Gold remains consolidative above $3,300 as silver takes a breather

OUTSIDE MARKET DEVELOPMENTS: Market sentiment remains tilted toward risk-on with eyes on U.S.-Sino trade talks in London. President Trump said he is prepared to ease export controls on tech and chips if China resumes the export of rare-earth materials.

The World Bank trimmed 2025 global growth expectations to 2.3% from 2.5%. "Global growth is slowing due to a substantial rise in trade barriers and the pervasive effects of an uncertain global policy environment," according to the Global Economic Prospects report. If they're accurate, it "would mark the slowest rate of global growth since 2008, aside from outright global recessions."

The World Bank slashed its 2025 U.S. growth expectations to 1.4%, from its previous forecast of 2.3% in January. U.S. GDP in 2024 was 2.8%, so they are now projecting a halving of U.S. growth. 

Chinese exports rose 4.8% y/y in May, below expectations. Exports to the U.S. specifically plunged 35% y/y, even though the White House walked back Chinese tariffs early in the month. It was the steepest drop in Chinese exports to the U.S. since early 2020 as the COVID crisis was ramping.

Nonetheless, markets continue to display some optimism that trade issues will be resolved, and at least U.S. growth will remain underpinned, despite recent downgrades. That, along with a resilient labor market and cooler inflation, has caused hopes for a rate cut to fade. Recent FedSpeak has reiterated that the central bank is in no hurry to adjust policy amid ongoing uncertainty.

Fed funds futures are no longer fully pricing in a 25 bps cut in October. The implied Fed funds rate for December is 3.9275%, indicating the market expects less than 45 bps in easing by year-end.

This week's U.S. inflation data may provide some impetus for policy expectations. However, the market is anticipating generally benign numbers.

Social unrest in Los Angeles and plans for more demonstrations across the country heading into the Flag Day celebration in DC could elevate risk aversion if they become more violent.

NFIB Small Business Optimism Index rebounded 3 points to 98.8 in May, above expectations of 95.9, versus 95.8 in April. It was the first rise in the index since December.

"Although optimism recovered slightly in May, uncertainty is still high among small business owners. While the economy will continue to stumble along until the major sources of uncertainty are resolved, owners reported more positive expectations on business conditions and sales growth." – NFIB Chief Economist Bill Dunkelberg

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$9.30 (+0.28%)
5-Day Change: -$23.70 (-0.71%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,295.86 - $3,495.89
Weighted Alpha: +43.56

Gold continues to consolidate above $3,300, underpinned by persistent geopolitical risks, uncertainty on trade, and a soft dollar. However, risk-on sentiment in the broader market continues to limit the upside.

 

With the yellow metal trading right around the midpoint of the $3,495.89/$3,127.12 range, it seems the market needs some new catalyst to either perpetuate the dominant uptrend or trade lower in search of renewed buying interest.

The latter result would be indicative of the 'summer doldrums,' when the market often ratchets lower amid diminished investor interest and lower trading volumes. The seasonal dearth of weddings and festivals in Asia, and fewer major economic events and policy announcements in the June-August period, are contributing factors.

U.S. inflation data this week could provide a spark, but the market is expecting generally benign CPI and PPI prints. Escalations in trade and/or geopolitical tensions could certainly be disruptive. Markets are also keen to see what the "Big Beautiful Bill" looks like when it finally makes it to the President's desk.

Downticks within the range are certainly possible, but I think they would be viewed as buying opportunities. Goldman Sachs believes we can still see $3,700 gold by year-end as central banks continue their years-long buying spree.

JPMorgan forecasts gold prices to reach an average of $3,675 in Q4'25, with potential to exceed $4,000 by Q2'26. As noted in yesterday's comment, $4,000 gold "may be a 2026 story” according to BofA's Francisco Blanch.

JPMorgan believes just a scant 0.5% reallocation of foreign-held U.S. assets to gold could push the market to $6,000 by 2029. That would suggest significant downside risk if reallocation goes the other way.

However, gold has certainly gained traction among central banks as reserve diversification amid increased instances of currency weaponization. I believe institutional and retail investors will increasingly view gold as appropriate and necessary diversification as well.

A breach of last week's high at $3,401.81 would clear the way for tests of more important resistances at  $3,416.97 (78.6% retracement of the corrective decline) and $3,431.63 (08-May high). Above that, the record high at $3,495.89 would be back in play.

The 20-day MA at $3,303.46 has contained the downside so far today, keeping yesterday's low at $3,297.69 at bay. Secondary support is marked by the 02-Jun low at $3,289.46. Penetration of the latter would leave the market vulnerable to $3,273.31 (50-day MA) and $3,251.28 (29-May low) vulnerable to tests. 

Silver is taking a breather after three consecutive sessions of impressive gains. While the white metal is trading lower on the day, action remains confined to yesterday's range.




A little bit of stabilization is not surprising, given the nearly 12% rally seen since the first trading day of the month. The gold/silver ratio corrected nearly 10%, approaching the targeted 90 zone yesterday.

The early U.S. low at $36.376 now provides intervening support ahead of congestion around $36, which is highlighted by Monday's low at $35.948. Friday's low at $35.654 is a more significant level to watch.

An eventual breach of Monday's 12-year high at $36.875 would bode well for the anticipated push to the high from February 2012 at $37.430. Further out, $40 remains a significant attraction, and if the market gets there record highs around $50, suddenly look pretty 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.