Gold remains range-bound as heightened risk appetite saps haven interest

OUTSIDE MARKET DEVELOPMENTS: China was granted another 90-day extension to continue negotiations toward a durable trade deal. The reprieve underpins risk appetite, suggesting the two sides are committed to reaching an agreement, but it also extends the period of uncertainty.

Headline CPI rose 0.2% and core was up 0.3% in July, in line with expectations. The annualized rate was unchanged at 2.7%. While core inflation accelerated to a five-month high of 3.1% y/y from 2.9% in June, and concerns about tariff impacts persist, price risks were perceived to be largely in check.

The rate cut probability for September rebounded to 94.2% from 85.9% yesterday. Fed funds futures are pricing 59 bps of easing by year-end.

Fed governor Michelle Bowman made the case over the weekend for three rate cuts this year. "A proactive approach in moving policy closer to neutral, from its current moderately restrictive stance, would help avoid a further unnecessary erosion in labor market conditions and reduce the chance that the Committee will need to implement a larger policy correction should the labor market deteriorate further," she said.

Risk assets like the extension of the China trade truce and the prospects for the Fed to resume its easing campaign. Optimism about the Trump/Putin summit on Friday, even as Russia steps up attacks in Ukraine, is contributing to risk appetite. U.S. shares are broadly higher, with the S&P 500 and NASDAQ reaching record highs.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$2.22 (+0.07%)
5-Day Change: -$33.38 (-0.99%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,435.86 - $3,495.89
Weighted Alpha: +32.18

Gold remains defensive within the range as heightened risk appetite weighs on safe-haven interest. However, lower yields and a softer dollar provide some underpinning.

 

President Trump confirmed on Monday that "Gold will not be Tariffed!" This calmed concerns that surfaced last week after a Customs and Border Enforcement ruling and coding raised questions.

The retreat below the 20- and 50-day moving averages leaves the yellow metal vulnerable back to the midpoint of the three-month range at $3,313.56. Below that, the 100-day MA at $3,298.37 corresponds with the lower limit of the triangle pattern, and protects recent lows at $3,270.50 (30-Jul) and $3,256.02 (30-Jun).

Nonetheless, gold is holding up pretty well, trading less than 5% off the record highs set in April around $3,500. An eventual upside breakout and resumption of the dominant uptrend remain favored.

Gold ETFs saw net inflows of 14.7 tonnes last week. There have only been four weekly outflows this year, and twelve over the last 52 weeks, suggesting investment interest remains robust. The World Gold Council notes that "global inflows are currently on pace for their second strongest year on record."

In Q2, gold-backed ETFs saved the day according to the WGC. Overall, U.S. demand fell 34% q/q as near-record-high prices weighed on jewelry and bar and coin demand.

UBS projects total gold demand to rise 3% to a 14-year high of 4,760 metric tonnes this year, driven largely by investment flows. “ETF demand is now expected to exceed 600 metric tons for 2025, revised upward from 450 metric tons,” according to the bank.

UBS cited geopolitical risks, fear of sanctions, worries about Fed independence, and ongoing de-dollarization trends as factors underpinning the gold market. Central bank demand has slowed, but remains structurally strong. “Almost all respondents—69 of 73 central banks—expect to increase or maintain their gold reserves,” UBS reported.

A close back above the 20-day moving averages at $3,356.90 would favor further attacks on the $3,400 zone. Successive highs at $3403.42 (08-Aug), $3,435.01 (23-Jul), and $3,449.13 (16-Jun) must all be cleared to allow for a retest of record highs around $3,500 and return confidence to the $4,000 objective.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$0.092 (+0.24%)
5-Day Change: -$0.123 (-0.33%)
YTD Range: $28.565 - $39.517
52-Week Range: $27.237 - $39.517
Weighted Alpha: +31.59

Silver is recovering from Monday's losses, boosted by reduced trade tensions and a weaker dollar. The white metal remains lower on the week, trading in the upper half of last week's range.



A close above the 20-day moving average at $38.074 would encourage the bull camp, returning focus to last week's high at $38.475 and the $38.826 Fibonacci level. Beyond the latter, the 14-year high set on 23-Jul at $39.517 and the $40 objective would be back in play.

Today's Asian low at $37.567 now provides an intervening barrier ahead of last Tuesday's low at $37.337 and the  50-day moving average at $37.142. Last week's low at $36.770 and the more important $36.287 low from 31-Jul now look to be well protected.


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.