Silver surged to new record highs above $51 before retreating into the range
OUTSIDE MARKET DEVELOPMENTS: The government shutdown has entered its ninth day with no signs of an imminent resolution. Senate votes failed again on Wednesday, with no progress expected before next week. Prediction market Polymarket heavily favors the shutdown lasting until October 15 or beyond (84%).
The 15th is the next payday for military personnel and many furloughed government workers. The White House continues to threaten layoffs via reductions-in-force (RIF) for non-essential workers.
The absence of fresh U.S. economic data due to the shutdown leaves markets to focus on broad-based uncertainty and expectations of further Fed easing. The minutes from the last FOMC meeting revealed that, "Most judged that it likely would be appropriate to ease policy further over the remainder of this year." FedSpeak is due from Powell, Bowman, Barr, Kashkari, and Daly.
The dollar index has rebounded to eight-week highs from a more than three-year low set last week. Political unrest in Japan that brought a very stimulus-oriented PM to power has driven the yen to an eight-month low against the greenback.
Strength in the U.S. stock market and a sense that the U.S. economy remains resilient – despite the lack of data to support that contention – are helping to underpin dollar demand.
Israel and Hamas have agreed to the first phase of President Trump's peace deal. A ceasefire will commence within 24 hours of the Israeli cabinet signing off on the deal. Hamas will release 20 living hostages and the bodies of deceased hostages within 72 hours of the ceasefire start. Israel will free up to 1,700 Palestinian prisoners in return.
This marks the most significant breakthrough since the war began two years ago, although the peace process remains fragile. Later stages of the peace deal require Hamas to disarm and give up governance of Gaza, and there are doubts that the terror organization will acquiesce to those demands.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$2.61 (+0.06%)
5-Day Change: +$200.33 (+5.19%)
YTD Range: $2,607.16 - $4,059.17
52-Week Range: $2,541.42 - $4,059.17
Weighted Alpha: +59.75
Gold remains generally well bid, within striking distance of the $4,059.17 all-time high set on Wednesday. Sticky inflation, combined with expectations of ongoing Fed easing, continue to provide a tailwind for the yellow metal. High-flying silver provides additional underpinning today, while a stronger dollar this week is a headwind.
Factor in persistent geopolitical risks, social unrest, the worsening fiscal situation, a government shutdown, the global de-dollarization trend that has led to robust central bank demand for gold, and you have a recipe for a protracted rally. Gold is on track for an eighth straight higher weekly close, and there haven't been more than two consecutive down days since late July.
My next upside target is a Fibonacci projection at $4,103.32, although the push above $4,000 lends additional credence to the longer-term objective at $5,000. Intervening upside targets will be revealed as the market continues to trade.
All that bullishness aside, the market remains extremely overbought. While the trade is likely to jump on corrective setbacks, things could get spicy without warning.
Initial support marked by the $4000.00/$3,990.91 zone protects Wednesday's low at $3,983.65. Penetration of the latter would shift focus to Tuesday's low at $3,941.36. The low for the week is well protected below $3,900.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$0.789 (+1.61%)
5-Day Change: +$3.793 (+8.07%)
YTD Range: $28.565 - $51.219
52-Week Range: $28.565 - $51.219
Weighted Alpha: +80.00
Silver surged to satisfy and exceeded the $50 objective. Follow-on buying spurred the rally to a new all-time high at $51.219, before profit-taking prompted a retreat into the range.
Demand for silver has surged as the world continues to electrify, with much of the world focused on clean energy initiatives. Silver is also a key component of AI hardware and infrastructure, a sector that is expanding at breakneck speed.
Silver is also seeing strong investment demand amid sticky inflation, expectations for further Fed easing, and record-high gold prices. Silver is often seen as a less expensive safe-haven alternative to gold. This week's gains notwithstanding, a generally weak dollar provides additional lift to the precious metals.
Meanwhile, the silver market is in its fifth consecutive year of a structural supply deficit, due to stagnant mining output that has failed to keep up with demand. The closure of large copper mines in Indonesia and South America also weighs on supply, as silver is a byproduct of copper mining. The Silver Institute projects the deficit will grow to a record 187.6 Moz this year.
Strong and growing demand for silver, combined with a persistent supply deficit, is a recipe for higher prices. The next psychological barrier is at $52, with today's high at $51.219 providing an intervening barrier. However, the move to that record high suggests longer-term potential to a major Fibonacci objective at $60.417 (127.2% retracement of the decline from $50.000 to 11.703).
I'm watching support at $49.00, which protects today's overseas high at $48.509. Fresh intraday lows after setting a record high would be troubling for the bull camp.
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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