Gold continues to consolidate above short-term support

OUTSIDE MARKET DEVELOPMENTS: The first look at U.S. Q1 GDP came in weaker than expected, but not nearly as bad as the Atlanta Fed's GDPNow model predicted (see yesterday's comment). Growth in the first three months of the year contracted by 0.3%, the first negative print since Q1 2022.

As expected, tariff front-running weighed significantly on growth. Imports jumped 41.3% in Q1, resulting in a huge $321.7 bln draw on net exports.

While the tariff situation remains fluid, the front-running is probably behind us, so it is likely that growth will rebound in Q2. Subsequent adjustments to Q1 could still result in positive growth.

Inflation indications within the GDP report were hotter than expected, but more important PCE inflation cooled to 2.3% in March, from 2.7% in February. The combination of weaker growth and some improvement in the Fed's preferred inflation measure casts a more dovish light heading into next week's FOMC meeting.

The Fed is still expected to hold steady in May, but prospects for a 25 bps cut in June edged up to 63.8% from 59.8% yesterday and 55.5% a week ago. The implied rate for year-end is 3.3875%, favoring just under 100 bps in easing.

Ukrainian sources say they expect to sign a deal with the U.S. to provide access to strategic minerals in exchange for ongoing military support. It's unclear at this point how the deal might impact progress toward a peace deal between Kyiv and Moscow.

MBA Mortgage Applications fell 4.2% in the week ended 25-Apr, following a 12.7% decline in the previous week. It was, in fact, the third straight weekly decline. The 30-year mortgage rate ticked down to 6.89% from a 9-week high of 6.90% in the previous week.

ADP Employment Survey showed a private payrolls increase of 62k in April, below expectations of 124k, versus a revised 147k in March (was 155k). The takeaway is a slight downside risk to Friday's NFP report.

Q1 GDP (advance) tumbled to -0.3%, below expectations of +0.4%, versus +2.4% in Q4'24. The chain price index jumped to 3.7%, above expectations of 3.1%, versus 2.3% in Q4.

Civilian ECI was steady at 0.9% in Q1, in line with expectations, versus +0.9% in Q4. Annualized ECI moderated to +3.6% from +3.8% in Q4.

Personal Income rose 0.1% in March, below expectations of 0.4%, versus 0.8% in February. 

PCE rose 0.6% in March, in line with expectations, versus +0.4% in February. The chain price index rose 0.1%, resulting in a 2.3% annualized rate, down from 2.7% in February.

Chicago PMI fell 3.0 points to 44.6 in April, below expectations of 45.5, versus 47.6 in March.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$44.97 (-1.36%)
5-Day Change: +$8.10 (+0.25%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,281.97 - $3,495.89
Weighted Alpha: +47.15

Gold remains defensive at the low end of the recent range, weighed by recent improvements in risk appetite and signs of moderating inflation. However, the downside is being limited by ongoing uncertainty on tariffs, a negative Q1 GDP print, heightened rate cut expectations, and a generally weak dollar.



The yellow metal is up nearly 6% in April, setting the stage for a fourth consecutive monthly gain. Gold is up nearly 27% year-to-date.

The World Goid Council reports that total demand reached a Q1 record of 1,206 tonnes, led by a resurgence in ETF inflows. "A sharp revival in gold ETF inflows fuelled a more-than-doubling of total investment demand to 552t (+170% y/y); its highest since Q1’22," according to the latest Gold Demand Trends report.

Central bank demand slowed to 244 tonnes from 365 tonnes in Q4'24, but was "comfortably within the quarterly range of the last three years," according to the WGC.

Jewelry demand also slowed, weighed by record-high prices.

Despite tariff uncertainty in Q1, technology demand remained strong at 80.45 tonnes, down slightly from 82.88 tonnes in Q4. While the Trump administration ended up exempting gold, who knows if that might change?

Bar and coin demand moderated slightly to 325.4 tonnes, versus 325.99 tonnes in the previous quarter. Demand from Chinese investors was especially strong.

Meanwhile, total supply tightened by 7% q/q to 1,206 tonnes on softer mine production and weaker recycling as consumers held out for higher prices.

While gold eked out a new low for the week of $3,271.82, the support zone defined by the recent lows at $3,274.47/69.62/65.55 is further reinforced. Should this area give way, a downside extension to the 20-day MA at $3,247.44 and $3,200 would become likely.

Today's post-GDP high at $3,314.89 protects the Asian high at $3,323.15. These additional tiers of resistance now stand in front of the high for the week at $3,351.87. A breach of the halfway back point of last week's decline at $3,380.72 must still be negated to return confidence to the uptrend.

Silver fell to a nine-session low of $32.219 just before this morning's data showed the U.S. economy contracted in Q1. The white metal subsequently recovered into the range, but worries about weak global growth and demand destruction continue to worry the markets.

 

Heightened expectations that the Fed will resume easing this summer are keeping the dollar on defense. That, along with hopes for more Chinese stimulus, is helping to underpin silver.

Support noted in yesterday's comment at $32.134/125 was left unthreatened. The still-falling 20-day MA is at $32.115 today, and still reinforces this area.

The failure to sustain gains above $33 and truly challenge key highs above $34 is already worrying to the bull camp. A short-term retreat below $32 from here would pave the way for further downside retracement toward $31.110/070, where the halfway back point of the April rally corresponds with the 200-day MA.


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.