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6/17/2024

The precious metals start the week easier after notching higher closes last week

OUTSIDE MARKET DEVELOPMENTS: Consolidative trading prevails for the precious metals as the market awaits a host of FedSpeak this week. Minneapolis Fed President Kashkari said over the weekend that a single rate cut this year was a “reasonable prediction.”

Additional FedSpeak is due from Williams, Harker, and Cook today. The calendar is chock-full of Fed speakers this week. I suspect the message will be largely consistent: One rate cut this year, probably in November, but it's all data-dependent.

Policy decisions are on tap this week for the BoE, SNB, RBA, PBoC, and Bank Indonesia. While the global bias is toward easing, timing remains dependent on perceived progress toward taming inflation and maintaining jobs growth.

U.S. calendar highlights include May retail sales (+0.3% expected) and IP (+0.4% expected) on Tuesday. Flash PMIs come out on Friday. Initial jobless claims will also be closely watched on Thursday, given the 10-month high of 242k seen in the last report. 

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -12.56 (-0.54%)
5-Day Change: +8.41 (+0.36%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34

Gold ended higher last week, breaking a string of three consecutive lower weekly closes. Price action was choppy, but confined to the previous week's range, leaving the $2,287.64 low from 07-Jun intact.



The yellow metal begins this week on its back foot and still appears vulnerable to further tests of the downside with the dollar holding firm. Gold may be forming a base here, or staging for another leg down. The low from 13-Jun at $2.296.92 protects more important support marked by the  $2,289.43/$2,287.64 lows.

First resistance is marked by Friday's high at $2,334.92, which stands in front of last week's high at $2,339.48. Penetation of the latter would highlight $2348.98 initially, but such a move would make the 07-Jun high at $2,386.90 look attractive.

RBI data revealed that India's forex reserves reached a record $655.8 bln in the week ended 07-Jun. Gold reserves rose by $481 million to $57 bln.

The sharp sell-off on 07-Jun was triggered by news that China's central bank hadn't bought any gold in May. Central bank gold buying is expected to remain a major source of demand, even if the PBoC has paused its buying.

The latest COT report for the week ended 14-Jun shows that net spec positions in gold dipped to 233.9k, versus 237.3k in the previous week. 


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.322 (-1.09%)
5-Day Change: -0.473 (-1.59%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379

Silver closed higher last week, but not before setting a 4-week low at $28.719. The lower low and higher close result in a simple reversal on the weekly chart, but the white metal is defensive early in the new week. Price action remains confined to Friday's range thus far.



Recent losses are still seen as corrective within the longer-term uptrend. While dips below $29 have generated some buying interest, momentum on the upside has failed to impress, suggesting that the low is not in yet.

Geopolitical tensions surrounding China's EV exports may be damping demand amid worries of a trade war. Additionally, the recent lurch right in the EU parliament may temper aggressive low-carbon benchmarks in Europe, which currently include banning ICE vehicle sales by 2035.

A less aggressive push toward EV and solar adoption could somewhat lessen the demand for silver, but I doubt it will materially alleviate the current supply deficit. This could however be a positive for platinum and palladium, which are used in the catalytic converters of ICE vehicles to reduce emissions.

U.S. Mint data show that demand for silver coins remained robust in May. A total of 1.75Moz of silver coins were sold in May, a rise of 9.7% y/y. Year-to-date sales now stand at 12.6Moz. +52% versus this time last year.

The latest COT report for the week ended 14-Jun shows that net spec positions in silver dipped to 51.7k, versus 56.4k in the previous week. 


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.

Good morning. The precious metals are lower in early U.S. trading.

U.S. calendar features Empire State Index. FedSpeak due from Williams, Harker, & Cook.

6/14/2024

Gold is poised for its first higher weekly close in four

OUTSIDE MARKET DEVELOPMENTS: French stocks are leading European markets lower amid mounting political uncertainty. The CAC index is down more than 2% today and is now trading lower on the year.

Concerns are rising that French President Macron's gamble to call snap elections will propel the National Rally (RN) party to a majority in France's National Assembly. The RN saw strong gains in the recent EU Parliament election. If the RN takes control of the French government, some worry that they will launch unsustainable fiscal spending.

Risk aversion in Europe is on the rise, which is helping both the dollar and gold. 

The BoJ held steady on rates, as was widely expected. They also indicated that they would reduce bond buying over the next 1 to 2 years. Details of that plan are expected to be revealed in July.

Favorable U.S. inflation data seems to be offsetting the reduction of Fed rate cut expectations to some degree. Yesterday's PPI report saw the largest decline since October. Both import and export price indexes for May declined more than expected this morning, -0.4% and -0.6% respectively.

While the Fed now projects just a single rate cut this year, down from a projection of three from the March FOMC meeting, policy remains data-dependent. Fed funds futures continue to show November as the most likely meeting for that cut.

However, further signs that inflation is moving back toward the Fed's 2% target, and/or indications of weakness in the labor market will see an increase in bets for a rate cut in September. The probability of a Sep rate cut currently stands at 61.1%.

The World Bank raised its 2024 global growth outlook to 2.6%, up from a 2.4% projection in January. This upgrade comes largely due to the resilience of the U.S. economy. “U.S. growth is exceptional,’’ said Ayhan Kose, the World Bank’s deputy chief economist.

"Exceptional" seems a bit dramatic given the tumble in Q1 GDP to 1.3%, versus 3.4% in Q4-23. However, growth is expected to accelerate to 2.5% in Q2.

GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +25.98 (+1.13%)
5-Day Change: +$38.10 (+1.66%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34

Gold continues to trade in a choppy manner in the lower half of last Friday's big $99 range. A close above $2,293.71 (07-Jun close) seems likely at this point, which would confirm the first higher weekly close in 4 weeks.



There were solid inflows of 12.1 tonnes into gold ETFs last week. North America and Europe led the charge with +4.4 tonnes each. The appetite of European investors for gold remains strong, spurred by political and economic uncertainty that has led to risk aversion. The sharply lower price at the end of last week likely contributed.



The underlying fundamentals in the gold market remain broadly supportive, and the longer-term trend is still decidedly bullish with the yellow metal less than 5% off the record high of $2,449.34 that was set less than a month ago.

A number of analysts have reiterated their bullish outlooks and suggested buying the dip. However, it is not a foregone conclusion that the corrective low is in place.

A higher weekly close today would be encouraging. A breach of Wednesday's high at $2,339.48 would be better yet. Secondary resistance is marked by the 61.8% retracement level of last Friday's plunge at $2348.98.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.291 (+1.00%)
5-Day Change: +$0.046 (+0.16%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379

Silver is trading higher on the day, but generally consolidative at the low end of yesterday's range. While gold has been able to hold last Friday's low, the white metal extended losses on Thursday to set a fresh 4-week low at $28.719. 



Silver needs to close above $29.172 to record a higher weekly close. However, a convincing move back above $30 and a breach of Wednesday's high at $30.169 is needed to ease short-term pressure on the downside.

However, at this point, a challenge of support at $28.467 (61.8% retracement of the leg-up from $26.049 to $32.379) can not be ruled out. The overseas low at $28.887 offers an intervening barrier ahead of Thursday's low at $28.719. 

Prospects for stronger economic growth in H2 should help underpin silver, as it derives the majority of demand from industrial applications. A resumption of the uptrend in gold should also help, as silver offers a less expensive alternative to the yellow metal as a means of portfolio diversification.


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.

6/12/2024

Gold and silver firm in early U.S. trading on unch CPI print

OUTSIDE MARKET DEVELOPMENTS: The precious metals caught a bid in early U.S. trading after May CPI came in unchanged, just below expectations of +0.1%. However, price action remains broadly consolidative in the wake of last Friday's sharp sell-off.

Annualized CPI edged down to 3.3%, from 3.4% in April. Core CPI was +0.2% in May on expectations of +0.3%; +3.4% y/y, versus 3.6% in April.

These data will likely reinforce the notion that the Fed is making progress on inflation and will have room to cut rates later this year, even amid persistent strength in the labor market. The prospects for a rate cut in September are back on the rise and currently stand at 59.9% based on Fed funds futures.

The 2-day FOMC meeting ends today and policy will be announced at 1:00PM CDT this afternoon. Steady policy is widely expected. The statement and Powell's presser will be closely monitored for clues as to the likely policy path in H2.

PPI comes out tomorrow. Median expectations are +0.1%. Core PPI is expected to come in at +0.3%.

GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$3.09 (-0.13%)
5-Day Change: -41.67 (-1.77%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34

Gold was under modest pressure at the beginning of the U.S. session, but jumped in reaction to the below-expectations CPI print. The yellow metal is up for a third consecutive day, and more than half of Friday's plunge has now been retraced.



Earlier this week, I had deemed that 50% retracement level at $2,337.27 as important short-term resistance. Focus now shifts to the 61.8% retracement level at $2348.98.

A measure of confidence has been returned to the underlying uptrend, but the market is unlikely to prosecute the breach of $2,337.27 until after Fed policy is announced. Softer-than-expected consumer inflation is already pulling rate-cut expectations back toward the present, but the Fed could temper those expectations with a more hawkish tenor later today.

There is also PPI to worry about tomorrow.

Reuters reports that demand for gold remains strong in Asia, despite near-record high prices. Asian buyers are primarily seeking to hedge geopolitical and economic uncertainty, which has led to lower confidence in other investments such as stocks and real estate.

"The trend in the market has been that if the consumer wants to buy gold, they will. The price doesn't matter." – Albert Cheng, CEO of the Singapore Bullion Market Association

India remains an exception, due to price sensitivity. Indian gold demand has fallen to a 3-year low, although the recent setback in the price of gold has seen some buyers return.

Wells Fargo and UBS have reiterated their bullish outlook on gold. Buy the dips is the strategy according to UBS.

SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: +$0.111 (+0.38%)
5-Day Change: -0.591 (-1.97%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379

Silver rallied to new highs for the week in reaction to the CPI print. Trades back above $30 are encouraging, but unlike gold, the midpoint of Friday's range in silver at $30.331 remains protected at this point.



The 61.8% retracement level of the decline from Friday's high to Tuesday's low at $29.098 comes in at $30.592. A minor chart point is noted at $30.825.

I suspect the intraday range has been set at this point. Barring a dovish surprise from the Fed later today, further tests of the downside can not be ruled out.

The underlying trend remains decidedly bullish, with the fundamentals broadly supportive. Therefore recent losses are considered corrective in nature. What is in doubt is whether the corrective low is in place at $29.098 or not.

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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.

6/11/2024

Gold continues to consolidate Friday's sharp losses

OUTSIDE MARKET DEVELOPMENTS: The precious metals market continues to assess the implications of Friday's news that the PBoC did not buy any gold in May. While China had added to official reserves for 18 consecutive months through April, buying in April was only 2 tonnes. That was well below their average purchase of 18 tonnes going back to Nov 2022.



Based on the chart above, it's obviously not uncommon for China to hold steady on gold reserves for extended periods. The market will eagerly anticipate June data to see if China's reserves remain at 2264 tonnes.

A number of central banks have been participating in the gold-buying spree so far this year. Turkey has actually been leading the charge. China was number 2 in terms of YTD volume through April. India, Kazakhstan, and Singapore round out the top 5.

With or without PBoC participation, central bank buying is likely to remain an important theme with regard to the underlying bull trend in gold.

Conservatives made gains in the recent EU Parliamentary elections, based in large part on voters' growing concerns about mass immigration. French President Macron reacted by dissolving the General Assembly and calling for a snap election. This may be an attempt by Macron to re-consolidate his power, but there is a risk that it will backfire. 

There is growing speculation that gains by the right in Europe could be a harbinger ahead of U.S. elections in November. Political uncertainty may provide some support for gold in the months ahead.

Look for choppy consolidative trading to prevail – with a bearish bias – ahead of Wednesday's FOMC decision and CPI data. PPI data comes out on Thursday.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -2.94 (-0.13%)
5-Day Change: -18.58 (-0.80%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34

Gold continues to consolidate the sharp losses seen on Friday, with a bit of a bid emerging in early U.S. trading that has taken the yellow metal into positive territory for the session.



Initial resistance at $2,315.47/$2,318.36 has been slightly exceeded, leaving $2326.73 vulnerable to a test. The more important level to watch is the midpoint of Friday's range at $2,337.27. Penetration of this level would set a more favorable short-term tone, shifting focus to $2348.98 (61.8% retrace) and then $2,386.90.

However, it seems unlikely in the wake of last week's collapse that the bears won't try and take the market lower again. Today's intraday low at $2,298.90 protects the lows of the previous 2 sessions at $2,289.43/$2,287.64. Key support is marked by the low from 01-May $2,281.97.  


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.481 (-1.62%)
5-Day Change: -0.165 (-0.56%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379

Silver eked out a new 4-week low of $29.103 in overseas trading, sightly exceeding Friday's low at $29.146. The magnitude of the total decline off the 11-year high at $32.379 (21-May) is now 10.1%.



The lack of downside follow-through is perhaps mildly encouraging, yet further attacks on the downside seem likely. Another round of new lows would confirm potential to $28.467 (61.8% retracement of the leg-up from $26.049 to $32.379).

Initial resistance defined by Monday's high at $29.805 has been reinforced by today's price action. Penetration is needed to call for further retracement of Friday's losses to the midpoint of that range at $30.764.

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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.