Gold retreats into the range, weighed by trade optimism

OUTSIDE MARKET DEVELOPMENTS: The European Commission is suggesting that a trade agreement with the U.S. is likely ahead of the August 1 deadline. "Our focus is on finding a negotiated outcome with the U.S. ... We believe such an outcome is within reach," said an EU spokesperson.

Coming on the heels of yesterday's announcement of a trade deal with Japan, markets remain decisively in risk-on mode. The major U.S. indexes are trading at or near all-time highs, driven by optimism over trade, signs of a resilient U.S. economy, and generally favorable Q2 earnings reports.

On Wednesday, President Trump revealed his AI action plan for achieving U.S. global AI dominance, providing an additional boost to tech stocks. The key tenets of the plan include removing federal regulations that hinder AI, building AI data centers, and exporting U.S. AI globally. 

Trump is slated to visit the Fed today to inspect the $2.5 bln renovation of the Eccles building. I anticipate the real estate developer in chief will have much to say about the project. Along with Trump's recent pressure on Chairman Powell to lower interest rates, the visit is thought by many to be a serious infringement on the central bank's independence.

The ECB held steady on rates today, as was widely expected. "Domestic price pressures have continued to ease, with wages growing more slowly. Partly reflecting the Governing Council’s past interest rate cuts, the economy has so far proven resilient overall in a challenging global environment. At the same time, the environment remains exceptionally uncertain, especially because of trade disputes," according to the press release.

In her presser, ECB President Lagarde noted slightly better-than-expected growth and anchored inflation, but still sees two-way risks in both cases. This raises some questions about whether this is just another one-meeting pause or if a protracted hold has begun.

Israel and the U.S. have recalled their negotiating teams from Qatar. Hamas “shows a lack of desire to reach a ceasefire in Gaza,” said U.S. special envoy Steve Witkoff. “It is a shame that Hamas has acted in this selfish way. We are resolute in seeking an end to this conflict and a permanent peace in Gaza,” he added.

A longstanding border dispute between Thailand and Cambodia flared on Thursday, with each side firing on the other. The AP reported that Thailand also launched air strikes. At least 12 people were killed, mostly civilians.

Initial Jobless Claims fell 4k to a 14-week low of 217k in the week ended 19-Jul, below expectations of 230k, versus 221k in the previous week. Continuing claims rose 4k in the 12-Jul week to 1,955k from a revised 1,951k in the previous week (was 1,956k).

S&P Flash Manufacturing PMI unexpectedly dropped 3.4 points to 49.5 in July, below expectations of 52.6, versus 52.9 in June. It was the first print below 50 since December.

S&P Flash Services PMI rose 2.3 points to a seven-month high of 55.2 in July, above expectations of 53.0, versus 52.9 in June.

New Home Sales rose 0.6% to a 0.627M pace in June, below expectations of 0.650M, versus 0.623M in May.

Chicago Fed National Activity Index rose 0.06 points to -0.10 in June, versus -0.16 in May (was -0.28).


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$23.54 (-0.69%)
5-Day Change: +$18.88 (+0.57%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,354.48 - $3,495.89
Weighted Alpha: +39.00

Gold continues to be weighed by optimism about tariff developments and an uptick in the dollar. With safe-haven interest dimmed, the yellow metal has retreated to the midpoint of the range-within-the-range, putting the 20- and 50-day MAs back in play.



The rally earlier in the week looked pretty promising for the bull camp, but gains stalled ahead of the 16-Jun high at $3,449.13. A breach of this level was needed to clear the way for a retest of the record high at $3,500. Wednesday's high at $3,435.01 provides a good intervening barrier.

With the range intact, consolidative trading prevails. A beach of the 20- and 50-day moving averages at $3,343.15 and $3,338.43 would leave the midpoint of the broader range at $3,311.51 vulnerable to a retest.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$0.213 (-0.54%)
5-Day Change: +$0.728 (+1.91%)
YTD Range: $28.565 - $39.517
52-Week Range: $26.524 - $39.517
Weighted Alpha: +42.49

Silver is under modest pressure, weighed by the retreat in gold and an uptick in the dollar. The white metal continues to outperform, with the gold/silver ratio keeping pressure on the lows for the year around 86. Another record high in copper is helping to keep silver underpinned.

The 14-year high set yesterday at $39.517 provides an intervening barrier ahead of the long-standing $40 objective. An eventual move above $40 would clear the way for an upside extension to the $41.610 Fibonacci objective.

China's National Energy Administration reported that the country added 14.36 GW of solar capacity in June, an 85% drop from the record high 93 GW of capacity added in May, and 38% lower than a year ago. While that headline may be troubling for the bull camp, China added solar capacity in H1 was 212.21 GW, +107% versus the same period last year.

While silver dipped below $39.000 intraday, the move attracted some buying interest, keeping Tuesday's low at $38.736 protected. Additional supports are noted at $38.092/000 and last week's low at $37.557. The 20-day moving average corresponds closely with the latter.


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.