Gold and silver poised for higher weekly closes on haven bid

OUTSIDE MARKET DEVELOPMENTS: The Fed's favored measure of inflation accelerated in December, reinforcing the recent more hawkish tilt on policy expectations. Sticky inflation has kept policymakers cautious, prompting a "higher for longer" stance on rates and even discussions of potential hikes if price pressures fail to ease meaningfully.

The PCE price index rose 0.4%, above expectations of +0.3%, versus +0.2% in November. The annualized rate edged up to 2.9% from 2.8% previously. Core PCE also rose 0.4% m/m, on expectations of +0.3%, versus +0.2% in November; 3.0% y/y versus 2.8% in November. 

Advance Q4 GDP disappointed at just 1.4%, well below the consensus of 3.0%, versus 4.4% in Q3. The protracted government shutdown late last year weighed. Slowed growth provides a counterbalance to the price risks noted above. Certainly, the White House will keep pressure on the Fed to resume its easing campaign.

Fed funds futures continue to suggest 50 bps of easing this year. However, that first 25 bps cut is no longer fully priced for September.

The Supreme Court has ruled 6-3 against the Trump administration's use of the International Emergency Economic Powers Act to impose sweeping tariffs. This represents a major setback for the White House, potentially requiring billions in refunds to importers, disrupting global trade deals, and creating substantial uncertainty.

Arguably, Trump has been testing the limits of executive power in the first year of his second term. This ruling reaffirms Congress's exclusive authority over tariffs, shifting power back to the legislative branch and limiting the president's unilateral trade actions.

The Trump administration is likely to respond by swiftly shifting to alternative legal authorities to reimpose or replace the invalidated tariffs, aiming to retain as much of the existing trade policy as possible through targeted national security investigations or unfair trade probes.

Pivoting to alternative tariff authorities could at least temporarily mitigate the risk of a widening trade deficit during this transition period. Additionally, countries and companies that committed to major U.S. investments as part of prior trade negotiations might face retaliation if they begin to backtrack on or delay those pledges.

Tensions between the U.S. and Iran continue to ratchet higher. President Trump delivered an ultimatum on Thursday, giving Tehran 10 to 15 days to reach a "meaningful" nuclear deal addressing its enrichment activities, ballistic missiles, and proxy support, or face unspecified "really bad things," presumed to include military strikes.

A massive U.S. military buildup in the Middle East involving multiple carrier strike groups, fighter jets, and other assets is ongoing. In response, Iran has conducted joint naval drills with Russia in the Gulf of Oman and Strait of Hormuz, fortified its nuclear and military sites, issued warnings of retaliation against U.S. bases or a "regional war" if attacked, and signaled defiance while keeping limited diplomatic channels open for any ongoing diplomacy.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$21.28 (+0.43%)
5-Day Change: +$13.02 (+0.26%)
YTD Range: $4,310.83 - $5,595.02
52-Week Range: $2,835.23 - $5,595.02
Weighted Alpha: +77.54

Gold is setting new highs for the week, as high geopolitical risks and trade uncertainty stemming from today's SCOTUS decision stoke haven interest. Diminished easing expectations and the stronger dollar pose headwinds, but the yellow metal appears to be on track for a third straight higher weekly close.



A close today back above the midpoint of the range and the 20-day moving average would provide some encouragement to the bull camp for the week ahead. Scope would be for renewed tests above $5,100.

A breach of last week's high at $5,117.94 is needed to put the next retracement level at $5,141.08 back in play. Above the latter, focus would shift to $5,200 and the 78.6% retracement level at $5,340.72. 

On the downside, the early U.S. low at $5,007.42 fortifies the $5,000 zone, protecting the overseas low at $4,985.34. Thursday's low at $4,960.86 provides an additional tier of support ahead of the lows from earlier in the week at $4,855.15/$4,847.74.

The new level of broad uncertainty associated with today's SCOTUS decision, along with the risk for armed conflict with Iran, setbacks in the range are likely to be viewed as buying opportunities. This lends credence to the scenario that suggests the corrective low is on at $4,406.69 and the long-term uptrend will ultimately reassert itself.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$1.924 (+2.45%)
5-Day Change: +$4.699 (+6.07%)
YTD Range: $64.140 - $121.630
52-Week Range: $28.565 - $121.630
Weighted Alpha: +170.17

Silver has moved decisively back above $80, buoyed by spillover haven interest. Moves in the white metal often amplify those of gold in such environments due to its higher beta. Silver is poised for its first higher weekly close in four weeks.



A close above the 50-day moving average at $82.028 today would be a bullish technical signal, putting the more important $86.233/287 level in play, where the 11-Feb high corresponds with the declining 20-day moving average. Penetration of the latter in the week ahead would shift focus to $92.186 (04-Feb high) and the halfway back point of the Jan/Feb decline at $92.885.

An eventual move into the upper half of the range would go a long way toward confirming $64.140 as the corrective low. However, I suspect silver will be relegated to choppy trade within the extraordinarily wide $121.630/$64.140 range for some time to come, even as gold moves on to new all-time highs.


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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