Gold and silver consolidate this week's record-setting gains

Outside Market Developments: Congressional Democrats and Republicans both remain recalcitrant regarding a CR, so the partial government shutdown will extend into next week. Bets on Polymarket favor a belief that the shutdown will end on or after October 15.

Mass firings of federal workers have reportedly started. “RIFs have begun,” OMB Director Russ posted on X.

Risk appetite is tilted toward risk-off heading into the holiday weekend. The U.S. bond market, the Fed, and banks are closed on Monday in observance of Columbus Day; however, the stock market will be open. All Canadian markets are closed for Thanksgiving.

The Israeli cabinet signed off on President Trump's peace deal, signaling the beginning of the ceasefire with Hamas. IDF forces have begun pulling back. The release of Israeli hostages and Palestinian prisoners is expected to happen early next week.

That's good news and dials back geopolitical risks. However, uncertainty prevails with regard to two key elements of the peace plan: Hamas' disarmament and who will govern Gaza.

Komeito, Japan's Liberal Democratic Party's (LDP) junior coalition partner for over 26 years, announced its withdrawal from the ruling coalition, amid disagreements surrounding the LDP's handling of a major political funding scandal. This is a blow to the newly elected LDP leader, Sanae Takaichi.

Takaichi was the presumptive next Prime Minister, but the fracturing of the ruling coalition has raised doubts and stoked political uncertainty. Takaichi was portrayed as being very pro-stimulus, so Japanese stocks soared and the yen tumbled earlier in the week. Some of those moves are now being retraced.

The rebound in the yen has put some pressure on the dollar index. The DX set a 10-week high on Thursday, although the overall trend remains bearish given the more than three-year low reached last week.

Michigan Sentiment (Prelim) ticked down to 55.0 for October, above expectations of 54.4, versus 55.1 in September. Year ahead inflation expectations ticked down to 4.6%, from 4.7% in September. "Overall, consumers perceive very few changes in the outlook for the economy from last month," according to the report.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$17.59 (+0.44%)
5-Day Change: +$121.32 (+3.12%)
YTD Range: $2,607.16 - $4,059.17
52-Week Range: $2,541.42 - $4,059.17
Weighted Alpha: +57.16

Gold is consolidating within Thursday's range and needs to close above $3,976.29 to confirm a higher close. Despite Thursday's correction, the yellow metal is poised for its eighth straight higher weekly close. The record high set on Wednesday at $4,059.17 was the 39th of the year.

 

Uncertainty associated with the government shutdown, the political situation in Japan, and persistent geopolitical risks continues to stoke safe-haven interest. Expectations for further Fed easing, a generally weak dollar, mounting political unrest, and fiscal worries provide additional buoyancy.

The World Gold Council noted that "political tension, US dollar weakness, and a flood of investment pushed gold to new highs" in September. All of those fundamental factors remain in play as we approach the midpoint of October.

From a technical perspective, the surge above $4,000 bodes well for a push to the next Fibonacci objective at $4,103.32, with Wednesday's high at $4,059.17 providing an intervening barrier. Further out, this week's gains lend considerable credence to the longer-term target at $5,000.

I'd like to see a short-term retracement to at least the 20-day moving average, currently at $3,818.36, to relieve the overbought condition and shake out some of the specs that were late to the party. Initial chart support at $3,945.87/41.36 is reinforced by today's intraday low at $3,947.99. Secondary support is marked by the $3,900.00/$3,895.23 zone.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$1.238 (+2.52%)
5-Day Change: +$2.355 (+4.91%)
YTD Range: $28.565 - $51.219
52-Week Range: $28.565 - $51.219
Weighted Alpha: +77.89

Silver is also on track for an eighth straight higher weekly close after finally cracking the $50 barrier on Thursday and extending to a new all-time high of $51.219. Today's price action remains confined to Thursday's range, but a higher daily close seems likely.



While the overbought condition remains extreme, it seems unlikely that a top is in. Like with gold, I'd like to see a pullback at least to the 20-day moving average, but it's nearly $5 away at $45.769!

The price surge comes with high volatility, wide spreads, soaring lease rates, and backwardation in the futures market. The discount to spot in the Dec futures is running around $3 today!

Bullion banks moved large quantities of silver from London to Comex vaults earlier in the year amid worries about tariffs. "The London silver market is experiencing unprecedented stress," according to Jeffrey Christian of CPM Group. 

In America, we seem to be awash in silver, as scrap sellers rush to lock in record-high prices only to be disappointed by weak bids. At least one major refiner has stopped accepting silver scrap less than .999 fine entirely.

While volatility will remain elevated, setbacks are likely to be viewed as buying opportunities driven by an expectation that industrial demand will remain strong, and the supply deficit, now in its fifth year, will persist.

A breach of $51.219 would clear the way for a test of the next psychological barrier at $52. However, this week's gains result in a new longer-term objective at $60.417 (127.2% retracement of the decline from $50.000 to 11.703).

As far as timing, normally, I'd be inclined to say early Q3'26, but silver went from $40 to beyond $50 in just six weeks! In a market like this, projecting price and time becomes really difficult.

Intraday support at $49.739 protects the low for the day at $48.769. Below the latter, $48.480 (Thursday low) and the $48 zone stand in front of the low for the week at $47.343.


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.