Gold regains $3,300 on rising geopolitical tensions

OUTSIDE MARKET DEVELOPMENTS: Houthi rebels in Yemen fired a ballistic missile on Sunday that struck near Tel Aviv's Ben Gurion airport. The famed Iron Dome defense system failed to intercept the projectile. Israel has vowed retaliation.

Also over the weekend, Israel's security cabinet voted unanimously to ramp up operations in Gaza. The plan is now to capture and reoccupy the entire Gaza Strip.

"The plan will include, among other things, the capture of the Strip and holding the territories, moving the Gazan population south for its defence, denying Hamas the ability to distribute humanitarian supplies, and powerful attacks against Hamas," the official said.

The UN has scheduled a high-level meeting for June to discuss a two-state solution to the Israeli-Palestinian conflict. A couple of weeks ago, UN Secretary-General Guterres worried that “the promise of a two-state solution is at risk of vanishing altogether." That opportunity may indeed be gone.

President Trump continues to suggest that deals are in the offing with some key trading partners. He also hinted at walking back tariffs on China during an interview on Meet the Press. “At some point, I’m going to lower them, because otherwise, you could never do business with them, and they want to do business very much,” Trump said.

However, Trump indicated he had no plans at this time to speak directly with Xi Jinping. This has the market worried that the trade war between the U.S. and China will continue for some time.


S&P Global Services PMI was revised down to 1 17-month low of 50.8 in the final read for April, versus 51.4 flash and 54.4 in March.

Services ISM rose 0.8 points to 51.6 in April, above expectations of 50.2, versus 50.8 in March. Prices jumped 4.2 points to a six-month high of 65.1, versus 60.9 in March.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$72.53 (+2.24%)
5-Day Change: -$27.19 (-0.81%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,287.64 - $3,495.89
Weighted Alpha: +45.18

Gold rebounded back above $3,300, buoyed by heightened geopolitical tensions, persistent trade uncertainty, and a softer dollar. The yellow metal is up more than 2% to start the week.



Last week, the yellow metal notched its first lower weekly close in four. Today's price action remains confined to last week's range thus far, with a minor chart point at $3,323.15 protecting the more important $3,351.87 level.

Penetration of the latter would constitute a more than 50% retracement of the correction off the $3,495.89 all-time high from 22-Apr. At that point, focus would shift to the 61.8% and 78.6% retracement levels at $3,384.74 and $3,433.62, respectively.

Recent losses are considered corrective within the dominant uptrend. Successive violations of these resistance levels heighten the likelihood of further attacks on the $3,500 zone. Above that, the next Fibonacci objective is at $3,575.04.

Goldman Sachs believes gold will continue to outperform silver due to ongoing central bank demand. Official sector demand has increased fivefold since Russian assets were frozen in 2022, and that trend seems likely to continue.

"With Chinese solar production now slowing amid oversupply, high recession risk, and central bank gold buying remaining strong in 2025, we expect gold to continue out-glittering silver," the bank said.

Goldman believes gold is in a structural bull market with potential to $3,700 by year-end, and $4,000 by mid-2026. If the U.S. slips into recession, safe-haven flows could drive gold to $3,880 this year.

On the downside, first supports are $3,300.00 and 3,289.15. The latter is bolstered by the midpoint of today's range at $3,280.43 and protects today's Asian low at $3,239.98.

Silver is trading higher to start the week, underpinned by renewed strength in gold and a softer dollar. However, the white metal's recent struggles above $33 suggest that at least the short-term tone is consolidative in the upper half of this year's range.



Ongoing tariff uncertainty and concerns about oversupply in the solar market are seen as headwinds for silver. So too are fading prospects for a Fed rate cut this summer, despite pressure from the White House for monetary easing.

A failure to reclaim the 33-handle would bode well for further tests below $32. Last week's low at $31.762 corresponds closely with an important retracement level and the 100-day moving average. A push below the $31.763/727/715 area would shift focus to the convergence of the next tier of Fibonacci support and the 200-day MA at $31.124/114.

Fresh five-week highs above $34.662 are needed to return focus to the high for the year at $34.543 and the more important 22-year high from October 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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