Gold continues to correct as trade optimism boosts risk appetite

I'm traveling today, so I'll keep it brief. I hope to see some of you at the Central States Numismatic Society Show in Chicago this week. We'll be at booth 1404.

OUTSIDE MARKET DEVELOPMENTS: Talk of de-escalating trade tensions with China and progressing trade talks with India and Japan is the kind of news markets were desperate for. U.S. stocks are higher amid improved risk appetite.

According to Treasury Secretary Scott Bessent, neither the U.S. nor China sees the current trade war as sustainable. President Trump is “setting the stage for a deal with China,” said Bessent on Tuesday, and de-escalation should happen in the "very near future."

The President also dialed down pressure on the Fed, saying he had "no intention of firing" Chairman Powell and never did. “I would like to see him be a little more active in terms of his idea to lower interest rates,” Trump said Tuesday evening.

The dollar index firmed on Tuesday, but gains stalled well shy of 100. The greenback is lower today, and the overall bias remains bearish after falling to a three-year low on Monday.

MBA Mortgage Applications fell 12.7% in the week ended 18-Apr as 30-year mortgage rates rose to a nine-week high of 6.90%.

S&P Flash Manufacturing PMI rose to 50.7 in April, above expectations of 49.1, versus 50.2 in March. 

S&P Flash Services PMI fell to 51.4 in April, below expectations of 52.5, versus 54.4 in March.

New Home Sales rose to 0.724M in March, above expectations of 0.686M, versus a revised 0.674M in February (was 0.676M).


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$51.37 (-1.52%)
5-Day Change: -$23.52 (-0.70%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,281.97 - $3,495.89
Weighted Alpha: +47.74

Gold peaked just shy of $3,500 on Tuesday after positive news on the trade front sparked profit taking. Follow-through losses today pushed the yellow metal to new lows for the week.



While gold is nearly $200 off yesterday's record high, I still see losses as corrective. The next level of support is marked by the 17-Apr low at $3,290.51.

The $3,210.36/$3,198.36 zone offers more substantial chart support and should correspond with the 20-day moving average over the next several sessions. An additional intervening barrier is noted at $3,229.84 (16-Apr low).

Ongoing weakness in the dollar is seen as a limiting factor on the downside for gold. The market will also be monitoring events on the trade front. I categorize recent trade optimism as 'fragile,' particularly with regard to China.

A climb back above $3,400 would return confidence to the dominant trend, which is still very clearly bullish. As noted yesterday, some sources show highs above $3,500. It seems likely that the market will want to return to that level to confirm.

Silver is probing above $33 again, underpinned by heightened optimism on trade and a soft dollar. Gains above $33 have been a struggle recently, but this time might be the charm.



A breach of the previous highs at 33.050/053 would clear the way for a challenge of the $33.264 Fibonacci level. Above the latter, the late-March high at $34.543 and the cycle high from October at $34.853 would be in play.

An intraday chart point at $32.782 should keep today's Asian low at $32.276 at bay. The 50- and 20-day moving averages continue to be significant with respect to the close.

A short-term close below the 20-day MA at $32.334 would set up a test of chart support at $32.134/125, but I would suggest potential at that point would be back to the 100-day MA at $31.613.


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.