Gold firms ahead of the weekend, bolstering confidence in the underlying uptrend

Outside Market Developments: Markets continue to digest the Fed's move this week and its forward guidance. Risk appetite is in neutral territory today, tempered by expectations of heightened trading volumes and volatility associated with today's quadruple witching.

Fed Chairman Powell framed Wednesday's 25 bps rate cut as a "risk management" move, a precautionary adjustment to mitigate potential future downside risks, particularly a further weakening in employment. That raised some doubts about future cuts, given that inflation remains above target.

However, the dot plot suggests that FOMC members anticipate 25-bps cuts at the two remaining meetings this year. Fed funds futures now reflect these expectations, with a 91% probability of a 25-bps cut in October and 78.6% probability of another in December.

The implied Fed funds rate for Jun'26 is 3.2625%. For the end of next year, the implied rate is currently 2.9650%.

The BoJ held rates steady today in a widely anticipated non-move. Governor Ueda emphasized a data-dependent approach, noting risks from a weakening yen and global trade tensions.

President Trump spoke by phone with Chinese President Xi today. The conversation focused on finalizing a TikTok deal, tariffs, and potentially paving the way for an in-person summit. Any progress on these fronts that mitigate U.S.-China tensions would stoke risk appetite.

Looking ahead to next week, we'll kick off with a host of FedSpeak and hopefully some additional clarity on the policy path. Other highlights are the S&P Global PMIs. Durable Orders and PCE, including the Fed's preferred measure of inflation.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$11.63 (+0.32%)
5-Day Change: +$11.28 (+0.37%)
YTD Range: $2,607.16 - $3,707.12
52-Week Range: $2,541.42 - $3,707.12
Weighted Alpha: +41.71

Gold is trading higher after two days of corrective losses, less than 1% below Wednesday's all-time high. More than 50% of the losses have already been retraced. If today's gains are sustained, the yellow metal will notch its fifth straight higher weekly close.



Expectations of further rate cuts are broadly supportive of the dominant uptrend, but the same is true of risk assets, like stocks. All of the major stock indexes set new record highs following the Fed's easing, sapping gold's haven appeal somewhat.

A firmer dollar in the latter half of the week also poses a bit of a headwind. The dollar index has eked out a new high for the week after falling to more-than three-year lows on Wednesday. The dollar index is down about 10% YTD, which has been a factor in gold's impressive rally this year.

The bull camp should be encouraged by gold's inability to take out support marked by the low for the week set on Monday at $3,626.99. Call $3,628.77/26.99 key short-term support. Secondary support is at $3,604.08/$3,600.00. The 20-day moving average should rise to the $3,600 zone next week.

Previously established upside objectives at $3,730.44 (Fibonacci) and $3,743 (measuring objective) remain valid. The highs from earlier in the week at $3,702.93/$3,707.12 provide an intervening barrier. Further out, I still like $3,800 and $4,000.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$0.424 (+1.01%)
5-Day Change: +$0.207 (+0.49%)
YTD Range: $28.565 - $42.968
52-Week Range: $28.565 - $42.968
Weighted Alpha: +44.08

Silver has surged more than 2% today, and most of the recent corrective losses have been retraced. The white metal is on track for a fifth consecutive higher weekly close.



With the Fed's easing campaign back underway after an eight-month pause, and hopes for reduced tensions between the U.S. and China, silver's rally seems to have more room to run. A move to new 14-year highs at $42.969/$43.000 would bode well for the attainment of previously established objectives at $43.352 (Sep'11 high) and $44.167 (Aug'11 high). Above the latter, I have a Fibonacci objective at $44.743

Intraday support at $42.290/281 protects the $41.965/958 level and should keep today's overseas low at $41.659 at bay. Thursday's corrective low $41.142 is deemed key short-term support, which should be bolstered by the 20-day MA early in the week ahead.


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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