Gold and silver tumble as strong jobs data dims rate cut hopes, and Middle East tensions remain elevated 

OUTSIDE MARKET DEVELOPMENTS: U.S. nonfarm payrolls rose 172k in May, well above market expectations of +85k. Back-month revisions were +93k. The unemployment rate held steady at 4.3%. Average hourly earnings climbed 0.3% m/m, but the annual pace of earnings growth slowed to 3.4% y/y, versus 3.6% in April.

These data are reflective of ongoing resilience in the labor market and bode well for continued economic growth. The Atlanta Fed's GDPNow forecast for Q2 is +3.0%, while the latest Philly Fed Survey of Professional Forecasters projects more modest Q2 growth of 2.1%.

Hezbollah has rejected the terms of the latest ceasefire deal between Israel and Lebanon, further eroding hopes for a broader peace deal. Iran reiterated strong support for Hezbollah and is now demanding full Israeli withdrawal from Lebanon. That's not going to happen, and Israel is continuing drone/air strikes in southern Lebanon.

Iran claims it fired warning shots at a U.S. Navy destroyer in the Gulf of Oman, forcing it to withdraw. CentCom quickly disavowed the claim, saying, "Iran is lying. U.S. military assets at sea continue to fly, sail, and operate safely and unimpeded.”

President Trump continues to express optimism about a peace deal, but tensions persist and negotiations seem to have stalled. The U.S. maintains the ceasefire with Iran is holding but has conducted "self-defense" strikes. Tehran says talks are suspended or complicated by ongoing Israel-Hezbollah fighting. IDF actions in Lebanon raised the ire of President Trump, prompting a heated phone call with Benjamin Netanyahu earlier in the week.

While oil is well off the April/May highs, Brent crude is still up nearly 40% from a year ago and continues to stoke inflation worries. That, combined with ongoing signs of os a resilient economy, fosters higher-for-longer rate expectations, which is providing support for the dollar. The dollar index jumped to eight-week highs to pressure 100.

The Fed is still widely expected to hold steady at the June FOMC meeting, the first presided over by new chairman Kevin Warsh. However, Fed funds futures now reflect scope for 23.5 bps of tightening by year-end.

The market will be focused on U.S. inflation data in the week ahead. May CPI will be released on Wednesday, and the market is expecting acceleration to 4.2% (headline) and 2.9% (core) from 3.8% and 2.8% in April. May PPI comes out on Thursday. Headline PPI is expected to accelerate to 6.5% y/y, versus +6.0% in April, while core PPI is forecasted to hold steady at 5.2%.

Hot inflation readings could bolster Fed rate hike expectations next week, driving bullish moves in yields and the dollar. However, Middle East headlines continue to have the potential to override these fundamentals.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$8.84 (-0.20%)
5-Day Change: -$71.85 (-1.58%)
YTD Range: $4,100.32 - $5,595.02
52-Week Range: $3,256.02 - $5,595.02
Weighted Alpha: +27.03

Gold has tumbled to ten-week lows after strong jobs data further diminished hopes for a Fed rate cut this year, driving yields and the U.S. dollar higher. Persistent Middle East tensions added to the selling pressure. The yellow metal is heading for a roughly 3% weekly loss and its first close below the 200-day moving average since late 2023.



Good economic news is bad news for gold right now, as strong jobs data further reduces the odds of a Fed rate cut this year and even raises the possibility of a future hike. When combined with persistent Middle East tensions that are supporting oil prices and inflation expectations, today’s sell-off comes as little surprise – especially during a seasonally weak period for the metal.

Looking ahead, progress toward a Middle East peace deal or signs of cooling inflation could revive buying interest next week. The latter appears unlikely in the near term, meaning developments in the Middle East will likely dictate gold’s direction in the week ahead.

The convincing breach of the 200-day MA shifts focus to the $4,268.92 Fibonacci level initially, but a retest of the March low at $4,100.32 must now be considered. If the market sets new lows for the year, the $4,000 zone would be in play.

The falling 20-day moving average at $4,538.56 must be regained to ease downside pressure somewhat, favoring further consolidation within the $5,595.02/$4,100.3 range. Intervening resistances are noted at $4,367.12, $4,400.00, and $4,443.95.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$1.021 (-1.38%)
5-Day Change: -$2.164 (-2.87%)
YTD Range: $61.036 - $121.630
52-Week Range: $35.369 - $121.630
Weighted Alpha: +82.75

Silver plunged more than 7% on Friday, weighed by weakness in gold and a stronger dollar. The white metal is poised for about an 8% loss for the week, and its fourth consecutive lower weekly close.



There have been growing signs of AI fatigue in early June, which may be contributing to a bit of a headwind for silver.
While AI-related capex and data center buildout remain part of a broadly positive narrative, sky-high valuations pose risk, prompting investor rotation toward less aggressive stances heading into summer.

Silver has fallen to approach its 200-day moving average at $68.124 after failing to climb into the upper half of this year's range in May. A breach of the 200-day MA would highlight the $67.091 Fibonacci level. Below that, chart supports at 66.763 (26-Mar low) and $66.030 (24-Mar low) would be in play. While the March low at $61.036 still looks to be protected, bull camp confidence has certainly taken a hit today.

A rebound above $72.488/$72.630 is needed to ease downside pressure and reestablish a more consolidative tone within the lower half of the broad range. The probability of such a rebound will hinge on Middle East headlines and U.S. inflation data next week.


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.