales plunged 0.9% in January, suggesting growth risks are also on the rise. While industrial production beat expectations, we're already seeing downward revisions to Q1 GDP expectations.

Treasury yields dove on the retail sales miss, dragging the dollar lower as well. The dollar index fell to nine-week lows below 107.00. 

If the economy is weakening, upward pressure on prices should moderate. Fed Chairman Powell told Congress this week that the central bank was in no hurry to ease further as there was more work to do on inflation. Rate cut expectations got pushed out to December, but after the weak retail sales print, the market is now pricing in a September cut.

Trade worries continue to dominate. President Trump is looking to impose reciprocal tariffs as soon as April, arguing that many trading partners treat the U.S. unfairly.

Citing WTO average external tariffs rates, a BBC article suggests he has a point. At 3.3%, the U.S. has one of the lowest average external tariff rates. The countries that have initially been in Trump's crosshairs have the following average tariff rates: China 7.5%, Mexico 6.8%, EU 5.0%, Canada 3.8%.

Retail Sales tumbled 0.9% in January, well below expectations of -0.1%, versus a positive revised +0.7% in December (was +0.4%). Ex-auto fell 0.4% on expectations of +0.3, versus a positive revised +0.7% in December (was +0.4%).

Import Price Index rose 0.3% in January, below expectations of +0.4%, versus a revised +0.2% in December (was +0.1%).

Export Price Index surged 1.3% in January, well above expectations of +0.3%, versus an upward revised +0.5% in December (was +0.3%).

Industrial Production +0.5%, above expectations of +0.3%, versus a positive revised 1.0% in December. Cap use rose to a five-month high of 77.8% from 77.5% in December.

Business Inventories fell 0.2% in December, below expectations of UNCH, versus +0.1% in November.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$2.63 (+0.09%)
5-Day Change: +$64.73 (+2.26%)
YTD Range: $2,607.16 - $2,940.10
52-Week Range: $1,990.62 - $2,940.10
Weighted Alpha: +43.85

Gold approached the record high at $2,940.10 in London trading on Friday, but was unable to break through leaving a potential double top. Nonetheless, the yellow metal appears poised for a seventh straight higher weekly close.



This week's U.S. data was highlighted by revived inflation and then today's retail sales miss stoked worries about faltering growth as well. While Q1 GDP expectations have been trimmed modestly, expect to hear more mentions of 'stagflation' in the week ahead.

Growth risks, trade tensions, lower yields, and a weaker dollar should all foster continued haven demand. I suspect the downside is limited and this setback will attract buying interest.

Wednesday's low at $2,869.08 is the confirmation point for the small double top. A breach of this level would open up potential to secondary supports at $2,860.70/$2,855.32 and $2,840.60/$2,839.69.

As noted in recent commentary, the market had also become quite overbought. A period of corrective/consolidative action would relieve that condition and bode well for the still-expected attainment of the $3,000 objective.

Silver surged to a fifteen-week high of $33.340 in London trading, but gains above $33 could not be sustained as U.S. retail sales disappointed. A close above $32.343 is needed to secure a third straight higher daily close, although the white metal does appear poised for a fourth consecutive higher weekly close.

 

While dislocation in the gold market has been a hot topic in recent weeks, similar conditions also emerged in the much smaller and more thinly traded silver market. Moves tend to be amplified in silver.

Spread traders have been short silver against gold and that started to unwind this week and accelerated during today's Asian session. The gold/silver ratio reached nearly a two-year high above 92 on Tuesday. The ratio was off more than 3% at the intraday low of 87.757.

Silver's breach of last week's high at $32.590 in Asia also confirmed the violation of an important Fibonacci level. That move targeted the next retracement level at $33.554 (78.6% retrace of the decline from $34.853 to $28.783).

Silver nearly got there before sellers stepped in and drove the market back below $33. While today's move returns additional credence to the longer-term uptrend, the sharp intraday retreat is going to give the bulls some pause.

A move back below $32 from here would put the important 20-day ($31.427), 100-day ($31.208), and 20-week ($31.199) moving averages back in play.

Today's high at $33.340 now provides an intervening barrier ahead of the $33.554 Fibonacci level. A short-term breach of the latter would bode well for a retest of October's high at $34.853.


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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