Gold and silver pull back from recent highs, awaiting tomorrow's jobs report

OUTSIDE MARKET DEVELOPMENTS: Further signs of a cooling labor market continue to stoke expectations of a rate cut this month. The probability for a 25 bps cut at the next FOMC meeting has risen to 97.4%, versus 86.4% a week ago.

The ADP Employment Report indicated private payrolls grew by just 54,000 in August, below the expected 75,000. Initial jobless claims rose to 237,000 last week, above the forecast of 230,000. Challenger layoffs rose 23,900 to 86,000. These data suggest downside risk for tomorrow's nonfarm payrolls report.

The revisions to Q2 productivity and ULCs suggest improved efficiency and reduced inflationary pressure from labor costs.

Markets remain on edge over tariff uncertainties. A federal appeals court ruled last week that most of Trump's global tariffs, imposed under the International Emergency Economic Powers Act (IEEPA), are illegal. The ruling is stayed until October 14, giving the Trump administration time to appeal to the Supreme Court.

Challenger Layoffs rose 23.9k to 86k in August, versus 62.1k in July.

ADP Employment Survey showed private payrolls rose 54k in August, below expectations of 75k, versus a revised 106k in July (was 104k).

Initial Jobless Claims increased 8k to 237k in the week ended 30-Aug, above expectations of 230k, versus 229k in the previous week. Continuing claims eased to 1,940k in the 23-Aug week, versus a revised 1,944k in the previous week (was 1,954k).

Q2 Productivity was revised up to +3.3%, above expectations of +2.6%, versus a preliminary reading of +2.4% and -1.8% in Q1. ULC was revised down to +1.0%, below expectations of +1.4%, versus a preliminary reading of +1.6% and +6.9% in Q1.

Trade Deficit widened to -$78.3 bln in July, inside expectations of -$78.6 bln, versus a revised -$59.1 bln in June (was -$60.2 bln).

S&P Global Services PMI was revised down to 54.5 for August, versus a preliminary print of 55.4 and 55.7 in July.

Services ISM rose 1.9 points to a six-month high of 52.0 in August, above expectations of 51.0, versus 50.1 in July.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$18.32 (-0.51%)
5-Day Change: +$131.18 (+3.84%)
YTD Range: $2,607.16 - $3,578.40
52-Week Range: $2,487.06 - $3,578.40
Weighted Alpha: +42.04

Gold 

Gold turned modestly corrective in overseas trading after setting a fresh record high of $3,578.40 on Wednesday. The yellow metal had notched seven straight sessions of gains, and today may mark the eighth if a close above $3,559.26 is recorded. 



Intraday dowticks met renewed buying interest ahead of the $3,508.20/$3,500.00 zone, leaving the downside well protected. More substantial supports are noted at $3,470.62 (Tuesday's low) and $3,437.31 (Monday's low). The rising 20-day moving average is at $3.398.37.

Tariff uncertainties, geopolitical risks, rate cut bets, heightened worries about inflation and the fiscal situation are all contributing to haven interest. The recent rise in yields and a firmer dollar pose modest headwinds.

Amid ongoing White House pressure on the Fed to resume its easing campaign, Goldman Sachs has warned that a politicized central bank could have dire consequences for the broader market and drive gold toward $5,000. “A scenario where Fed independence is damaged would likely lead to higher inflation, lower stock and long-dated bond prices, and an erosion of the dollar’s reserve-currency status,” Goldman analysts said in a note.

“In contrast, gold is a store of value that doesn’t rely on institutional trust,” they added. It would take just a small allocation shift from Treasuries to gold to drive the price significantly higher.

My next upside target is $3,601.32 based on a Fibonacci objective. Above that, a measuring objective off the symmetrical triangle breakout suggests potential to $3,743. This week's gains also bolster confidence in the long-standing target of $4000.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$0.239 (-0.58%)
5-Day Change: +$1.860 (+4.76%)
YTD Range: $28.565 - $41.459
52-Week Range: $27.732 - $41.459
Weighted Alpha: +49.41

Silver has pulled back from Wednesday's 14-year high at $41.459, consolidating the last five days of gains. Setbacks are likely to attract buying interest as signs of weakness in the labor market bode well for a rate cut later this month.



With haven interest driving gold to all-time highs this week, the white metal is often viewed as a less expensive alternative. Silver is still more than 20% below its record high.

Yesterday's gains stalled just shy of targeted Fibonacci levels at $41.513 and $41.610. An eventual breach of the latter would lend considerable credence to the bullish scenario that calls for a run at the record highs around $50.

Today's intraday low at $40.413 protects more important supports at $40.148 (Tuesday's low) and $39.574 (Monday's low).  The rising 20-day moving average is well protected below $39 through the end of the week.


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.