Gold and silver start the week with new record and 14-year highs, respectively

OUTSIDE MARKET DEVELOPMENTS: The U.S. federal government is on the brink of a partial shutdown starting October 1, with Congress deadlocked on a funding deal. The White House has directed agencies to prepare for permanent mass firings of federal workers in non-essential programs. Both parties seem more concerned about ensuring the other side gets the blame rather than striking a deal to fund the government.

Even if a CR is agreed upon, it would likely only fund the government for about seven weeks as negotiations on full-year appropriations continue. Any relief provided by a CR would be short-lived.

The focus at the end of the week will be on the September jobs report. However, BLS data processing and publication are deemed non-essential operations, so a government shutdown could delay the report.

Median expectations are +50k jobs, a continuation of recent weakness. The unemployment rate is expected to remain unchanged at 4.3%.

President Trump has proffered a 21-point peace plan for Gaza. Key elements reportedly include the surrender and disarmament of Hamas, the release of the remaining hostages, deployment of an international security force, and hints at a process that could lead to a Palestinian state. 

Israeli Prime Minister Netanyahu is meeting with Trump at the White House today to discuss the proposal. The plan includes some non-starters for both Israel and Hamas. 

Pending Home Sales Index rose 4% to 74.7 in August, well above expectations of +0.3%, versus -0.3% in July. "Lower mortgage rates are enabling more homebuyers to go under contract," said NAR Chief Economist Lawrence Yun.

Dallas Fed Index fell 6.9 points to a three-month low of -8.7 in September, versus -1.8 in August. 


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$58.06 (+1.54%)
5-Day Change: +$83.86 (+2.24%)
YTD Range: $2,607.16 - $3,833.43
52-Week Range: $2,541.42 - $3,833.43
Weighted Alpha: +48.60

GOLD

Gold begins the week on the bid, establishing fresh record highs. The yellow metal is being buoyed by haven interest associated with the risks of a government shutdown and a weaker dollar.



Geopolitical and trade tensions remain elevated. The market remains worried about inflation, but is also anticipating further rate cuts that could stoke that inflation, creating a bit of a perfect storm for gold.

Bloomberg reports that Switzerland has offered to invest in the U.S. gold-refining industry, in hopes of persuading the Trump administration to lower the recently imposed 39% import tariff. The plan could include building a new refinery and/or expanding existing processing capacity as a means to reduce the Swiss trade surplus with the United States.

Global gold ETFs saw net inflows of 27.2 tonnes last week, led once again by North American investors. It was the fifth straight week of inflows.

Today's convincing breach of the targeted $3,800 level lends credence to longer-term objectives at $4,000 and $5,000. The next big round number at $3,900 marks an intervening barrier.

The first tier of support is $3,807.12/$3,800.00. Below that, the previous high at $3,790.90 protects today's intraday low at $3,760.05.

While gold is quite overbought at this point and vulnerable to setbacks, the trade is likely to continue viewing downticks as buying opportunities. If Congress passes a CR before the government shuts down, corrective potential could be to the rising 20-day moving average at $3,667.51.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$0.903 (+1.96%)
5-Day Change: +$2.971 (+6.74%)
YTD Range: $28.565 - $47.172
52-Week Range: $28.565 - $47.172
Weighted Alpha: +60.83

Silver extended to the upside, reaching new 14-year highs. The white metal is now up more than 17% for September, spurred by solidly bullish supply/demand dynamics, a resilient U.S. economy, above-target inflation, dovish Fed expectations, a weaker dollar, and safe-haven spillover from record-high gold.



Based on all these factors, and a very bullish technical picture, record highs in silver above $50 are looking increasingly likely. The $47.973/$48.000 zone is the next upside target.

The gold/silver ratio has fallen to an 11-month low of 80.468, suggesting ongoing silver outperformance. The 78.6% retracement level comes in at 80.065. If that level is negated, potential would be back to last year's low at 72.675.

However, like gold, the silver market is very overbought at this point, having notched just six down days so far this month. Be cautious, because silver can be quite volatile when the bulls start booking profits.

The early U.S. low at $46.486 marks first support. Today's low was set in Asia at $45.955 is the more important level to watch. 


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.