Gold and silver remain range-bound, with focus still on tariff developments

OUTSIDE MARKET DEVELOPMENTS: Markets remain focused on tariff developments. The previously announced 90-day pause in tariffs was set to expire today, but President Trump pushed the trade deal deadline back to August 1.

Notices were sent to numerous countries warning that reciprocal tariffs would take effect on August 1, and the President vowed that the deadline would not be extended. Nonetheless, some degree of optimism remains that deals will be struck with major trading partners.

Trump shocked the market late on Tuesday when he said. “I believe the tariff on copper we’re going to make it 50%.” Spot copper surged to a record high of $5.870. Front-month copper futures reached a record high of $5.9535, and the spread between London and New York futures widened to 26%.

President Trump signed an executive order in February that launched an investigation into copper imports, noting that "The United States faces significant vulnerabilities in the copper supply chain, with increasing reliance on foreign sources for mined, smelted, and refined copper."

It's prudent for the U.S. to take strides to boost mining, smelting, and refining capacity to shorten and harden the copper supply chain. However, this is a long-term proposition.

The price of copper is up nearly 40% year-to-date, with significant implications for the construction, power generation/transmission, auto, aircraft, and defense sectors. It strikes me that the threat of a 50% tariff on copper could be another negotiating ploy.

Russia launched another record drone attack against Ukraine, although Ukraine said most were shot down. The attack came hours after President Trump announced the U.S. would be sending more defensive weapons to Ukraine. This is likely a significant setback to ceasefire negotiations.

Hopes for a ceasefire and hostage release deal between Israel and Hamas remain elevated. "I think we're getting closer to a deal," said President Trump after meetings with Israeli PM Netanyahu.

The minutes from the June FOMC meeting come out today. I don't expect any great revelations as the central bank remains on hold amid tariff uncertainty. The doves are already on the ropes after better-than-expected June jobs data.

Today's $39 bln 10-year reopening was well received, thanks largely to the direct bid. The indirect bid, a reflection of foreign interest, was moderate. Nonetheless, bids totaled $101.8 bln for a solid 2.61 cover, and a high yield of 4.362%.

MBA Mortgage Applications rose 9.4% in the week ended 4-Jul, versus +2.7% in the previous week. The 30-year mortgage rate fell to a 13-week low of 6.77%, versus 6.79% in the previous week.

Wholesale Sales declined 0.3% in May, versus a revised unch in April (was +0.1%). Inventories fell 0.3% on expectations of +0.2%, versus +0.2% in April.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$5.37 (-0.16%)
5-Day Change: -$50.96 (-1.52%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,354.48 - $3,495.89
Weighted Alpha: +36.28

Gold set a new low for the week at $3,284.61, but remains confined to last week's range and right around the midpoint ($3,311.51) of the broader range that has been in place since mid-May. In the absence of significant U.S. data this week, the yellow metal is consolidating as it awaits fresh impetus.



Good interest in today's 10-year auction saw yields moderate somewhat, providing an intraday bid for the yellow metal. The dollar index eased slightly after six straight sessions of gains.

Price action since May still appears to be a large continuation pattern, favoring an eventual upside breakout and resumption of the dominant uptrend. Bank of America sees gold reaching $4,000 over the next year, driven largely by U.S. fiscal worries.

Passage of President Trump's signature 1BBB is expected to add trillions to the already bloated national debt over the next decade, further eroding confidence in Treasuries and the dollar. This ongoing trend has already increased the appeal of gold as a safe-haven asset.

A sustained move above the midpoint of the range at $3,311.51 would return focus to yesterday's high at $3,344.27. Penetration of the latter would clear the way for probes back above $3,400. More substantial resistance marked by the 16-Jun high at $3,449.14 must be cleared to put the record high at $3,500 back in play.

Today's early U.S. low at $3,284.61 now provides a good intervening barrier, protecting the more important 30-Jun low at $3,256.02. The 100-day moving average has risen to the $3,200 zone, which should keep the $3,127.12 range low (15-May) at bay.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$0.138 (-0.38%)
5-Day Change: -$0.154 (-0.42%)
YTD Range: $28.565 - $37.288
52-Week Range: $26.524 - $37.288
Weighted Alpha: +22.70

Silver remains defensive within the range established on Monday, but gold's turn higher on the day, a slightly easier dollar, and yesterday's record highs in copper provide some underpinning. The 20-day moving average has provided support so far this week.



While silver is underperforming today, this week's move in the gold/silver ratio below 90 constituted the first breach of the 50-day MA since December. That suggests potential in the ratio to the 85 zone.

As long as Monday's low at $36.201 is intact, I think the downside is well protected. This level also corresponds closely with the midpoint of the $37.288/$35.369 range.

Today's Asian high $36.757 and yesterday's high at $36.864 now protect the $37 level. The more substantial  $37.198/288 zone must be cleared to set new cycle highs and bolster confidence in previously established upside objectives at $38.750 (Fibonacci) and $40 (psychological).


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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