Gold hits $3,000, silver trades with a 34-handle for the first time since October 

OUTSIDE MARKET DEVELOPMENTS: Markets remain on edge as global trade tensions escalate. Uncertainty reigns amid threats of new levies, counter-threats of retaliation, and tariffs on one day and off the next. “I’m not going to bend at all,” Trump said.

Mounting risk aversion drove the S&P 500 into correction territory on Thursday. The other major indexes are hovering near the correction threshold as well.

Indications this week that inflation cooled in February did little to relieve market angst. Inflation expectations continue to surge as tariffs kick in. The preliminary one and five-year inflation expectation components of Michigan Sentiment rose to 4.9% and 3.9%.

Meanwhile, consumer sentiment and employment expectations continue to erode. The preliminary read on March consumer sentiment plunged 6.8 points to a 28-month low of 57.9.

The Fed is expected to hold steady when they announce policy next week. Amid heightened inflation worries, a June cut is no longer fully priced in. Fed funds futures are now only projecting 67 bps in cuts by year end.

Germany Chancellor-in-waiting Friedrich Merz announced a deal had been reached with the Green Party that likely clears the way for massive proposed defense and infrastructure spending. "Germany is back," said Merz.

China's policymakers will hold a news conference on Monday, presumably to announce new measures to boost domestic consumption. Chinese shares rebounded on hopes for additional stimulus.

Russian President Putin laid out his conditions for a ceasefire with Ukraine after dismissing the U.S.-brokered deal yesterday. “We agree with the proposal to cease hostilities but we have to bear in mind that this ceasefire must be aimed at a long-lasting peace and it must look at the root causes of the crisis,” said Putin.

Many of the Russian conditions are likely unacceptable to Ukraine and perhaps the U.S. as well. At least, negotiations are ongoing.

Michigan Sentiment (preliminary) fell 6.8 points in March to a 28-month low of 57.9, below expectations of 63.0 versus 64.7 in February. It was the third consecutive monthly decline. One-year inflation expectations surged to 4.9% from 4.3% previously. Five-year inflation expectations reached 3.9% versus 3.3% in February.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$4.68 (+0.16%)
5-Day Change: +$70.88 (+2.43%)
YTD Range: $2,607.16 - $3,003.05
52-Week Range: $2,146.66 - $3,003.05
Weighted Alpha: +38.51

Gold extended to the upside on Friday to satisfy the $3,000 objective, buoyed by ongoing haven interest and a soft dollar. While the yellow metal has backed off the new record high at $3,003.05, a second consecutive higher weekly close appears likely.



The next Fibonacci objective is at $3,029.67. A measuring objective off the recent corrective phase highlights $3,049.34. The market is already talking about $3,500 as everyone adjusts expectations higher.

Chinese gold ETFs saw record inflows in February, rising 21 tonnes to 131 tonnes. The PBoC was also a buyer in February, adding 5 tonnes to reserves. It was the fourth straight month of purchases since the central bank's gold buying pause ended in November.

Goldman Sachs believes U.S. policy uncertainty will support investor demand for gold, and I'm anticipating solid ETF inflows this week. GS also expects that central bank buying "will remain structurally higher," creating upside risk to their $3,100 year-end forecast.

Record-high gold prices continue to weigh on jewelry demand. Reuters reported that Indian jewelers were offering discounts up to $39, the biggest in nearly eight months. India's gold imports plunged 85% y/y to 20-year lows in February, and demand appears destined to remain weak in March.

The former all-time high at $2,955.40 marks the first significant level of support. A minor intraday chart point from Thursday at $2,968.06/67.98 provides an intervening barrier.

Silver traded with a 34-handle in early U.S. trading, a level not seen since late October. The white metal is garnering support from news that the Greens won't oppose Germany's spending blitz and hopes that additional stimulus measures will be announced by China on Monday.



Fresh record highs in gold and ongoing weakness in the dollar are providing an additional boost. Silver is up more than 17% YTD and nearly 36% from a year ago.

Suddenly, the more than 22-year high set last year at $34.853 (22-Oct) is back in the market's sights. A minor intervening resistance is noted at $34.517 (30-Oct high).

A minor intraday chart point from Thursday at $33.396/394 bolsters former resistance now support at $33.340. Below the latter, the $33.000/$32.961 level stands in front of the 20-day MA at $32.462.


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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