Gold poised for higher weekly close, but silver steals the show

OUTSIDE MARKET DEVELOPMENTS: The headline NFP print for May beat expectations, but negative back-month revisions totalling 95k curbed the market's enthusiasm somewhat. With the labor market still on a modestly positive trajectory, and in light of President Trump's "very good" call with China's Xi on Thursday, the trade heads into the weekend with some appetite for risk.

The decent NFP report offsets some of the growth worries that emerged earlier in the week. Rate cut expectations have been dialed back once again.

Trump said his call with Xi focused exclusively on trade and had "resulted in a very positive conclusion for both countries". Trump indicated that trade talks between the world's two largest economies would resume shortly.

"He invited me to China and I invited him here," Trump said. "We both accepted," he added, perhaps signalling a significant easing of tensions between the two superpowers.

Geopolitical tensions remain elevated. Russia launched a massive drone and missile strike against Ukraine, apparently as retribution for Kyiv's recent drone attacks on Russian airbases. Meanwhile, Israel struck Hezbollah drone production sites in Lebanon.

The escalating feud between President Trump and Elon Musk is drawing additional attention to U.S. fiscal concerns. Musk's attacks on the so-called "Big, Beautiful Bill" could give Republican deficit hawks in the Senate the cover they need to break ranks amid conflicting stories on the long-term debt implications of the BBB. Trump's hope to have the legislation on his desk for signing by Independence Day is at risk.

Nonfarm Payrolls rose 139k in May, above expectations of +125k, versus a negative revised 147k in April (was +177k). The jobless rate was steady at 4.2%. Hourly earnings rose 0.4% on expectations of +0.3%. The average workweek was steady at 34.3 hours.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$7.45 (+0.22%)
5-Day Change: +$66.72 (+2.03%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,287.64 - $3,495.89
Weighted Alpha: +47.57

Gold ends the week under modest pressure as risk-on sentiment saps haven demand. However, geopolitical risks and fiscal worries continue to underpin the market, with silver providing some help as well. Despite the inability to sustain the brief foray back above $3,400, the yellow metal still appears poised for a higher weekly close.



While gold is consolidative just above the midpoint of the range that has been in place since 15-May, I continue to view price action since the all-time high was set on 22-Apr as a continuation pattern within the long-term uptrend.

A more convincing move above $3,400 would clear the way for tests of Fibonacci resistance at $3,416.97 and the 07-May high at $3,431.63. Above the latter, $3,495.89 would be back in play with potential to $3,596.20 and beyond.

Global gold ETFs saw net outflows in May (19.1 tonnes), the first since November. As the White House backed away from its most punitive tariff threats, risk appetite improved, safe-haven bets were pared, and investors were drawn back into the stock market.

All-in-all, it was a very modest retracement of the solid inflows seen earlier in the year. Ongoing uncertainty on trade, heightened geopolitical and growth risks, and a general global bias toward easier monetary policy should underpin demand.

The 20-day moving average bolsters congestive support around $3,300. The rising 50-day moving average should move into this area in the week ahead and help to keep last week's low at $3,251.28 at bay.

Silver has had quite a week, clearing numerous key resistances. The white metal traded above $36 for the first time since February 2012 and is on track for a weekly gain of more than 9%. The white metal is up more than 24% YTD.



I attribute much of this week's action to technical activity. As key resistances were negated, buy stops were triggered, and the bull camp was encouraged to pile in. With gold basically holding steady, we finally got the much-needed correction in the ratio.

The gold/silver ratio peaked above 107 in April and remained elevated around 100 throughout May. The ratio plunged nearly 8% this week to a nine-week low of 92.31. Congestive support around 90 is a likely attraction.

The $36.169 Fibonacci objective in silver was satisfied and exceeded, shifting focus to $36.568. However, the range breakout builds a compelling technical case for $40 silver. The high from February 2012 at $37.430 provides a solid intervening barrier.

Friday's Asian low at $35.654 marks first support. Thursday's U.S. low at $35.391 protects $35 and former resistance, now support, at $34.853/543.


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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