8/29/2025
Gold reaches 10-week highs, bolstered by heightened risk aversion, rate cut hopes, weaker dollar
OUTSIDE MARKET DEVELOPMENTS: Today's U.S. economic data reinforces the narrative of a resilient economy with inflation in check. This is keeping expectations for a 25 bps rate cut in September elevated near 90%.
Personal income rose 0.4% and PCE rose 0.5% in July, indicating sustained consumer-driven growth. While buoyant household spending underpins economic growth, worries about the potential detrimental impacts of tariffs, the potential for revived inflation, and troubling signs revealed in the July jobs report linger.
As noted in yesterday's comment, good growth and above target inflation suggest there is no urgency for the Fed to ease. Additionally, I feel some voting members may be inclined to assert Fed independence by holding steady in the face of considerable White House pressure to cut rates.
That being said, while Fed independence signalling is a bit of a wildcard for the upcoming meeting, policymakers are generally disinclined to intentionally surprise the market. Recent FedSpeak has tilted dovish, so there hasn't been any concerted effort to trim market expectations for a cut.
The market remains quite optimistic about a September rate cut, but I see it more as a 50/50 proposition at this point. We'll see another payrolls report next week and additional inflation data ahead of the September FOMC meeting. It would take a bad August NFP report and/or a significant tempering of inflation to drag me into the consensus camp.
With inflation still elevated, consumer confidence ebbing, and a weak Chicago PMI print, the stock market is under pressure on the last trading day of August amid heightened risk-off sentiment.
The dollar index has fallen more than 2% in August, although price action has been confined to the range established in July.
Trade Balance widened to a -$103.6 bln deficit in July, outside expectations of -$90.2 bln, versus a revised -$84.9 bln in June (was -$86.0 bln).
Personal Income rose 0.4% in July on expectations of +0.5%, versus +0.3% in June. PCE rose 0.5%, in line with expectations, versus a revised +0.4% in Jube (was +0.3%). Headline PCE inflation rose 0.2% m/m, leaving the annualized rate unchanged at 2.6%. Core inflation rose 0.3%, leading to an uptick in the annualized rate from 2.8% to 2.9%.
Chicago PMI fell to 45.0 in August, below expectations of 46.0, versus 47.1 in July.
Michigan Sentiment Index (final) was revised down to a three-month low of 58.2 for August, versus a preliminary print of 58.6 and 61.7 in July. Inflation expectations were revised down to 3.5% (was 3.9%) versus 3.4% in July.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$11.61 (-0.34%)
5-Day Change: +$43.89 (+1.30%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,474.08 - $3,495.89
Weighted Alpha: +35.15
Gold advanced to a ten-week high on the last trading day of August, buoyed by persistent expectations of a September rate cut, a weaker dollar, and an uptick in risk aversion. While the range remains intact, the yellow metal is poised for a second straight higher weekly close and the strongest monthly close since April, when the all-time high was set.
The breach of resistance at $3,435.01 (23-Jul high) prompted a challenge of the 16-Jun high at $3,449.13, the last significant barrier ahead of the all-time high from 22-Apr at $3,500. While we may still see some profit-taking ahead of the holiday weekend, this week's gains are consistent with expectations for a range breakout to the upside as the summer doldrums wind down.
While multi-week highs may keep jewelry demand subdued, Indian jewelers are starting to stock up ahead of the festival season. Demand tends to increase in advance of Diwali and the Indian wedding season, contributing to increased volatility.
Fresh record highs would bolster confidence in the previously established $3,601.42 Fibonacci objective. A measuring objective off the symmetrical triangle breakout suggests potential to $3,743.
I still like the $4,000 target as well, although in light of the prolonged consolidation this summer, getting there this year now seems unlikely. We could see $4,000 gold in Q1'26 as dedollarization continues, central banks continue to increase their holdings, and investor interest increases.
On the downside, the earlier U.S. low at $3,411.30 now protects the more important $3,403.42/$3,400.00 level. The market has pulled away nicely from the 20- and 50-day moving averages, which are now well protected at $3,368.25 and $3,349.64, respectively.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$0.213 (-0.55%)
5-Day Change: +$0.041 (+0.11%)
YTD Range: $28.565 - $39.517
52-Week Range: $27.732 - $39.517
Weighted Alpha: +37.08
Silver has surged to new 14-year highs to move within striking distance of $40. The white metal is on track for a second straight higher weekly close and a fourth consecutive winning month.
Beyond $40, there's a Fibonacci objective at $40.396 and an important retracement level at $41.610 that corresponds closely with a measuring objective off the triangle breakout.
An eventual breach of $41.610 would mean $50 is very much in play. Robust demand and an impending sixth straight year of a structural supply deficit in 2026 bode well for the bullish scenario.
Former resistance at $39.517 now defines initial support. Below that, intraday levels at $39.127/123 protect the $39.00 zone.
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.