Gold and silver extend losses as rate cut hopes dim and dollar firms

OUTSIDE MARKET DEVELOPMENTS: The release of backlogged economic data this week –especially September jobs and October CPI/PPI – will provide the first post-shutdown snapshot of the U.S. labor market and inflation, potentially swinging December Fed rate-cut odds higher or lower depending on the prints. However, October figures are likely to be distorted or incomplete due to missed surveys during the record 43-day shutdown, which creates unusually high uncertainty, risk of sharp market reactions, and the probability of significant subsequent revisions.

Fed funds futures currently put the probability of a 25 bps rate cut in December at 39.9%, versus 44.4% on Friday, 62.4% a week ago, and 93.7% a month ago. At this point, the implied Fed funds rate for January is 3.7675%, suggesting the market is pricing in just 11 bps of easing for the first FOMC of 2026.

Waning rate cut bets in recent weeks have provided some support for the dollar. However, dollar index gains above 100 have proven unsustainable thus far, with the 200-day moving average limiting the upside. Generally weak momentum on upticks suggests the dominant trend remains bearish.



Tensions between Japan and China remain elevated following remarks by Japan's new Prime Minister Sanae Takaichi, who suggested that a Chinese military move against Taiwan could prompt a Japanese response. China has deployed Coast Guard vessels near disputed islands, issued travel warnings to its citizens urging them to avoid Japan, and signaled potential economic reprisals. Tokyo has dispatched a senior diplomat to Beijing in a bid to de-escalate the situation.

Empire State Index rose eight points to a 12-month high of 18.7 in November, well above expectations of 6.0, versus 10.7 in October. It was the fourth positive reading out of the last five months.

Construction Spending rose 0.2% in August, above expectations of -0.1%, versus +0.2% in July. It was the third consecutive monthly gain.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$2.29 (-0.06%)
5-Day Change: -$40.51 (-0.98%)
YTD Range: $2,607.16 - $4,381.21
52-Week Range: $2,563.07 - $4,381.21
Weighted Alpha: +52.63

Gold remains defensive, weighed by a firmer dollar, uncertainty about U.S. data, and the implications for Fed policy. U.S. fiscal worries and rising geoplitical tensions provide some underpinning.

 

While last week's rebound above $4,200 could not be sustained, the magnitude of the gains did return a measure of credence to the underlying uptrend. Despite the sell-off into the weekend, gold is generally holding above the 20-day moving average.

Further consolidation within the $4,381.21/$3,887.03 range seems likely as the market sorts out the veracity of the incoming data and whether it warrants the Fed continuing the easing cycle. The 50-day MA climbing above the range low bolsters the scenario that suggests the corrective low is in.

This outlook would be called into question if the trade comes to believe that the Fed is back on hold for an extended period. That would clear the way for a sustained move in the dollar index above 100, and a fresh round of corrective losses in gold.

I'm watching the 20-day MA at $4,060.89 on a close basis. Below that, Friday's low at $4,038.83 protects the $4,000 zone, and the 50-day MA at $3,946.62.

Gold ETFs saw modest inflows from all regions last week, totalling 16 tonnes. However, Asian investors led the way with 7.4 tonnes of net buying.

The halfway back point of the decline from last week's high comes in at $4,414.82. A breach of this level would provide some encouragement to the bull camp and bode well for further tests above $4,200. Today's Asian high at $4,106.37 provides a minor intervening barrier.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$0.437 (+0.86%)
5-Day Change: +$0.380 (+0.75%)
YTD Range: $28.565 - $54.465
52-Week Range: $28.565 - $54.465
Weighted Alpha: +73.81

Silver is trading lower for a third straight session, weighed by dimming rate cut hopes and a firmer dollar. While the white metal has tumbled more than 8% from last week's high, it's still up nearly 3% for November.



The retreat below $50 does lend some credence to the potential double top at $54.390/$54.465, but the true confirmation point is still a long way away at $45.563. Confidence in this chart pattern will be boosted further upon a breach of $49.000/$48.934.

The 20-day moving average bolsters this area. The bull camp will want to see silver stay above $49.006 on a close basis. If it can't, it will open up potential to the 50-day MA at $47.560, and a retest of the October low at $45.563 would have to be considered.

A rebound above today's Asian high at $51.307 is needed to ease pressure on the downside somewhat. Penetration would shift focus to the $52 zone. Conditions seem likely to remain choppy in the short term.


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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