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Gold remains underpinned ahead of Fed decision

OUTSIDE MARKET DEVELOPMENTS: The Fed will announce policy this afternoon, along with its economic forecasts. A 25 bps rate cut is widely expected.

Fed funds futures project 65 bps in easing by year-end, 113 bps through June of 2026, and 146 bps by the end of next year. We'll see later today how the market expectations compare to the dots, providing a critical piece of guidance.

Stephen Miran was confirmed as a governor on Monday, replacing Adriana Kugler, who resigned last month. Miran is perceived to be a dove and is expected to vote in favor of resuming the Fed's easing campaign, which has been on pause this year. I'm curious to see if he dissents in favor of a 50 bps cut.

Lisa Cook remains a governor for this meeting after court rulings blocked her from being fired. However, the White House seems unlikely to abandon its efforts to oust her from the Fed for cause.

The trade continues to worry that the central bank is losing its independence. However, the Fed has never been truly apolitical; both FDR and LBJ exerted influence on monetary policy in the past. President Carter tapped Fed chairman G. William Miller to be his Treasury Secretary. 

The Bank of Canada cut rates by 25 bps this morning in a move that was widely expected. "With a weaker economy and less upside risk to inflation, Governing Council judged that a reduction in the policy rate was appropriate to better balance the risks," according to the policy statement.

The BoJ begins its two-day meeting on Thursday. They are expected to hold steady when they announce policy on Friday.

MBA Mortgage Applications surged 29.7% in the week ended 12-Sep, versus +9.2% in the previous week. U.S. 30-year mortgage rates fell to an 11-month low of 6.39%.

Housing Starts fell 8.5% to a 1.307M pace in August, below expectations of 1.370M, versus a revised 1.429M in July (was 1.428M). Permits contracted 3.7% to 1.312M from 1.362M. Completions jumped 8.4% to 1.608M from 1.483M.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$28.33 (-0.77%)
5-Day Change: +$44.54 (+1.22%)
YTD Range: $2,607.16 - $3,702.93
52-Week Range: $2,541.42 - $3,702.93
Weighted Alpha: +43.35

GOLD

Gold turned mildly corrective as the market awaits today's Fed decision and forward guidance. However, the yellow metal is still higher on the week after setting an all-time high of $3,702.93 on Tuesday.



With a 25 bps cut baked into the cake, the guidance and Powell's presser will carry greater weight than the easing itself. Unless, of course, they surprise with a 50 bps cut or another hold. Persistent worries about Fed independence will continue to underpin gold.

If the dots show a more dovish tilt in the wake of recent signs of labor market weakness, I'd look for gold to continue its rally and set fresh record highs. If a more cautious approach to further easing is signalled, we could see a more sustained pullback. That being said, any corrective retreat is likely to be viewed as a buying opportunity within the long-term uptrend.

Today's early U.S. low at $3,660.24 marks first support. Additional downside barriers are noted at $3,626.99 (Monday's low), $3,614.69 (Thursday's low), which protect last week's low at $3,580.13.

On the upside, fresh highs above $3,702.93 would bode well for the attainment of previously established objectives at $3,730.44 (Fibonacci) and $3,743 (measuring objective). Above the latter, $3,800 would attract, and make $4,000 gold increasingly appealing.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$1.1267 (-2.98%)
5-Day Change: +$0.892 (+2.13%)
YTD Range: $28.565 - $42.968
52-Week Range: $28.565 - $42.968
Weighted Alpha: +42.46

Silver dropped sharply in overseas trading as investors paired long exposure ahead of today's Fed decision. Much of those intraday losses have already been retraced.



Today's European low at $41.142 now defines good short-term support, ahead of the rising 20-day moving average at $40.533, which corresponds closely with last week's low at $40.547.

Post-Fed, if the white metal is able to sustain the intraday rebound above $42, I'd expect further tests above $43. The following remain valid upside targets: $43.352 (Sep'24 high), $44.167 (Aug'24 high), and $44.743 (Fibonacci). 


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.