Gold and silver gain on Iran ceasefire
OUTSIDE MARKET DEVELOPMENTS: The situation in Iran swung dramatically over the past 24 hours from threats of "annihilation" to a two-week ceasefire. The deal is conditional on Iran allowing the immediate and complete reopening of the Strait of Hormuz to shipping. Not surprisingly, both sides are claiming victory.
The trade swung to risk-on amid optimism that the ceasefire would lead to a longer-term peace agreement. Negotiations are expected to begin as soon as April 10 in Islamabad, Pakistan.
Oil plunged, with Brent Crude gapping lower to four-week lows well below $100. Stocks surged, retracing approximately half of the war-inspired losses. Treasury yields and the dollar retreated.
The dollar index dropped to a four-week low, testing support below 99, where the 200-, 100-, and 50-day moving averages have converged. This zone is currently holding. A short-term close below 98.49 is needed to confirm potential to the halfway back point of the recent rally at 98.08.
Today's war relief and tempered inflation worries will overshadow this afternoon's release of the minutes from the March FOMC meeting. Back in March, the war was relatively new, spurring heightened uncertainty, and that's what will be reflected in the minutes.
Fed funds futures are discounting the slight prospects for a rate hike that emerged amid the surge in energy prices. Scope for a rate cut has improved modestly, but the Fed still looks to be on hold for the remainder of the year.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$76.13 (+1.62%)
5-Day Change: -$4.06 (-0.09%)
YTD Range: $4,100.32 - $5,595.02
52-Week Range: $2,972.73 - $5,595.02
Weighted Alpha: +45.20
Gold reached a three-week high of $4,853.18 in overseas trading, spurred by enthusiasm over the ceasefire deal, expectations that the Strait of Hormuz will reopen, lower energy prices, and a weaker dollar. The yellow metal has traded more like a risk asset throughout the conflict, with the trade giving greater weight to Fed expectations.
Gold has traded back above the midpoints of the primary range and the range-within-the-range. The move back above the 100- and 20-day moving averages provides further encouragement to the bull camp.
The 50-day MA corresponds closely with the $4,915.17 Fibonacci level, and penetration would bode well for a move back above $5000. An eventual breach of the 61.8% retracement level of the entire correction at $5,024.04 would return considerable credence to the long-term uptrend.
The situation in the Middle East remains fluid, and there are certainly risks that progress toward a peace deal could quickly unravel. If that were to happen, today's market movements would likely reverse. Volatility remains elevated, so expect swings on any fresh headlines from the region.
While the trade was cautiously rebuilding long positions earlier today, volatIlity will continue to make them quick to take profits. If gold is unable to sustain gains above $4,700, recent lows around $4,600 and $4,555.08 (2-Apr) would be vulnerable to retests.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$3.815 (+5.23%)
5-Day Change: +$0.355 (+0.47%)
YTD Range: $61.036 - $121.630
52-Week Range: $29.460 - $121.630
Weighted Alpha: +120.92
Silver extended to a three-week high of $76.370, spurred by broad-based risk-on sentiment and a weaker dollar. The white metal tested briefly above the 100-day moving average and appears poised for its first close above the 20-day MA in nearly a month.
A confirmed close above the 20-day today would bode well for further tests above the 100-day, with potential back to the $80 zone. The declining 50-day MA comes in at $80.021. Above that, the $82.887 Fibonacci level would be in play.
Spiking energy prices caused by the war made the economics of AI expansion more fragile, prompting some analysts to warn about reduced investment and delayed or cancelled projects. While the ceasefire relief is easing that pressure, some uncertainty is likely to persist, at least until a peace deal is in place and oil prices return to pre-war levels below $70.
Silver is currently trading higher for a third consecutive week, but significant upside follow-through is needed to bolster the confidence of the bull camp. Right now, the price action since the $61.036 low still has the look of a continuation pattern.
Like gold, expect volatility to remain high with traders reluctant to hold positions until clear low-risk opportunities present. If silver is unable to maintain gains above $70, further attacks on the downside would have to be considered. A drop back below $70 would suggest potential to the 50% retracement level of the rally at $67.009.
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.