Gold continues to consolidate last week's runup to $3,500, awaiting fresh inputs

OUTSIDE MARKET DEVELOPMENTS: The first 100 days of Trump 2.0 are being assessed, and as you might imagine, the grades vary wildly. President Trump delivered quickly on border security, but fulfilling economic and geopolitical pledges has proven more difficult.

A ceasefire in Gaza earlier in the year could not be sustained, and the war in Ukraine rages on. Russian President Putin unilaterally declared a 72-hour ceasefire to begin on 08-May, but a permanent ceasefire, and ultimately the peace deal Trump wants, remains elusive. That's keeping geopolitical tensions elevated.

On the trade front, on-again-off-again tariffs have stoked uncertainty and frayed long-standing relationships. While Trump's goal is to reduce the trade deficit, massive front-running of tariffs has actually had the opposite effect.

The advance trade balance for March just came out today, and it was a record -$162.0 bln. That print was well outside market expectations and exceeded the previous record from January by -$7.4 bln.

More recently, some degree of optimism has surfaced about a handful of key trade deals. While this has resulted in improved risk appetite, the erratic implementation of tariffs and ongoing uncertainty about how tariffs will impact inflation, growth, and monetary policy are keeping global markets on edge.

The surge in imports has the market anticipating that growth slowed sharply in Q1.  Advance Q1 GDP comes out tomorrow, and median expectations are +0.4%, versus +2.4% in Q4'24.

The Atlanta Fed's GDPNow has been painting a much grimmer picture since mid-quarter, with the latest reading for Q1 at -2.7%. This is attributed to the widening deficit and weaker consumer spending, but inputs have been volatile, so there are some expectations that GDPNow is overstating the contraction.

If Wednesday's Q1 GDP print is closer to GDPNow than market expectations, doubt about Trump's policies will intensify. Stocks are likely to suffer even if rate cut expectations grow. At this point, Fed funds futures continue to predict 100 bps in easing by year-end, with the first 25 bps cut likely in June or July.

In an interesting turn, Trump may have inadvertently helped the liberal party remain in power in Canada. The country had been supremely dissatisfied with the previous liberal government of Justin Trudeau, prompting him to resign in January. The liberal party made Mark Carney their leader, and he served as Prime Minister until a snap election could be held. 

Canada seemed poised for a resounding swing to the right. However, Trump's tariffs, demands for more military spending, and gibes about making Canada the 51st state swung the polls back to the left. The liberals appear to have won yesterday's election by a slim margin. Carney won a seat in the House of Commons and is expected to remain as PM.

Balance of Trade (advance) -$162.0 bln in March, outside expectations of -$143.0 bln, versus a revised -$147.8 bln (was -$147.9 bln). 

FHFA Home Price Index rose 0.1% in February to 437.3, versus a revised 436.7 in January (was 436.5). It was the twelfth straight monthly increase.

S&P Case-Shiller Home Price Index (20-cities) rose 0.7% in February to 335.1, versus a revised 332.7 in January (was 332.6). The record high was set in July at 335.8. The annual pace of appreciation decelerated slightly to 4.5% from 4.7% y/y in January.

Consumer Confidence continued to erode in April, falling 7.9 points to 86.0. That's below expectations of 87.2, versus a positive revised 93.9 in March (was 92.9). It was the fifth consecutive monthly decline to the lowest print since April 2020.

JOLTS Job Openings declined 288k in March to 7,192k, below expectations of 7,480k, versus a revised 7,748k in February (was 7,568k).


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: -$31.38 (-0.94%)
5-Day Change: -$74.15 (-2.19%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,281.97 - $3,495.89
Weighted Alpha: +47.80

Gold is trading lower within Monday's range, which was within Friday's range. The yellow metal appears to be consolidating last week's runup to $3,500 and awaiting new economic data and fresh info on tariffs.


 
If tomorrow's advance Q1 GDP print undershoots market expectations by a wide margin, haven interest in gold would reignite. However, be aware of the potential for another bout of deleveraging pressure if stocks tank.

Such a move would be seen as a buying opportunity, but the recent lows at $3,274.4, $3,269.62, and $3,265.55 are not secure yet. A test of the $3,200 zone would have to be considered.

Ongoing weakness in the dollar provides some underpinning for gold, and a weak GDP print would spark more dovish Fed expectations. Hotter than expected PCE inflation could see rate cut expectations trimmed somewhat, but probably not significantly.

A short-term rebound above the halfway back point of last week's decline at $3,380.72 would return a measure of confidence to the uptrend. Yesterday's high at $3,351.87 and Friday's high at $3,366.18 provide intervening barriers.

Silver set new highs for the week in early U.S. trading, but last week's highs at $33.662/655 remain well protected. A weak dollar and expectations of further Chinese stimulus provide some support, but the market is waiting for U.S. growth and inflation data before it takes a run at the key highs above $34.



Some significant breakthrough on the trade front, and perhaps specifically with China, is probably needed to truly set silver free. If that happens, the cycle high from last October at $34.853 would likely be exceeded.

A convincing move above an important Fibonacci level at $35.217 would shift focus to $37.430 initially, but $40 would look pretty attractive at that point.

On the downside, yesterday's low at $32.696 and the 50-day moving average at $32.651 protect more important support at 32.188/134/125, where the 20-day moving average and a couple of recent lows converge.


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.