Gold near the midpoint of the range, eying trade developments and Fed

OUTSIDE MARKET DEVELOPMENTS: The market continues to focus on trade developments with the August 1 deadline fast approaching. Optimism, and therefore risk appetite, remains elevated in the wake of this week's agreement with the EU.

U.S. and Chinese negotiators are meeting in Stockholm to finalize a deal before the temporary trade truce expires on August 12. At a minimum, there is an expectation of an additional 90-day extension that could be a precursor to a face-to-face meeting between Trump and Chinese President Xi later in the year.

Negotiations between Canada and the U.S. are in an "intense phase," according to Canadian PM Mark Carney. The Japan and EU deals put pressure on Canada to strike an agreement. "We will only sign a deal that's the right deal, that's a good deal for Canada," Carney said.

The U.S. trade balance narrowed by $10.4 bln to -$86.0 bln in June, inside expectations of -$98.0 bln. The goods trade deficit has moderated in recent months as importers reduced orders after front-loading earlier in the year to avoid tariffs.

The Trump administration reportedly used trade pressure to get Cambodia and Thailand to agree to a ceasefire. Negotiations to resolve the long-standing border dispute are ongoing.

Trump also shortened the timeline for Russia to achieve a ceasefire with Ukraine to 10-12 days. Trump has grown increasingly frustrated by Moscow's attempts to improve its negotiating position by escalating attacks even as talks are ongoing. "I'm disappointed in President Putin, very disappointed in him," Trump told reporters.

The two-day FOMC meeting begins today. When policy is announced tomorrow, the central bank is widely expected to hold steady. What's going to be interesting is how many committee members dissent against that decision. At least one is likely (Waller), but it could be two (Bowman?). The results could spark some movement in Fed funds futures.

We'll also get policy decisions from the Bank of Canada and the BoJ this week.

Advance Goods Trade -$86.0 bln in June, inside expectations of -$98.0 bln, versus -$96.4 bln in May.

Case-Shiller Home Price Index (20-city) rose 0.4% to a record high 343.0 in May, versus 341.6 in April. It was the fifth straight monthly rise. The annualized rate of appreciation slowed to 2.8% from 3.4% in April.

FHFA Home Price Index fell 0.2% to a six-month low of 434.4 in May, versus 435.1 in April. It was the third straight monthly decline. The annualized rate of appreciation slowed to 2.8% from 3.2% in April.

Consumer Confidence rose 2 points to 97.2 in July, above expectations of 95.9, versus a revised 95.2 in June (was 93.0). Year-ahead inflation expectations ticked down to 5.8% from a revised 5.9% in June (was 6.0%).

JOLT Job Openings fell 275k to 7,437k in July, below expectations of 7,750k, versus a revised 7,712k in June (was 7,769k). Quits -128k to 3,142k. Layoffs -7k to 1,604k.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$7.05 (+0.21%)
5-Day Change: -$106.25 (-3.10%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,369.10 - $3,495.89
Weighted Alpha: +34.46

Gold has recovered modestly from a three-week low on Monday as the trade continues to eye tariff developments ahead of Friday's deadline. While the yellow metal remains well contained within the range, dips into the lower half of that range have attracted bids so far this week.



Trade optimism and expectations of steady Fed policy have pushed the dollar index to five-week highs above 99. Dollar strength poses a headwind for gold.

That being said, the yellow metal is holding up pretty well. I still see the chart formation that has emerged since May as a continuation pattern within the long-term uptrend.

Nonetheless, more progress on trade could weigh further on safe-haven demand for gold, sparking dips below $3,300. However, the important $3,256.02 low from 30-Jun has been fortified by the rising 100-day moving average. The 9-Jul low at $3,284.61 provides a good intervening barrier.

On the other hand, signs of dovish dissent at the Fed would likely increase the prospects for rate cuts later in the year. That would weigh on the dollar, providing some lift for gold.

Mondy's high at $3,343.81 corresponds closely with the 20- and 50-day moving averages. A rise above this zone would ease pressure on the downside somewhat, returning focus to $3,400.

Last week's high at $3,435.01 protects the June high at $3,449.13. The latter must be cleared to put the record high around $3,500 back in play.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$0.048 (-0.13%)
5-Day Change: -$1.231 (-3.13%)
YTD Range: $28.565 - $39.517
52-Week Range: $26.524 - $39.517
Weighted Alpha: +35.87

Silver remains defensive just above $38 after gains last week stalled ahead of $40. Trade optimism is seen as generally encouraging for silver, as the bulk of demand is driven by industrial uses.



While copper has backed off the record high set last week at $5.9844, the market remains generally well bid amid threats of 50% tariffs scheduled to take effect on August 1. Copper strength provides support for silver, but I still have a feeling that copper tariffs will get walked back.

While we're seeing modest bids around the $38 level, the market is keen to hear the Fed's decision on rates before picking a short-term direction. Friday's jobs report is also going to be important.

New highs for the week above $38.316 would shift focus to the halfway back point of the recent decline at $38.741. A breach of the latter would bode well for renewed tests above $39, with $40 still considered a valid target. A secondary objective is marked by a Fibonacci level at $41.610.

On the downside, Monday's low at $37.965 represents a slight penetration of the 38.2% retracement level of the leg up from $35.369 to $39.517. The rising 20-day moving average at $37.840 further bolsters this area. Penetration would shift focus to the next tier of chart/Fibonacci support at $37.557/443. 


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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