Blog posts tagged with 'copper'

9/10/2024

Gold and silver remain rangebound ahead of inflation data later this week

OUTSIDE MARKET DEVELOPMENTS: Fed funds futures are steady today with prospects for a 50 bps rate cut holding at 27%. The market awaits tomorrow's CPI report and Thursday's PPI data, which will bring us within a week of the FOMC policy announcement. A 25 bps rate cut is the most likely outcome.

The ECB will announce policy on Wednesday this week. A 25 bps cut is widely expected as worries about persistently slow growth override lingering inflation risks.

Germany – Europe's largest economy – contracted by 0.1% in Q2 and is threatening to slip back into recession. Annualized growth this year is a scant 0.2%.

Former ECB President Mario Draghi is pitching a new coordinated industrial policy for Europe to boost competitiveness and lift the EU out of its doldrums. Draghi recognizes that productivity is "very weak" and a significant investment of up to €800bn a year will be needed to keep the Continent from falling further behind the U.S. and China.

According to a Bloomberg article, the BoJ reportedly sees little need to raise rates again next week. Officials are still monitoring lingering market volatility in the wake of the July hike and are keen to see how markets react to the anticipated first easing move by the Fed in more than four years.

U.S. NIFB small business optimism tumbled 2.5 points to 91.2 in August, versus 93.7 in July. Fewer firms are planning to hire as those expecting a better economy plunged to -13% from -7% in July. The uncertainty index rose 2 points to 92, the highest since October 2020.

Fed Vice Chair Michael Barr (centrist) is slated to speak on Basel III later this morning. 


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$1.03 (+0.04%)
5-Day Change: +$14.33 (+0.57%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +30.84

Gold is pushing higher but remains confined to Friday's range for a second session. Consolidative trading is likely to prevail ahead of U.S. inflation data later this week.



The yellow metal continues to hold the 20-day moving average on a close basis, which is encouraging for the bull camp. The all-time high at $2,529.57 (20-Aug high) defines the upper boundary of the range.

A move to new record highs would reestablish the uptrend and confirm potential to the $2,539.77 Fibonacci objective. Beyond that, the $2,597.15/$2,600.00 zone.

Initial support is at $2,501.33/$2,500.63, where the 20-day SMA corresponds closely with today's overseas low. More substantial support at $2,487.11/06 protects the short-term range lows at $2,474.31/08.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.117 (+0.41%)
5-Day Change: +$0.395 (+1.41%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +22.12

Silver edged higher within Friday's range into early U.S. trading. Just over 50% of the decline from $29.125 (5-Sep high) to $27.732 (6-Sep low) was retraced, but the white metal came under renewed pressure and has since fallen to fresh intraday lows.

  
A minor chart point is noted at $28.079 which stands in front of the recent lows at $27.791/732.

Choppy trading within the range is likely to prevail through Thursday's PPI release. Market expectations for both CPI and PPI are +0.2%. It would take something significantly hotter than expectations to get the market to believe the Fed will hold steady next week. 

A short-term close back above the 20-, 50-, and 100-day moving average complex is needed to return a measure of credence to the underlying uptrend and call for another run at $30. Those are out of reach today at $28.884, $29.052, and $29.174 respectively.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

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.

9/9/2024

Gold and silver consolidate ahead of this week's inflation data

OUTSIDE MARKET DEVELOPMENTS: Friday's jobs report reinforced that the labor market is cooling. August payrolls undershot expectations by 20k jobs, and back-month revision totaled -86k.

The downtick in the jobless rate to 4.2% suggested that the slowdown in the labor market remains orderly thus far. “While the labor market has clearly cooled, based on the evidence I see, I do not believe the economy is in a recession or necessarily headed for one soon,” said Fed Governor Chris Waller on Friday. Hopes for a soft landing spring eternal.

FedSpeak last week indicated that the focus has shifted to the "full employment“ side of the central bank's dual mandate. Fed funds futures were volatile on Friday, but ultimately swung in favor of a smaller 25 bps rate cut when the Fed announces policy on 18-Sep. 

The probability of a 25 bps cut has fallen to 25%. That's down from 30% last week, and 51% a month ago. Fed funds futures imply 112 bps in cuts by year-end.

While the Fed's focus may be on the weakening labor market, inflation data out this week will have the market's attention.  Median expectations for August CPI (out on Wednesday) stand at +0.2%. Thursday's PPI report is expected to come in at +0.2% as well.

U.S. wholesale sales surged 1.1% in July, well above expectations of +0.2%, versus an upward revised -0.3% (was -0.6%). It's the best monthly sales jump since February. Inventories rose 0.2%, just off the advance print of +0.3%, versus +0.2% in June.

We'll see July consumer credit later today. The market is anticipating a monthly increase of $10.2 bln, versus an $8.9 bln rise in June. 

Over the weekend, The Wall Street Journal reported that there are "about 590 million active cards in circulation in the first quarter of this year, 40 million more than in 2019." America's total credit card balance reached a record-high $1.142 trillion in the second quarter.

With an average interest rate on credit cards north of 27%, this level of debt is an ever-growing millstone around the neck of the U.S. consumer and the economy. Even with home prices and stocks at/near record highs, the Fed is behooved to start bringing rates down or consumption is going to collapse.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$2.74 (-0.11%)
5-Day Change: -$0.61 (-0.02%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +30.25

Gold is straddling the $2500 level as traders look ahead to this week's inflation data. The market is expecting fairly benign readings for both CPI and PPI, which should solidify beliefs that the Fed will begin its easing campaign with a cautious 25 bps cut.



Consolidative trading is likely to prevail early this week as the market awaits the inflation data. The range is well defined by the all-time high at $2,529.57 (20-Aug) and the lows since then at $2,474.31/08. The 20-day moving average has been serving as support on a close basis and comes in at $2,498.84 today.

ETF inflows were unchanged last week amid some lingering uncertainty as to Fed intentions. Modest North American inflows were offset by European outflows.

The COT report shows that net spec positions moderated slightly to 287.6k contracts, versus 294.5k contracts in the previous week. The market is still quite long, at levels not seen since Q1'20. That does create some downside risk, but the long specs have proven themselves to be sticky up here.

CFTC Gold speculative net positions

With the underlying trend bullish, and recent activity deemed corrective/consolidative, buying strategies remain favored. A short-term breach of $2,529.57 would clear the way for tests of $2,539.77 (Fibonacci) and  $2,597.15/$2,600.00 (measuring).


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.194 (+0.69%)
5-Day Change: -$0.419 (-1.47%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +20.29

Silver is trading higher on the day, buoyed by the strong wholesale sales print. However, price action has been confined to the lower half of Friday's range.



The inability of silver to sustain rallies in recent weeks is reflective of persistent concerns about growth and doubts that the Fed will successfully orchestrate a soft landing. Where the 20-day moving average has been providing support in the gold market, the 20-day serves as resistance on a close basis for silver.

Short-term conditions are likely to remain choppy with a modest downside bias ahead of this week's inflation data. The comparative strength of the gold market may provide some underpinning with the gold/silver ratio above 90.

Net speculative long positions in silver futures fell to 46.1k last week, versus 52.2k in the previous week. The specs have been reducing long exposure since mid-July. Current positioning is the lowest since the week ended 16-Aug. A little over a week later, silver was testing above $30.

CFTC Silver speculative net positions

A climb back above the midpoint of last week's retreat at $28.429, would be somewhat encouraging. The 20-day SMA comes in at $28.863 today. A breach of Thursday's high at $29.125 is needed to return focus to the August highs above $30.

Intraday support at $28.079/00 protects the recent lows at $27.791732. The latter now appears to be a formidable downside barrier.



Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

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.

9/6/2024

Gold and silver initially rallied on NFP miss, but subsequently retreated

OUTSIDE MARKET DEVELOPMENTS: U.S. nonfarm payrolls rose 142k in August, below expectations of +162k, versus a negative revised +89k in July (was +114k). June was revised lower by 61k from 179k to 118k.

The unemployment rate ticked down to 4.2% in line with expectations, versus 4.3% in July.

Hourly earnings rose 0.4% on expectations of +0.3%, versus a 0.2% rise in July.

The average workweek ticked up to 34.3 hours in line with expectations, versus 4.2% in July.

The 20k miss on the August payrolls print wasn't as bad as some of the whispers. However, -86k in back-month revisions to the previous two months strengthened – at least initially – the probability of a 50 bps rate cut on 18-Sep.

The likelihood of a 50 bps cut jumped to 59% immediately after the jobs report but those odds plunged in subsequent trading. As of this writing, the chances are just 25%, 5 percentage points lower than last week.

"[I]t is now appropriate to dial down the degree of restrictiveness in the stance of policy," said New York Fed President John Willams (centrist). However, Williams claims not to have a personal opinion on the appropriate size of a September rate cut, repeating the Fed's 'data dependence' mantra.

“The balance of risks has shifted toward the employment side of our dual mandate,” said Fed Governor Chris Waller (hawk). He noted that recent jobs data "no longer requires patience, it requires action." Waller said he was "open-minded about the size and pace of rate cuts," but seemed to hint at a preference for a slower pace of rate cuts.

I continue to believe the Fed's first step on the easing path will be a cautious one. In commentary earlier this week, I suggested a sub-100k August payrolls print might get me to change my view. While July was revised down below 100k, August was just moderately below expectations.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$2.45 (+0.10%)
5-Day Change: +$7.86 (+0.31%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +31.81

Gold jumped to a new high for the week after nonfarm payrolls missed expectations prompting more aggressive rate-cut bets and a drop in the dollar. However, gains stalled ahead of the record high at $2,529.57 and the yellow metal retreated into the range.



Despite today's volatility, gold still appears poised to register a higher weekly close. If confirmed with a close above $2,503.45, it would be the fourth higher weekly close in six.

Tests of the downside this week were successfully contained by the 20-day moving average on a close basis. I find that to be technically encouraging.

Price action since the record high was established on 20-Aug has been only mildly corrective; dropping just 2.2% from high to low. Arguably the tone for the past two weeks has been more consolidative than anything.

The underlying trend remains decisively bullish. The yellow metal is up more than 20% year to date and has closed higher every month except January. Gold is up nearly 30% since 06-Sep'23.

A short-term move to new all-time highs will favor a test of the $2,539.77 Fibonacci objective. Beyond that, potential is to the $2,597.15/$2,600.00 zone.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.021 (+0.07%)
5-Day Change: -$0.360 (-1.25%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +23.08

Silver modest upticks after the jobs report stalled ahead of yesterday's high at $29.125 leading to a sharp sell-off to new 3-week low. The white metal is now down more than $1 on the day and trading below $28.



Silver is poised for a second consecutive lower weekly close. This market sucks you in with encouraging signals and then spits you right back out again.

The resilience displayed by gold should provide some underpinning to the market, but that's not readily apparent at this point. Suddenly the $27.303 Fibonacci level (78.6% retrace of the August rally) is back in play.

I don't think it will get there today as this move is already pretty overdone. I wouldn't be surprised to see at least some short-covering into the close.

There are still 12 days until the FOMC announces policy. A lot can happen between now and then. Look for silver to remain volatile as traders on each side of the 25 bps or 50 bps debate continue to duke it out.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

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.

9/5/2024

Gold and silver retrace recent losses and await jobs data

OUTSIDE MARKET DEVELOPMENTS: Heightened growth risks continue to weigh on global stocks. Most of the major overseas indices were lower once again today. U.S. shares are called lower today.

The ADP Employment Survey showed private payrolls rose by just 99k in August, well below market expectations of 148k, versus a negative revised 111k in July (was 122k). This is the weakest print since Jan 2021 and adds to whispers of a potential nonfarm payrolls miss tomorrow.

Challenger Layoffs surged 50k to 75.9k in August, a 193% increase over July. That's the highest August print in 15 years. 

Initial jobless claims fell 5k in the week ended 31-Aug to 227k, below expectations of 232k, versus a revised 232k in the previous week. Continuing claims dipped 22k to 1,838k, versus a downward revised 1,860k in the previous week.

U.S. Q2 productivity was revised up to +2.5% on expectations of +2.4%, versus +2.3% preliminary read. Unit Labor Costs were slashed to +0.4%, below expectations of +0.8%, versus +0.9% preliminary read.

U.S. S&P Global Services PMI was revised up to 55.7 from a preliminary read of 55.2. It was the 19th consecutive month above 50, and the highest print since March 2022.

U.S. Services ISM rose to 51.5 in August, above expectations of 51.0, versus 51.4 in July. Prices rose to 57.3 from 57.0 in July. Employment fell 0.9 points to 50.2 retracing some of the strong 5-point gain seen in July.   

While the services sector continues to show strength, signs from the labor market are raising concerns about the economy. Traders have boosted expectations for a 50 bps Fed rate cut this month to 45%. That's up from 34% a week ago, but down significantly from 85% a month ago.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$22.26 (+0.89%)
5-Day Change: -$3.30 (-0.13%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +32.31

Gold has rebounded to new highs for the week, buoyed by an uptick in bets that the Fed will be more aggressive in cutting rates this month and a weaker dollar. The record high at $2,529.57 (20-Aug high) is suddenly back within striking distance.



I don't see gold setting new highs before tomorrow's nonfarm payrolls report. However, if payrolls miss expectations, 50 bps rate cut bets would increase, the dollar will weaken further, and gold will be back on track for attainment of previously established objectives at $2,539.77 (Fibonacci) and  $2,597.15/$2,600.00 (measuring objective).

While the low from 22-Aug at $2,474.31 was slightly exceeded yesterday, I'm going to call this level technically intact. I'm also encouraged by gold's inability to sustain tests below the 20-day moving average on a close basis.

Global gold ETFs saw inflows of 14.3 tonnes last week as the yellow metal was consolidating just off its record high. North American investors accounted for the vast majority of that interest (11.6 tonnes).

Gold ETFs notched a fourth monthly net inflow in August. Inflows totaled 28.5 tonnes for the month with North American investors responsible for 17.2 tonnes of buying interest.

UBS Global Research claimed in August that the uptrend in gold has legs and could continue for the next couple of years. The report went on to say that "Gold models are unable to explain the bulk of gold’s rally," even though aggressive official sector (central bank) buying is heavily featured.

Jan Nieuwenhuijs of the Gold Observer believes the PBoC hasn't paused its gold buying at all. Covert PBoC gold buying is hidden in plain sight in global customs data according to Nieuwenhuijs. It's a great piece of research that goes a long way toward explaining what UBS models can not.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.542 (+1.92%)
5-Day Change: -$0.693 (-2.36%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +24.42

Silver has rebounded smartly to test back above $29 as choppy trading prevails ahead of Friday's payrolls report. New highs for the week have been established and more than 50% of the pullback from last week's high at $30.164 has been retraced.



The 50- and 100-day moving averages come in at $29.123 and $29.160 today and have successfully capped the upside thus far. The market now awaits the jobs data.

If job growth is weaker than expected, silver should follow gold higher on heightened expectations of a 50 bps rate cut on 18-Sep and a weaker dollar. Secondary resistance is noted at $29,583/635.

A short-term breach of last week's highs at $30.082/164 would put the yellow metal back on the path for a challenge of the July high at $31.652 and eventually the 11-year highs from May at $32.379.

A beat on the jobs front would likely send the precious metals back down into their ranges as rate-cut bets are pared. A decisive swing back in favor of a 25 bps Fed rate cut would support the dollar.

Minor intraday support is noted in silver at $28.655, which protects the lows from Wednesday and Tuesday at $27.791/779. 


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

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.

9/4/2024

Gold and silver recover somewhat on more aggressive Fed bets

OUTSIDE MARKET DEVELOPMENTS: U.S. stocks dropped sharply on Tuesday after signs of economic weakness sapped risk appetite. The DJIA ended the session with a 1.5% loss, the S&P500 fell 2.1%, and the tech-heavy Nasdaq tumbled 3.3% weighed by heavy selling of NVIDIA shares.

Global stocks took their queue from Wall Street with the major indexes recording losses: Nikkei 225 -4.2%, DAX -0.8%, CAC 40 -0.8%, FTSE 100 -0.8%. U.S. equities began Wednesday's session under pressure, but rising bets for more aggressive Fed easing are providing some market relief.

Risk-off is the theme to begin the month of September. In two weeks the Fed will announce policy and we'll see their latest economic projections. Between now and then key incoming data points that could materially impact policy are August payrolls (Friday), August CPI (11-Sep), August PPI (12-Sep), and Retail Sales (18-Sep).  

JOLTS nonfarm job openings fell 237k to 7,673k in July, the lowest print since January 2021. Layoffs rose 202k to 1,762k, the highest since March 2023. Hires rebounded 273k to 5,521k following a 407k plunge to 5,248k in June.

Incoming jobs data continue to suggest weakness in the labor market and may be a harbinger for a payrolls miss on Friday. The median estimate for August nonfarm payrolls stands at +162k, an improvement on the +114k reported in July. Nonetheless, a sub-160k payrolls print would likely result in Fed funds futures favoring a 50 bps cut.

Barring a dramatic payrolls miss (sub-100k), I still believe the Fed will initially be cautious as they embark on their first easing cycle since the pandemic. The last easing cycle actually began on 01-Aug 2019 and culminated with two large emergency cuts in March of 2020 as the COVID crisis ensued.

The Bank of Canada lowered its policy rate today by 25 bps to 4.25%. The move was widely expected.

U.S. factory orders rebounded 5.0% in July on expectations of +4.9%, versus -3.3% in June. It was the biggest monthly jump since July 2020. Most of the strength remains attributable to the transportation sector. Ex-trans a much more modest 0.4% gain was recorded.

Auto and light truck sales come out later today. Market expectations are 1.9M and 9.7M respectively.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$3.76 (-0.15%)
5-Day Change: -$15.32 (-0.61%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +30.22

Gold began the session on the defensive, edging to a two-week low of $2,474.08. However, the yellow metal rebounded as weak job openings data boosted bets for a 50 bps Fed rate cut, and weakened the dollar.



Earlier losses saw a slight breach of support at  $2,474.08 (22-Aug low), but gold is now trading back above the 20-day moving average. I suspect the range is now defined until the jobs data come out on Friday. Choppy consolidative trading should prevail until then, although a close back above $2500 would hearten the bull camp.

Key resistance is well-defined by the highs from the previous two weeks at $2,527.97/$2,529.57. A breach of this level is needed to return credence to previously established objectives at $2,539.77 (Fibonacci) and  $2,597.15/$2,600.00 (measuring objective).

The World Gold Council reports that, despite record-high prices, net central bank gold purchases more than doubled to 37 tonnes in July. The top three buyers in July were Poland, Uzbekistan, and India.

Official gold buying for reserve diversification is expected to remain an ongoing source of demand. Additions of gold to reserves are primarily coming at the expense of dollar holdings.

Goldman Sachs noted emerging market central bank buying as just one reason investors should buy gold. "Our preferred near-term long is gold. It remains our preferred hedge against geopolitical and financial risks, with added support from imminent Fed rate cuts and ongoing EM central bank buying," according to Goldman Sachs analysts.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.010 (-0.04%)
5-Day Change: -$1.068 (-3.67%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +20.48

Silver is consolidating within yesterday's range as soft U.S. economic data boosts the probability of an aggressive move by the Fed in two weeks. The rebound in factory orders led by the transportation sector, which is a heavy user of silver, may have given the bears some pause.



However, the magnitude of the losses seen since last week's failed tests above $30 has me thinking that the low is not yet in. The market certainly had become oversold, which helped prevent follow-through losses today.

With more than half of the August rally already retraced, further attacks on the downside can not be ruled out. Yesterday's low at  $27.779 now provides an intervening barrier ahead of the next Fibonacci level at $27.303 (61.8%).

A climb back above $29 would ease pressure on the downside and perhaps re-embolden the bull camp. However, choppy trade with a bias to the downside is likely ahead of Friday's jobs data.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

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.

9/3/2024

Gold and silver remain defensive as focus shifts to Friday's jobs data

OUTSIDE MARKET DEVELOPMENTS: The bodies of six more Israeli hostages were discovered in Gaza over the weekend, including Israeli-American Hersh Goldberg-Polin. Israelis took to the streets demanding that the Netanyahu government reach a cease-fire deal and secure the release of the remaining hostages.

Negotiating with terrorists never seems to work out in the long run. Despite the intense internal and international pressure, the latest hostage deaths likely steel the resolve of Netanyahu to achieve “total victory” over Hamas.

NATO member Turkey has formally applied to join the BRICS economic block in a bid to boost its global influence. According to Bloomberg, Turkish President Recep Tayyip Erdogan recognizes that "the geopolitical center of gravity is shifting away from developed economies."

The BRICS group is growing; recently adding Iran, the United Arab Emirates, Ethiopia, and Egypt. Saudi Arabia has been asked to join, while Malaysia, Thailand, the Philippines, Vietnam, and Azerbaijan are considering joining.

With America's global economic influence eroding, the BRICS – most notably China – are eager to fill the void. This shift plays into the de-dollarization theme.

Prospects for a 50 bps Fed rate cut had been hovering around 30% but were boosted by signs of economic weakness in today's data:

U.S. manufacturing PMI was adjusted lower to a final August print of 47.9, the lowest since June of 2023. That's down from a preliminary print of 48.0 and 49.6 in July.

“A further downward lurch in the PMI points to the manufacturing sector acting as an increased drag on the economy midway through the third quarter. Forward looking indicators suggest this drag could intensify in the coming months," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

While August manufacturing ISM rose to 47.2, the print was below expectations of 47.8. The indicator is less than a point off the 3-year low of 46.4. Prices paid rose 1.1 points to 54.0, versus 52.9 in July. New orders tumbled 2.8 points to a 15-month low of 44.6.

Construction spending fell 0.3% in July, below expectations of +0.1%, versus an upward revised UNCH in June. Back month revisions offset the headline number netting a modestly positive report.

Focus this week is squarely on U.S. jobs data, out on Friday. The market is estimating payrolls to rise by 162k and the jobless rate to tick down to 4.2%. Weaker-than-expected jobs growth would boost bets for a 50 bps rate cut.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$2.22 (-0.09%)
5-Day Change: -$44.36 (-1.76%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +29.55

Gold is trading lower for a third session after failing to extend to new record highs last week. A firmer dollar is weighing on the yellow metal as market focus moves to Friday's nonfarm payrolls report for August.



Gold is currently testing below the 20-day moving average at $2,483.77, leaving the low from 22-Aug at $2,474.31 vulnerable to a test. The close that day at $2,484.57 is the lowest close since 15-Aug. Chart points at $2,451.50 (16-Aug low) and $2,435.86 (15-Aug low) offer additional support.

The latest COT report shows spec long positioning rose 3.1k last week to 294.4k contracts. That's the biggest long position since the week ended 13-Mar of 2020.

Given the long positioning, it's not surprising to see some position-squaring ahead of this week's jobs report. Those jobs data have significant implications for the Fed policy decision that is just 15 days out.

A close back above $2,500 would ease pressure on the downside somewhat. While the underlying trend remains bullish, corrective/consolidative action is likely to prevail until Friday.

Last week's high at $2,527.97 reinforces the record high from the previous week at $2,529.57. Beyond that, established objectives at $2,539.77 (Fibonacci) and  $2,597.15/$2,600.00 (measuring objective) remain valid.




SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.234 (-0.82%)
5-Day Change: -$2.097 (-7.00%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +19.34

Silver has extended to the downside, weighed by weak manufacturing data and a firmer dollar. The white metal is decisively back below the 20-day moving average and more than 50% of the August rally has been retraced.



Silver has disappointed yet again, failing to sustain last week's probes above $30. A sustained breach of this level would have had silver on track for a challenge of the high for the year $32.370 (21-May).

Those tests above $30 drew some new longs into the futures market last week. The COT report showed net long positions increased by 2.9k to 52.2k contracts, a 6-week high. Alas, those longs seem to be weak.

The next supports I'm watching are minor chart points at $27.505 and $27.425. These levels protect the more important $27.303/237 zone.

Monday's low at $28.352 and today's intraday high at $28.558 define initial resistances. A climb back above $29.00 is needed to ease pressure on the downside, but that seems unlikely before Friday's jobs report.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

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.

8/30/2024

Gold and silver slide ahead of the holiday weekend on pared rate cut bets and a stronger dollar

OUTSIDE MARKET DEVELOPMENTS: The table remains set for a Fed rate cut in September following this morning's economic data. It would be the first rate cut in more than four years.

Chicago PMI rose to 46.1 in August, above expectations of 44.5, versus 45.3 in July. Boeing issues remain a headwind, keeping the indicator in contraction territory.

The final Michigan Sentiment reading for August edged up to 67.9, from the preliminary print of 67.8. Sentiment remains well off the high for the year set in March at 79.4.

One-year inflation expectations were adjusted to a 44-month low of 2.8%, versus a preliminary print of 2.9%. The Buying Conditions for Houses index reached an all-time low of 23.

U.S. PCE rose 0.5% in July, above expectations of +0.4%, versus +0.3% in June. Personal income climbed 0.3% on expectations of +0.2%, versus +0.2% in June.

The chain price index – the Fed's preferred inflation indicator – rose 0.2% in July, in line with expectations. The annualized rate held steady at 2.5%. Core inflation also rose 0.2% m/m. The annualized rate was unchanged at 2.6% y/y on expectations of 2.7%.

I'd call the inflation readings benign, with year-over-year readings less than half of the post-COVID highs, but still above target. This lends further credence to the belief that the Fed's focus has shifted from price risks to growth risks.

The probability for a 50 bps rate cut edged lower, providing some support for the dollar. The dollar index set a new high for the week at 101.65.

There was some troubling news in this morning's data: The savings rate dropped to 2.9%, versus a negatively revised 3.1% in June. That leaves the savings rate just above the 14-year low of 2.7% from June 2022.

Dollar General shares plunged this week after the company slashed earnings and profit guidance. CEO Todd Vasos said their core customers are "less confident of their financial position" and are having to make hard choices at the discount retailer.

"Inflation has continued to negatively impact these households with more than 60% claiming they have had to sacrifice on purchasing basic necessities due to the higher cost of those items, in addition to paying more for expenses such as rent, utilities and healthcare," said Vasos. Those who earn the least are the most impacted by inflation, particularly when it comes to necessities such as food, fuel, and shelter.

"More of our customers report that they are now resorting to using credit cards for basic household needs and approximately 30% have at least one credit card that has reached its limit," added Vasos.

Credit card balances increased by $27 billion in Q2 to reach a record high $1.14 trillion according to a recent report by the New York Fed. Contrasting rising credit card debt with the declining savings rate paints a pretty grim picture.

With the average credit card interest rate at 27.64%, according to Forbes Advisor’s weekly credit card rates report, this is a hole that many simply won't be able to claw their way out of. Not surprisingly, the delinquency rate reached a more than 12-year high of 3.25% in Q2.

Looking at total household debt, the picture is even more disturbing. Total household debt rose by $109 billion to reach a record $17.80 trillion in Q2.

This week's upward revision in Q2 GDP to 3.0% was driven largely by stronger-than-expected consumer spending. Consumption was revised up to 2.9% from 2.3% in the first report.

However, that strong consumption is being fueled largely by debt. That's simply unsustainable.

While the Fed is rightly shifting its attention to growth risks, policymakers must be careful not to restoke inflation in the process. I think they will be cautious with the first cut in September unless there is a significant downside surprise in August jobs data, which comes out next Friday.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$6.07 (-0.24%)
5-Day Change: -$14.27 (-0.57%)
YTD Range: $1,986.16 - $2,529.57
52-Week Range: $1,812.39 - $2,529.57
Weighted Alpha: +30.32

Gold went back on the defensive in early U.S. trading, weighed by diminished expectations for a 50 bps rate cut and a stronger dollar. While the yellow metal appears poised for a lower weekly close, it will notch a seventh consecutive higher monthly close.



At this point, the low for the week set on Wednesday at $2,494.93 remains intact. This keeps more important support at $2,474.31/16 (22-Aug low, and 20-day SMA) at bay.

A rebound back above $2500 early next week would bode well for another run at $2,527.97/$2,529.57. Penetration of the latter would establish new record highs and boost confidence in my previously established upside objectives at $2,539.77 (Fibonacci) and  $2,597.15/$2,600.00 (measuring objective). 

Thin holiday trading is likely to be seen on Monday with U.S. markets closed in observance of Labor Day. Our Tornado precious metals hedging platform will close early at 12:30 CDT on Monday, September 2.

A study by Wisdom Tree found that a gold allocation of 16–19% in a portfolio maximizes risk-adjusted returns. A special report by Incrementum was released today that identifies the ideal allocation to gold as 14–18%. 

 "A 40% gold allocation might offer the highest returns, but it also comes with significantly higher volatility and drawdowns." according to the report.

In a post on X today, Incrementum notes that gold's total estimated market capitalization is approaching %18 trillion.

Perhaps surprisingly, many investors have little or no allocation to gold at all. Do you have enough gold?

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.010 (-0.03%)
5-Day Change: -$1.082 (-3.63%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379
Weighted Alpha: +20.43

Silver tumbled to a new low for the week in U.S. trading on Friday. The white metal is poised to notch its first lower weekly close in three (outside week), and a third consecutive lower monthly close (confirmed on a close below $28.998).

 

Perhaps there's a growing realization that while consumer electronics, solar panels, and EVs all require significant loads of silver, at least American consumers are losing confidence and are already saddled with a massive amount of debt. Who's going to buy these silver-laden products?

The violations of supports at $29.176/159 (50- and 100-day SMAs) and $28.830 (22-Aug low) leave the 20-day moving average at $28.556 vulnerable to a test. Secondary support is noted at $28.078/$28.000.

A climb back above the 50- and 100-day moving averages would take the short-term pressure off the downside, but silver continues to disappoint. The failure to sustain gains above $30 this week leaves the highs for the year above $32 well protected for the time being.

Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
312-549-9986 Direct/Text
[email protected]
www.ZanerPreciousMetals.com
www.TornadoBullion.com
X: @GrantOnGold
X: @ZanerMetals
Facebook: @ZanerPreciousMetals

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.

While there was continued divergence between gold and silver yesterday, gold was able to hold its ground in positive territory and finished Thursday with a mild gain.

In contrast, silver was the weaker market as it closed with a heavy loss. The declines in silver were outsized and were likely the result of profit-taking by aggressive Asian buyers over the prior two weeks.

It should be noted that Chinese silver prices reached a significant premium to spot prices recently resulting in Chinese buying international silver and reducing their risk to the weakness in their currency...[MORE]

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With the dollar overnight breaking out to the highest level since May 14th, US treasury yields nearing the highest levels of the month and critical US inflation data from the quarterly PCE report to be released tomorrow, traders should expect an expansion of volatility in gold.

Divergence between gold and silver extended yesterday with silver remaining strong, gold showing weak, and silver adding to its recent show of sector leadership.

However, we suspect strength in the dollar and rising global interest rates undermined sentiment and might have prompted some gold longs to exit ahead of tomorrow's US PCE data...[MORE]

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We expect gold and silver to continue to chop roughly in line with yesterday's price action until the first of two significant US inflation reports is released tomorrow.

However, bullish fundamental information justifies silver's recent relative strength versus gold as reports of heavy Chinese buying of international silver (because domestic prices are significantly higher) suggest a major demand source has emerged.

The bullish theme behind significant Chinese interest is the surging demand for silver in solar energy applications. Along those lines Shanghai spot silver prices last week were 2% above the 13% Chinese import tax or 15% above international silver prices...[MORE]

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