Gold consolidates around the midpoint of the range

OUTSIDE MARKET DEVELOPMENTS: Israel and Iran appear to be honoring the ceasefire agreement. While some degree of unease persists, oil below $65 is indicative of a market that is optimistic that the truce will hold. Investors remain tilted toward risk-on. The S&P is near record highs.

Reduced geopolitical tensions in the Middle East may now allow President Trump to focus on the ongoing war in Ukraine. Trump will meet with Ukrainian President Zelensky on the sidelines of the NATO summit in The Hague, where continued access to U.S. weapons will certainly be discussed.

Meanwhile, NATO members agreed to more than double defense spending, from 2% of GDP to 5%. This is a big win for President Trump as it reduces America's defense burden. Leaders, including President Trump, also reaffirmed their commitment to the central tenet of the alliance, “that an attack on one is an attack on all.”

Fed Chairman Powell is back on The Hill today to testify before the Senate. While inflation has cooled lately, the Fed is on hold amid ongoing worries that tariffs pose price risks. 

"We should start to see this over the summer, in the June number and the July number...If we don't we are perfectly open to the idea that the pass-through (to consumers) will be less than we think, and if we do that will matter for policy," Powell told the House on Tuesday.

The market seemed to read that as "so you're saying there's a chance," reflecting some level of optimism that trade deals will get worked out, and/or tariff costs won't be passed along to consumers. Prospects for a July rate cut have risen more than 10% over the past week, although it's still a long shot at 22.7%.

Fed funds futures continue to fully price a 25 bps cut for October. The implied Fed funds rate for year-end is 3.7825%, pricing nearly 60 bps in easing between now and then, suggesting that the market perceives heightened growth risks later in the year.

MBA Mortgage Applications rose 1.1% last week, versus -2.6% in the previous week. Purchases fell 0.4%, while refis jumped 3.0%. The 30-year mortgage rate edged up to 6.88% from 6.84%.

New Home Sales plunged 17.3% to a 623k pace in May, below expectations of 693k, versus a negative revised 722k in April (was 743k). 


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$1.01 (+0.03%)
5-Day Change: -$50.62 (-1.50%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,295.86 - $3,495.89
Weighted Alpha: +41.62

Gold is consolidating recent losses above $3,300 as the ceasefire between Israel and Iran holds, underpining risk appetite. Heightened easing expectations and a weak dollar are providing some support.



The yellow metal is trading right around the midpoint of the range that has been in place since mid-May, and straddling the 50-day moving average. Support at $3,297.69 (9-Jun low) successfully contained the downside on Monday, providing some encouragement for the bull camp.

A rebound above the 20-day MA at $3,355.56 would bode well for renewed tests above $3,400.00/01.45 and keep the technical bias tilted in favor of the dominant uptrend. Good resistance marked by last week's high at $3,449.13 protects the record high around $3,500.00.

If the yellow metal is unable to hold above $3,300, further consolidation in the lower half of the range becomes likely. Focus would shift initially to the $3,251.28 low from 29-May.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$0.175 (-0.49%)
5-Day Change: -$0.967 (-2.63%)
YTD Range: $28.565 - $37.288
52-Week Range: $26.524 - $37.288
Weighted Alpha: +25.06

Silver has retraced all of Tuesday's losses and is now higher on the week. The white metal is being supported by an uptick in rate cut expectations and a generally soft dollar.

 

While silver is still more than 3% off the 13-year high set last week at $37.288, the failure to sustain corrective losses below the 20-day moving average and the subsequent rebound above $36 are encouraging to the underlying uptrend. A new high for the week above $36.351 would bode well for further tests above $37.

The February 2012 high at $37.430 is bolstered by last week's high at $37.288. A push through this area is needed to perpetuate the uptrend and shift focus to my next Fibonacci objective at $38.750. Beyond that, $40 would attract.

On the downside, keep an eye on the 20-day MA. Tuesday's low at $35.369 now protects the previous high at $34.853. Penetration of the latter would favor a deeper correction toward $33.988/949, where the 50-day MA corresponds with 38.2% retracement of the most recent leg higher.


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.