Gold and silver consolidate Friday's gains, look to fresh inputs to clarify Fed policy path

OUTSIDE MARKET DEVELOPMENTS: Speaking at the Jackson Hole Symposium on Friday, Fed Chairman Powell hinted that a September interest rate cut may be appropriate. "[W]ith policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance."

While markets reacted to the statement, Fed funds futures suggest the probability of a 25-bps cut at the September FOMC meeting hasn't changed significantly. Those odds currently stand at 83.1%, compared to 82.7% a week ago.

The trade will be paying close attention to the second reading on Q2 GDP on Thursday and the PCE report on Friday. An upward revision to GDP or signs of accelerating inflation would temper September rate cut expectations.

The dollar index reached a three-week low on Friday, after forays into the upper half of the recent range sparked selling interest. The dominant trend in the dollar remains bearish.

Vice President JD Vance told Meet the Press on Sunday that Russian President Putin has made some concessions concerning the war in Ukraine. Putin told Trump he would respect the territorial integrity of Ukraine after the fighting ends, but it remains likely that Kyiv will have to give up some territory to get to that point.

“They’ve recognized that they’re not going to be able to install a puppet regime in Kyiv, and importantly, they’ve acknowledged that there is going to be some security guarantee to the territorial integrity of Ukraine,” Vance said.

Russian Foreign Minister Sergey Lavrov said Moscow views Ukraine's Zelenskyy as “illegitimate,” dimming hopes for a summit between Putin and Zelenskyy. “Irrespective of when this meeting might take place, and that must be very well prepared, the issue of who is going to sign the deal on Ukrainian side is a very serious issue,” Lavrov claimed.

Chicago Fed National Activity Index ticked down 0.01 points to -0.19 in July, versus a revised -0.18 in June (-0.10).

New Home Sales ebbed to a 0.652M pace in July, above expectations of 0.635M, versus a revised 0.656M in June (was 0.627M).

Dallas Fed Index fell 2.7 points to -1.8 in August, versus 0.9 in July. The July print was the only positive reading since January.

Today was the Summer Bank Holiday in the UK. Markets were closed, and there were no fixes. 


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$6.54 (-0.19%)
5-Day Change: +$36.30 (+1.09%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,474.08 - $3,495.89
Weighted Alpha: +32.57

Gold remains range-bound, although Powell's dovish comments on Friday prompted a test of the upper limits of the symmetrical triangle. The trade now awaits further inputs to gauge the likelihood that the Fed will resume its easing campaign.



As the yellow metal approaches the apex of that triangle pattern, we are also approaching the traditional end of the "summer doldrums." Historically, investors become reengaged at the end of the summer, and we start to see buying in advance of Diwali and the Indian wedding season. 

I believe gold will ultimately break out to the upside and resume its bullish trend. However, I wouldn't be surprised by a headfake to the downside to first shake out weak longs.

The 100-day moving average has provided good support in recent weeks and corresponds closely with Friday's low at $3.322.00. Last week's low at $3,311.66 provides an additional intervening barrier ahead of more important lows at $3,270.50 (30-Jul) and $3,256.02 (30-Jun).

Friday's convincing breach of the 50- and 20-day moving averages at $3,346.57/48.53 bodes well for renewed short-term tests above $3,400. Penetration of the 8-Aug high at $3,403.42 would shift focus to $3,435.01 (23-Jul high).


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$0.196 (-0.50%)
5-Day Change: +$0.741 (+1.95%)
YTD Range: $28.565 - $39.517
52-Week Range: $27.732 - $39.517
Weighted Alpha: +36.22

Silver is consolidating Friday's knee-jerk reaction to Powell's comments. While lower on the day, the white metal is trading at the high end of Friday's range.



While tests above $39 have been unsustained thus far, with the 78.6% Fibonacci objective exceeded, a retest of the 14-year high at $39.517 (23-Jul) looks likely. Beyond the latter, $40 attracts.

Today's earlier U.S. low at $38.578 now protects the midpoint of Friday's range at $38.383. The 20-day moving average is well protected at $37.893.


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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