Gold little changed on the week, as silver hit yet another record high

OUTSIDE MARKET DEVELOPMENTS: Markets continue to anticipate a rate cut next week after the delayed release of the Fed's favored inflation measure was essentially a non-event. Headline PCE inflation ticked up to 2.8% y/y in September, while core PCE inflation ticked down to 2.8%.

Fed funds futures didn't move meaningfully, with personal income and PCE generally in line with assumptions. The data are also four months old, so only a large surprise in either direction was likely to move the needle. The probability of a 25 bps rate cut continues to hover just below 90%.

The preliminary read on consumer sentiment for December showed improvement over November, and one-year inflation expectations moderated to 4.1% from 4.5%. However, "the overall tenor of views is broadly somber, as consumers continue to cite the burden of high prices," according to the University of Michigan.

Risk appetite remains broadly tilted toward 'risk-on' heading into year-end, with the major stock indexes at or near record levels. A rate cut next week certainly would provide a tailwind, but the trade will be paying close attention to the tenor of the FOMC statement and the dots to gauge the likelihood of further easing in 2026. At this point, a pause in January appears likely.

Personal Income rose 0.4% in September, in line with expectations, versus +0.4% in July.

PCE rose 0.3% in September, on expectations of +0.4%, versus a revised +0.5% in July (was +0.6%).

PCE Price Index rose 0.3% in September, in line with expectations, versus +0.3% in July; +2.9% y/y, up from 2.8% in July. Core +0.2% m/m, in line, versus +0.2% in July; 2.8% y/y, down from 2.9% in July. 

Michigan Consumer Sentiment (prelim) rose 2.3 points to a four-month high of 53.3 for December, above expectations of 52.0, versus 51.0 in November. The current conditions reading, however, hit a record low of 50.7. One-year inflation expectations moderated to 4.1% from 4.5%, while the 5-10 year inflation measure fell to a 12-month low of 3.2% from 3.4%.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$20.09 (+0.48%)
5-Day Change: -$5.05 (-0.12%)
YTD Range: $2,607.16 - $4,381.21
52-Week Range: $2,585.51 - $4,381.21
Weighted Alpha: +61.28

Gold heads into the weekend slightly lower on the week, with price action since Wednesday confined to the range that was established on Monday and Tuesday. The yellow metal continues to be underpinned by rate cut expectations, a weaker dollar, and high-flying silver.



Monday's push to six-week highs keeps the technical bias tilted toward the upside within the broader range. A test of the  $4,275.46 Fibonacci level is considered likely, with potential above that, back to gold's all-time high at $4,381.21. New record highs would shift focus to the $4,515.53 Fibonacci projection, while bolstering confidence in the longer-term objective at $5,000.

The early U.S. session low at $4,200.08 protects the low for the day set in Asia at $4,195.31. Below the latter, more substantial supports are noted at $4,175.89 (4-Dec low) and $4,164.99 (3-Dec low). The rising 20-day MA should correspond with the latter early next week.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$1.673 (+2.96%)
5-Day Change: +$1.767 (+3.12%)
YTD Range: $28.565 - $59.331
52-Week Range: $28.565 - $59.331
Weighted Alpha: +108.26

Silver extended to yet another all-time high in early U.S. trading following the benign inflation data. While the white metal has since stabilized within the intraday range, it is on track for a weekly gain of more than 3% and the second straight higher weekly close.



Silver has gained more than 100% year-to-date, spurred by robust supply/demand dynamics, Fed easing expectations, a weaker dollar, elevated geoplitical and trade risks, and rising worries about the U.S. fiscal situation. None of these drivers are likely to change materially in the new year, keeping focus on the upside.

That being said, silver remains quite extended and is historically prone to violent corrective activity. Record-high prices are attracting retail physical sellers. Even investors who bought in as recently as last month have already made more than a 20% return, which could prompt some profit-taking. It's also likely that commodity funds will look to book silver profits ahead of year-end.

However, I think the greatest near-term risk to the uptrend is revived concerns that the AI sector is overvalued. If such concerns are pushed to the fore again, the trade would anticipate a slowing of the build-out of data centers and AI infrastructure. NVIDIA's Q3 earnings beat pushed those worries to the back burner in November, but overvaluation risks linger.

The next upside target is well established at $59.966/$60.000. Beyond that, there's a very long-standing Fibonacci objective at $60.417 (127.2% retracement of the entire move from the 2011 high at $50 to the 2020 low at $11.703).

The early U.S. low at $57.839 protects the overseas low at $56.888. Thursday's low at $56.509 stands in front of the low for the week from 1-Dec at $56.232. Below the latter, former highs at $54.465/390 would be in play.


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.