Gold and silver plunged to new lows for the year as war escalation sparked broad deleveraging
Outside Market Developments: Over the weekend, Iran launched two long-range ballistic missiles targeting the U.S.-U.K. joint base on Diego Garcia in the Indian Ocean, over 2,500 miles away. One missile failed mid-flight, and the other was shot down by a U.S. warship, but the attempt displayed a heretofore unknown Iranian capability.
Israeli officials described the missiles as a two-stage system with intercontinental potential that could be used to threaten Europe and a wider array of distant U.S. assets. While the eastern seaboard of the U.S. is far beyond this demonstrated range, the intelligence failure is understandably concerning.
On Saturday evening, President Trump issued a 48-hour ultimatum to Iran to reopen the Strait of Hormuz or face consequences. "The United States of America will hit and obliterate [Iran's] various POWER PLANTS, STARTING WITH THE BIGGEST ONE FIRST," warned Trump.
In response, Iran threatened to completely close the Strait – or even mine the entire Persian Gulf – if the U.S. attacks its power plants or energy infrastructure. The latest round of saber-rattling initially reinforced mounting concerns about a protracted conflict, with elevated energy prices creating broad inflation and growth risks.
However, on Monday, Trump extended the deadline for five days, citing "very good and productive conversations." Iran's Foreign Ministry called those claims "falsehood and psychological warfare." While the walking back of the imminent threats calmed markets, the trade remains on edge and tilted toward risk-off.
That risk aversion is underpinning the dollar, as the trade seeks maximum liquidity. The dollar index remains within striking distance of the 10-month high set a week ago.
The dollar is drawing additional support from fading expectations of Fed easing, which has helped push Treasury yields higher. Mounting inflation risks from volatile – and persistently elevated – oil prices amid the Iran conflict have led markets to price in the Fed remaining on hold well into 2027. Talk that the Fed's next move could be a hike has intensified over the past week.
Markets this week will focus on Tuesday's flash S&P Global PMIs (manufacturing, services, and composite for March) for early signals on private-sector activity and resilience; Tuesday's final Q4 productivity and unit labor costs revisions, which could influence wage-inflation views; Wednesday's February import/export price indexes and Q4 current account balance, highlighting trade dynamics and inflation pass-through from higher energy costs.
Traders will scrutinize these releases for any indications of economic softening or persistent inflationary pressures that could influence Fed rate path expectations. However, headline developments from the Middle East are likely to continue dominating overall market sentiment.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$225.85 (-5.02%)
5-Day Change: -$583.45 (-11.65%)
YTD Range: $4,100.32 - $5,595.02
52-Week Range: $2,961.83 - $5,595.02
Weighted Alpha: +37.15
Gold plunged to new lows for the year in overseas trading after a significant escalation of the Iran war over the weekend. While most of those losses were subsequently retraced, and the yellow metal is once again higher YTD, considerable technical damage has been done.
Deleveraging certainly contributed to the strong selling pressures. Faced with margin calls from equity/bond losses, gold often gets sold off rapidly, even if the underlying fundamentals remain broadly supportive. The high to low move so far this year is now nearly $1,500 (-26.7%).
The breach of the previous corrective low at $4,406.69 cleared the way for a challenge of the $4,200 zone. However, the market extended another $100 beyond that to put the 200-day moving average at $4,101.83 to the test.
The longs have been rocked once again, reviving the trepidations from earlier in the year. Look for short-term conditions to remain volatile as the trade adjusts to the new range.
Gold hasn't traded below the 200-day since October 2023. The 200-day containing the downside and the subsequent $400+ rebound to trade back above $4,500 give the long-term bulls something to hang their hat on. It's also worth noting that gold is quite oversold. October 2023 is also the last time the 14-day RSI has been this low.
A breach of today's highs at $4,511.50/$4,534.96 would shift focus to the rising 100-day MA at $4,613.75. A short-term close about the latter would provide further encouragement to the bull camp. The midpoint of the new range is currently well protected at $4,847.67.
A failure to stay back above $4,400 would put intraday support at $4,352.57 back in play. Below that, focus would return to the $4,305.91/$4,300.00 area.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$3.936 (-5.79%)
5-Day Change: -$12.514 (-15.50%)
YTD Range: $61.036 - $121.630
52-Week Range: $28.565 - $121.630
Weighted Alpha: +88.62
Silver extended to the downside in overseas trading on Monday, establishing a new low for the year at $61.036 amid broad deleveraging and a resilient dollar. However, the white metal was able to regain its footing and appears poised to close higher on the day.
Similar to gold, I think the latest plunge and recovery have reignited fears of extreme volatility on both sides of the market. Traders will be quick to cash in on profits, and equally quick to rein in losses, leading to choppy conditions.
A breach of the early-U.S. high at $70.757 would bode well for a test of the 100-day MA at $74.092. An eventual close above the latter would shift focus to the halfway back point of the most recent leg-down at $78.715. The midpoint of the broader range is at $91.333, and out of play for the time being.
Intraday support at $67.536/38 stands in front of last week's low at $65.637, which is a diminished level ahead of today's low at $61.036. Below that, $60 protects the rising 200-day MA at $57.827.
These are all wide levels to be sure. Warranted by the realities of this market.
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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