2/25/2025

Gold tumbles below $2,900, silver below $32

OUTSIDE MARKET DEVELOPMENTS: Geopolitical tensions are easing in hopes of a negotiated resolution to the war in Ukraine. “It looks like we’re getting very close,” President Trump said on Monday.

Geopolitical Risk (GPR) Index

The GPR index is declining from a 10-month high and has moved below the 7 and 30-day moving averages. The ruble has set a six-month high against the dollar, reflecting market optimism that a deal will be struck and sanctions on Russia will be lifted.

Putin has already offered aluminum supply and cooperation on energy and rare earths development. Trump posted on TruthSocial that "major Economic Development transactions" between the United States and Russia are being discussed.

Speaking at the White House, French President Macron struck a more cautious tone; pointing out that it was Putin who violated the peace and warning that Russia has a history of violating ceasefire agreements. Nonetheless, he conceded that a deal was "feasible" within the next few weeks.

Meanwhile, a top deputy of Volodymyr Zelenskyy cautioned that Ukraine would not concede any territory. "What I can say is that we, now, are not ready to accept any territorial concessions whatsoever. We have no other option but to say no to a bad peace deal," said Ihor Brusylo.

Given the blood and treasure expended by Russia over the past three years, I don't think Putin can entirely withdraw from Ukraine without political repercussions at home. A lot can still go wrong here.

Despite some optimism on the geopolitical front, markets remain decidedly in risk-off mode. Concerns about the health of the U.S. economy continued to mount due to eroding consumer confidence and rising inflation worries.

“In February, consumer confidence registered the largest monthly decline since August 2021,” said Stephanie Guichard, Senior Economist, Global Indicators at The Conference Board. “This is the third consecutive month on month decline, bringing the Index to the bottom of the range that has prevailed since 2022." she added.

The Trump honeymoon may be over amid worries about his trade policies, inflation, and brash efforts to cut spending and the size of government. While I believe the federal government headcount needs to be slashed, the angst of more than three million employees, and their family members, can have a consequential ripple effect throughout the broader economy.

Will deregulation and expectations of lower energy costs offset the above? Time will tell...  

S&P/Case-Shiller 20-City Home Price Index slipped 0.13% to 332.2 in December from 332.6 in November. It was the fifth consecutive monthly decline, although the annualized pace of gains accelerated to 4.48% y/y, from +4.35% in November.

FHFA Home Price Index edged up 0.4% in December to 436.1, versus an upward revised 434.3 in November. Annualized appreciation accelerated to a 4.7% pace from an upward revised +4.5% in November (was +4.2%).

Consumer Confidence tumbled seven points to an eight-month low of 98.3 in February, below expectations of 102.8, versus 104.1 in January. It was the third straight monthly decline. Twelve-month inflation expectations surged to a 21-month high of 6.0% from 5.2% in January. The Conference Board cited "the recent jump in prices of key household staples like eggs and the expected impact of tariffs" as contributing factors.

Richmond Fed Manufacturing Index jumped 10 points to 6 in February, above expectations of -3, versus -4 in January. It was the first positive reading in 15 months and the highest in nearly three years. Prices paid ebbed to a 2.23% pace from 2.37%.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$13.71 (-0.46%)
5-Day Change: +$4.38 (+0.15%)
YTD Range: $2,607.16 - $2,955.40
52-Week Range: $2,025.08 - $2,955.40
Weighted Alpha: +40.16

Gold fell nearly 2% to trade briefly below $2,900, weighed by tempered geopolitical risks and perhaps helped by deleveraging. The losses come a day after I highlighted some warning signs in Monday's commentary.



While scope is seen for additional corrective activity, the underlying trend remains decisively bullish. I'm watching the 20-day moving average at $2,881.07 and chart support at $2,880.05/$2,878.68. Below the latter, the 12-Feb low at $2,869.08 would be in play.

As noted yesterday, there is risk for a protracted corrective phase which could mean $3,000 is on hold for a while. The next couple of sessions will tell us a lot.

A breach of the 20-day moving average on a close basis would suggest potential as low as $2,748.41 (50% retracement of the rally from $2,541,42 to $2,955.40). This level is bolstered by the 50-day moving average at $2,754.32. Good intervening support is noted at $2,800.00/$2,797.26.

A rebound above the halfway-back point of this decline at $2,925.06 would ease pressure on the downside somewhat. While not a guarantee of imminent new highs, it would be viewed as encouraging to the bull camp.

President Trump reiterated yesterday that he's interested in the gold reserves held at Fort Knox. "We're actually going to Fort Knox to see if the gold is there. Because maybe somebody stole the gold. Tons of gold,” he said.

While I doubt it has been stolen, I do wonder if the Fed can account for all 8,133 tonnes. I also want to know if there are encumbrances on that gold that call into question its ownership.

A comprehensive audit is needed to assure the public that their gold is exactly where it's supposed to be and no other government or entity else has a claim to it. Jan Nieuwenhuijs's open letter to President Trump provides a thorough explanation of why there have been persistent concerns about U.S. gold reserves for decades. 

If Treasury fails to provide said assurances, I think the dollar's position as the global reserve currency would be further eroded. A weaker dollar would further exacerbate inflation and provide yet another driving force behind the dollar-based price of gold.

In such an instance, I'd be thinking seriously about $5,000 gold.

Silver plunged back below $32, weighed by the retreat in gold. Arguably, gold's strength and a resilient U.S. economy were the last underpinnings for silver amid mounting global growth risks and worries of an impending trade war.


  
The tumble below $32 shifted focus to the 11-Feb low at $31.334 and the 100-day MA at $31.257. Below these levels, the halfway-back point of this year's rally comes in at $31.062.

The 61.8% retracement level of the rally from $28.783 to $33.30 is at $30.525 and corresponds closely with the 200-day moving average. These will be levels to watch on move below $31.

A rebound and close above the 20-day MA at $32.095 would ease pressure on the downside somewhat. However, now I want to see a close above $33 – something silver just couldn't muster in recent weeks – before I can feel confident about a retest of the October cycle 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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