Haven demand drives gold to record highs above $3,200, silver follows to regain $32

OUTSIDE MARKET DEVELOPMENTS: The trade war between China and the U.S. continues to escalate. Beijing raised retaliatory tariffs on all U.S. goods to 125%.

President Trump lifted tariffs on Chinese goods to 125% on Wednesday, but that's on top of 20% fentanyl-related levies already in place. The White House confirmed that tariffs on Chinese goods currently stand at 145%.

Trump paused reciprocal tariffs on other countries for 90 days to provide time for ongoing negotiations. "USTR has informed us that there are maybe 15 countries now that have made explicit offers that we're studying and considering and deciding whether they're good enough to present the president," said White House Economic Advisor Kevin Hassett.

"Everybody wants to come and make a deal, and we're working with a lot of different countries, and it's all going to work out very well," predicted President Trump. Some are sceptical that all these new trade deals can get done in three months, but I believe progress will beget a longer pause if necessary.

Nonetheless, uncertainty prevails, which will continue to roil markets. "In the 129-year history of the Dow Jones Industrial Average, the index has closed higher or lower by at least 1,000 points just 31 times. Four of those times happened in the past week," noted CNN.

Global uncertainty and concerns about the Trump administration's tactics have undermined the appeal of U.S. assets. While this week's Treasury auctions were fairly well received, the 10-year yield surged to eight-week highs above 4.5% amid evidence that foreign holders of U.S. debt are accelerating their retreat from Treasuries.

FX flows typically follow higher yields, but the dollar index has fallen to three-year lows. Haven interest in the foreign exchange market has shifted to the Swiss franc, yen, and to a lesser degree, the euro.

The franc has reached a 14-year high against the greenback, gaining nearly 8% since the beginning of April. The SNB is under increasing pressure to slow the franc's rise via a rate cut or direct intervention.

While U.S. inflation cooled in March, the needle hasn't moved much in terms of Fed policy expectations. Fed fund futures continue to price 75 bps in easing by year-end, with the first 25 bps cut likely to come in July.

PPI fell 0.4% in March, below expectations of +0.2%, versus a revised +0.1% in February (was unch); 2.7% y/y, down from 3.2% in February. Core -0.1% on expectations of +0.3%, versus +0.1% in February (was -0.1%); 3.3% y/y, versus 3.5% in February.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$36.83 (+1.16%)
5-Day Change: +$186.00 (+6.12%)
YTD Range: $2,607.16 - $3,231.83
52-Week Range: $2,281.97 - $3,231.83
Weighted Alpha: +43.06

Gold marched to new record highs above $3,200, boosted by persistent haven flows and a weaker dollar. With a weekly range of more than $275, I think we can say it's been one heck of a week!



My takeaway is that gold remains the haven asset of choice, and that gets amplified when Treasuries and the dollar fall out of favor. However, those initial deleveraging sell-offs in gold make for a wild ride.

With other countries less inclined to hold dollars and Treasuries as reserve assets, the appeal of gold is heightened. Global central banks have been on a buying spree for nearly two years, and that trend seems likely to accelerate in light of recent events.

The 127.2% retracement level of this week's corrective plunge at $3,219.91 has been exceeded, shifting focus to the next Fibonacci level at $3,290.11. Beyond the latter, $3,300 attracts. Recent price action also lends additional credence to the longer-term target at $3,500.

While the dominant uptrend has fully reasserted itself, I wouldn't be surprised to see some profit-taking ahead of the weekend. Initial support is marked by the early U.S. low at $3,211.77, which protects the low for the day at $3,174.99, and the old record high at $3,264.72. I'd call $3,200.00 a minor downside barrier as well.

Silver is trading back above $32, pulled higher by resurgent gold, the plunge in the dollar, and perhaps some optimism that deals will get worked out with most of our trading partners. The white metal is poised to close higher on the week after initially plunging to a seven-month low on Monday.



Silver is back above the 200- and 100-day moving averages, and nearly 61.8% of the two-week plunge has already been retraced. A breach of $32.259 Fibonacci level would bode well for tests of the 50- and 20-day MAs, which are going to converge around $32.50 early next week. Above the latter, the next tier of Fibonacci resistance is at $33.264.

I have always maintained that gold is the best option for wealth preservation. Silver's volatility over the past two weeks puts an exclamation point on that position! I believe investors will be gun-shy when it comes to silver for some time to come. Caution remains warranted for both the bull and the bear camps.

Given the magnitude of the gains since Monday's low, it seems likely that we'll see some profit taking ahead of today's close. The early U.S. low at $31.267 is the first level of significant intraday support. The low for the day at $31.039 seems well protected, but I guess you really never know with silver these days. 


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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