Gold and silver tumble on China and Middle East disappointments, stronger dollar

OUTSIDE MARKET DEVELOPMENTS: Markets are reacting with disappointment, as the two-day Trump-Xi summit ended without major breakthroughs on contentious issues such as Taiwan, tariffs, technology restrictions, or the Iran conflict. While both leaders highlighted constructive dialogue and a desire to improve trade cooperation and avoid escalation amid ongoing global tensions, markets are ending the week in risk-off mode.

Adding to the risk aversion is a similar disappointment in the lack of progress toward a peace deal with Iran. Talks continue through backchannels, but momentum is slow, and the ceasefire remains shaky. Renewed military action remains a real risk if President Trump's nuclear red line isn’t addressed.

The U.S. blockade of Iran continues. Passage through the Strait of Hormuz remains heavily restricted, keeping oil prices elevated and stoking global inflation. This week’s U.S. economic data showed a clear resurgence in inflation pressures, with April CPI rising to 3.8% y/y and PPI surging 1.4% m/m to 6% annually. Retail sales and other indicators pointed to resilient but cautious consumer demand.

Those inflation prints in particular triggered a sharp hawkish shift in Fed expectations, with markets virtually eliminating any chance of rate cuts this year and now pricing in roughly a 35-40% probability of at least one rate hike by year-end. Goldman Sachs and BofA have pushed back their forecasts for the first cut into late 2026 or even 2027, as persistent energy-driven price pressures and a resilient economy reduce the Fed’s room to ease policy.

President Trump’s nominee, Kevin Warsh, takes the reins of the Fed today after being narrowly confirmed by the Senate on Wednesday, as Jerome Powell's eight-year term comes to an end. Warsh is likely to maintain a data-dependent, inflation-focused stance in the near term amid current pressures. His first FOMC meeting as Chair is scheduled for 17-Jun.

In the week ahead, markets will focus on the release of the FOMC minutes from the May meeting on Wednesday for any additional clues on the likelihood of rate hikes versus cuts. The trade will also continue to digest the Trump-Xi summit and monitor developments in the Middle East.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$86.05 (-1.85%)
5-Day Change: -$172.87 (-3.66%)
YTD Range: $4,100.32 - $5,595.02
52-Week Range: $3,161.16 - $5,595.02
Weighted Alpha: +34.60

Gold has fallen to new lows for the week, weighed by disappointment on multiple fronts, which is sending safe-haven flows into the dollar. The yellow metal is poised to notch a more than 3% loss on the week after gains on Monday and Tuesday stalled shy of the 100-day moving average.



Gold is historically a well-established hedge against both geopolitical uncertainty and inflation. However, the market is focusing instead on the implications for Fed policy, where persistent war-related energy inflation has pushed markets to price out 2026 rate cuts, buoying yields and the greenback.

That being said, geopolitical and price risks are seen as providing longer-term underpinnings to the market. Gold remains in a structural bull market, up 43% from a year ago (and +5% YTD), with most major banks forecasting prices to climb toward $5,000-$6,300 by the end of the year (and higher into 2027), driven by sustained central bank buying, geopolitical risks, and investor diversification away from fiat currencies (particularly the dollar).

Key short-term support is well defined by the 4-May low at $4,503.02. If this level gives way, focus will initially shift to the $4,401.28 Fibonacci level, but a challenge of the rising 200-day MA at $4,359.06 would have to be considered.

Price action will continue to hinge primarily on Middle East headlines. Renewed progress toward fully opening the Strait of Hormuz and a peace deal would likely put oil, yields, and the dollar under pressure. A rebound in gold above $4,600 would ease pressure on the downside somewhat, suggesting further consolidation within the broad range is in the offing.

This week's high at $4,773.13 marks important resistance, reinforcing the significance of the 100-day MA at $4,793.20. The declining 20-day MA at $4,663.22 provides an intervening barrier.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$4.614 (-5.52%)
5-Day Change: -$2.672 (-3.32%)
YTD Range: $61.036 - $121.630
52-Week Range: $31.945 - $121.630
Weighted Alpha: +119.59

Silver is off more than 8%, adding to losses incurred on Thursday, as recent trade optimism evaporated following an underwhelming outcome to the Trump-Xi summit. The white metal is on track to close more than 5% lower on the week as dimmed rate cut expectations, higher yields, and a stronger dollar add to the pressure.



The inability to reclaim the 90-handle and sustain gains above the 100-day moving average leaves silver firmly entrenched in the lower half of the broad $121.630/$61.036 range that formed earlier in the year. More than half of the recent rally has already been retraced, and a close below the 20-day MA today would suggest scope for a retest of the late-April low at $70.893.

Like gold, price action in silver will remain sensitive to Middle East headlines, Fed expectations, and the dollar. A rebound above $80 would be somewhat encouraging, and a close back above the 100-day MA at $81.195 more so. However, the sharp losses at the end of this week have once again severely rattled the confidence of the bull camp.


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.