Gold consolidates within yesterday's range as focus shifts to May jobs data

OUTSIDE MARKET DEVELOPMENTS: CBO scoring of the House-passed reconciliation bill revealed that taxes will be cut by $3.75 trillion and the deficit will increase by $2.4 trillion over the next decade. While the White House is questioning the veracity of the results, concerns about the fiscal situation in the U.S. are escalating. Even Trump ally Elon Musk roundly criticized the legislation as a "disgusting abomination.”

The legislation is currently in the hands of the Senate, which is likely to make significant amendments. At that point, the two houses of Congress will need to reconcile the differences. President Trump's desire to have the legislation on his desk by the Fourth of July is looking questionable.

Today's ADP Employment Survey undershot expectations by a significant margin. This offsets the better-than-expected JOLTS print from Tuesday, leaving downside risk for Friday's NFP report.

Services PMI beat expectations, but the ISM number was a miss. These data temper some of the growth optimism stemming from manufacturing data beats earlier in the week. Rises in the price components increase inflation worries.

The net effect of today's data is a modest uptick in rate cut expectations as reflected by Fed funds futures. The futures are pricing 55 bps by year-end.

The Bank of Canada held steady on rates, as was widely expected. BOC Governor Macklem acknowledged that Q2 growth would be substantially weaker in the face of tariff headwinds. "There was a clear consensus to hold policy unchanged as we gain more information," he said.

MBA Mortgage Applications fell 3.9% in the 30-May week, versus -1.2% in the previous week. The 30-year mortgage rate fell to 6.92% from 6.98% in the previous week.

ADP Employment Survey showed a private payrolls increase of just 37k in May, well below expectations of +120k, versus a revised +60k in April (was +62k). This was the weakest print since the 53k decline in March 2023.

S&P Global Services PMI was revised up to 53.7 for May, versus a 52.3 flash and 50.8 in April. Prices charged jumped to a 33-month high of 58.6 from 53.0 in April.

Services ISM fell 1.7 points to 49.9 in May, below expectations of 52.0, versus 51.6 in April. That leaves the index in contraction (albeit slightly) for the first time since last June. Prices paid surged 3.6 points to a 30-month high of 68.7, versus 65.1 in April.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$2.28 (-0.07%)
5-Day Change: +$87.60 (+2.66%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,287.64 - $3,495.89
Weighted Alpha: +48.67

Gold is trading higher within Tuesday's range, buoyed by heightened fiscal worries and signs of revived inflation from the services sector. A tilt toward more dovish Fed expectations and a weaker dollar provide additional underpinnings for the yellow metal.



New highs for the week above $3,389.78 would bode well for expected tests back above $3,400. Additional tiers of resistance at $3,416.97 (78.6% retracement of the corrective decline) and $3,431.63 (08-May high) protect the all-time high at $3,495.89.

A convincing move to new record highs above $3,500 would shift focus to $3,596.20 based on a Fibonacci projection. However, such a move would also return considerable confidence to the longer-term objective at $4,000.

On the downside, Tuesday's low at $3,338.34 and the $3,324.40/28.00 zone protect the 20-day moving average at $3,293.76. Penetration of the latter would favor further consolidation into the lower half of the range.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$0.157 (-0.45%)
5-Day Change: +$1.449 (+4.40%)
YTD Range: $28.565 - $34.783
52-Week Range: $26.524 - $34.853
Weighted Alpha: +19.65

Silver remains consolidative within the upper half of Monday's impressive $1.805 range, supported by persistent strength in gold, a softer dollar, and some hope that direct talks between President Trump and China's Xi this week will ease trade tensions.



Key resistance marked by the high from October at $34.853 successfully contained the upside earlier in the week, leaving the broader range intact. While Monday's strong surge leaves the short-term bias in favor of further attacks on the upside, recent volatility has the trade on edge.

Failure to muster a breakout in short order is likely to lead to position squaring ahead of the weekend. That would send the white metal back below $34 with potential to the $33 congestion zone.

A breakout above $34.783/853 would confirm that the uptrend is back underway, targeting $36.169 initially based on a Fibonacci projection. A long-standing retracement level at $35.217 provides an intervening barrier. Surther out, $40 silver would look increasingly appealing.


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.