Gold edges higher, underpinned by haven interest and weaker dollar

OUTSIDE MARKET DEVELOPMENTS: President Trump's sweeping tariffs of up to 50% went into effect today against dozens of countries. However, news of broad exemptions on chips stoked risk appetite. Stocks rose, led by tech.

The ever-changing landscape of U.S. tariffs since April has created considerable uncertainty. Tariff front-running led to dislocations in trade, economic growth, and price data. Now that inventories have been built and most of the import taxes have been implemented, perhaps the true impacts of Trump's tariff regime will become apparent.

We've certainly seen positive effects:

Tariff revenue reached a record monthly high of $28 bln in July, bringing the fiscal year-to-date total to $150 bln. In just 10 months, gross tariff receipts have far exceeded the previous record high set in FY2022 at $108.2 bln.

According to the White House, President Trump secured as much as $5.1 trillion in promised investments in the U.S., stemming from his tariffs and threatened tariffs. While it remains unclear how much of that will come to fruition, it's an impressive number.

It is widely believed that exporters and importers have been absorbing the cost of tariffs over the past several months. This has kept inflation in check. While there are now considerable pre-tariff inventories to draw down, price risks should start revealing themselves in the months ahead.

If there are to be additional supply chain and labor market disruptions associated with tariffs, those too should become apparent in the coming months. The Trump administration's deportation agenda creates another level of uncertainty for the job market and growth.

Tariff uncertainty has kept the Fed cautious this year, much to President Trump's chagrin. Nonetheless, on the heels of July's weak employment report, the Fed suddenly appears poised to resume its easing campaign in September.

Atlanta Fed President Raphael Bostic (centrist, non-voter) worries that tariff effects will persist and therefore believes only one 25 bps rate cut is warranted this year. “This question about whether tariffs are a one-time thing, or whether they’re going to be more persistent in their effects and might even cause structural changes, I think is perhaps the most important question that we have today,” Bostic said.

The BoE cut rates today on a 5-4 split vote. The statement reiterated the BoE's "gradual and careful approach to the further withdrawal of monetary policy restraint."

U.S. special envoy Steve Witkoff reportedly had a "highly productive" meeting with Russian President Putin and will now brief Ukrainian and NATO leaders. Trump and Putin may meet as soon as next week for a face-to-face discussion on achieving a ceasefire in Ukraine. The prospect of a Trump/Putin meeting dials back the recent uptick in geopolitical tensions and is contributing to today's rise in risk appetite.

Productivity (prelim) rebounded 2.4% in Q2, above expectations of +2.0%, versus a revised -1.8% in Q1 (was -1.5%). ULC (prelim) rose 1.6% in Q2, in line with expectations, versus a revised +6.9% in Q1 (was +$6.6%).

Initial Jobless Claims jumped 7k to 226k in the week ended 2-Aug, above expectations of 222k, versus a revised 219k in the previous week (was 218k). Continuing claims rose 38k to 1,974k in the 26-Jul week from a revised 1,936k in the previous week (was 1,946k).

Wholesale Sales rose 0.3% in June, above expectations of +0.2%, versus a revised -0.4% in May (was -0.3%). Inventories rose 0.1%, versus -0.3% in May.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$4.12 (+0.12%)
5-Day Change: +$86.91 (+2.79%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,381.66 - $3,495.89
Weighted Alpha: +37.29

Gold edged to a new two-week high as trade uncertainty and geopolitical risks continue to underpin the yellow metal within the range. The rebound in Fed easing expectations has weighed on the dollar this week, providing some additional lift.



The yellow metal has been unable to test back above $3,400 thus far, leaving important resistances at $3,435.01 (23-Jul high) and $3,449.13 (16-Jun high) protected. It would take a breach of the latter to clear the way for a run at new all-time highs above $3,500 and return confidence to the $4,000 objective.

On the downside, the 20- and 50-day MAs at $3,353.24/47.94 are bolstered by the lows from the previous three sessions. Monday's low at $3,347.21 is important, as new lows for the week would suggest potential for a retreat into the lower half of the range below $3,313.56.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$0.573 (+1.51%)
5-Day Change: +$1.575 (+4.21%)
YTD Range: $28.565 - $39.517
52-Week Range: $26.524 - $39.517
Weighted Alpha: +40.18

Silver is trading higher for a fifth straight session and set a new two-week high at $38.477. While the white metal has backed off that high as overbought pressures built, more than 61.8% of the recent decline has now retraced, suggesting the corrective low is in place.



Look for setbacks to attract buying interest around the 20-day moving average. I'd like to see a close above the 2-day at $38.080 today.

Today's earlier high now provides an intervening barrier ahead of the next tier of Fibonacci resistance at $38.836 (78.6% retracement). A breach of this level would clear the way for a retest of the 14-year high set on 23-Jul at  $39.517. Above that, $40 would attract.

Initial supports are marked by today's overseas low at $37.836 and Wednesday's low at $37.696. These protect the more important $37.382/337 zone, where the halfway back point of the recent bounce corresponds closely with Tuesday's low.


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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