Gold and silver retreat from new highs for the week ahead of event risks

Outside Market Developments: Risk appetite remains neutral as markets continue to eye the release of backlogged data from the government shutdown. There are concerns that some data will be permanently impaired or go unreleased. As a result, there has been virtually no fresh official economic data available in recent weeks to gauge the data relative to consensus expectations, leaving economists and the Fed trying to navigate with stale pre-shutdown figures and heightened uncertainty about Q4 growth and inflation trends.

The probability of a December rate cut continues to hover around 40%, amid uncertainty about the incoming data and recent FedSpeak that has tilted toward caution. However, the market still believes in the easing bias, with Fed funds futures implying 83 bps in additional cuts by the end of 2026.

The minutes from the October FOMC meeting will be scrutinized for additional clues about the likely December policy decision. Further signs of caution could keep the pressure on equities and support the dollar.

Tomorrow's delayed release of September jobs data will certainly factor into Fed expectations. The market is anticipating a gain of 45k jobs and the unemployment rate to hold steady at 4.3%. Anything that disappoints on the labor front will increase the likelihood of a December easing.

Nvidia reports Q3 earnings after the bell today and is arguably the biggest event risk of the week. The chip giant is seen as a bellwether for the AI sector, and more broadly, the tech sector. Results and guidance are expected to either calm fears about an AI bubble or trigger more selling, with potential for outsized impact on the entire Nasdaq and S&P 500 given Nvidia's massive index weighting.

Nvidia has beaten Wall Street consensus estimates for both revenue and adjusted EPS for 21 straight quarters. Analysts expect another modest beat today, but the bar is extremely high after the stock's massive run. 

Wall Street has grown increasingly concerned that AI isn’t yet generating enough revenue or profits to justify the huge spending on infrastructure. Alphabet CEO Sundar Pichai recently warned that the “AI investment boom has elements of irrationality.”

MBA Mortgage Applications fell 5.2% in the week ended 14-Nov, versus +0.6% in the previous week. “Mortgage rates increased for the third consecutive week, with the 30-year fixed rate inching higher to its highest level in four weeks at 6.37 percent,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.

Balance of Trade narrowed 23.8% to -$59.6 bln in August, inside expectations of -$60.5 bln, versus -$78.2 bln in July. That's the narrowest deficit since March of 2023.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$45.51 (+1.12%)
5-Day Change: -$77.67 (-1.85%)
YTD Range: $2,607.16 - $4,381.21
52-Week Range: $2,585.51 - $4,381.21
Weighted Alpha: +54.82

Gold climbed to new highs for the week, buoyed by safe-haven demand ahead of event risks in the latter half of the week. However, gains above $4,100 could not be sustained as the greenback was also garnering some haven interest, which pushed the dollar index back above 100.



If Nvidia earnings miss expectations (+$1.23 - $1.26 EPS), and/or Q4 guidance disappoints (+$1.37 EPS), look for a substantial risk-off reaction. I would expect a miss to weigh on gold initially due to deleveraging pressures.

The $4,000.00/$3.998.62 level marks initial support and protects the rising 50-day MA at $3,963.95. Below the latter, the October low at $3,887.03 wouild be in play. A new low for the move would target $3,800 initially, but potential would be to the $3,754.16 (50% retrace of the rally from $3,127.12 to $4,381.21).

A convincing move back above $4,200 would keep focus on the underlying uptrend. Today's earlier high at $4,132.58 marks an important intervening barrier. An eventual breach of last week's high at $4,244.81 would bode well for tests of $4,275.46 (Fibonacci) and $4,381.21 (all-time high).

Central bank gold purchases have been a significant driving force behind the rally. An FT article estimates that China's gold purchases are more than 10 times the official figures reported by the PBoC. China's opaque over-the-counter transactions, involving intermediaries like the sovereign wealth fund, CIC, and even the military, have become a major hidden driver behind gold's record-breaking rally to all-time highs.

According to Société Générale, China's actual gold purchases in 2025 are likely to reach 250 tonnes or more, significantly higher than the roughly 20 - 30 tonnes reported. China's underreporting has been a long-held, but not unwarranted, belief in the gold market for years.

You may recall that the PBoC dropped a bombshell on the market a decade ago, revealing in July 2015 that reserves had increased from 1,054 tonnes (unchanged since 2009) to 1,658 tonnes – a sudden jump of 604 tonnes (57%)! Speculation about underreporting was also rampant back then, and the news contributed to a short-term price drop as the "mystery" of hidden buying was resolved.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$1.421 (+2.80%)
5-Day Change: -$1.400 (-2.63%)
YTD Range: $28.565 - $54.465
52-Week Range: $28.565 - $54.465
Weighted Alpha: +78.38

Silver reached a new high for the week above $52, but like gold, intraday gains could not be sustained amid event risk today and tomorrow. A firmer dollar provided an additional headwind for the white metal.



Silver is a bit of a mixed bag at these levels. I'm encouraged by the market holding above the 20-day moving average, but troubled by the potential double top. While I continue to like the long-term fundamentals for silver, bad news from Nvidia today could signal a reduction in AI infrastructure spending, sending silver to new corrective lows on expectations of reduced demand and deleveraging.

A breach of the 20-day at $49.302 would set up a test of the 50-day at $47.957. Below the latter, decent chart support at $46.910/885 protects the October low at $45.563.

A close above $52 would be encouraging to the bull camp, favoring another run at the $54.390/465 highs. Fresh record highs would target the $56.885 Fibonacci projection initially.

Be prepared for short-term volatility.


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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