Gold buoyed by heightened geopolitical tensions and weaker dollar

OUTSIDE MARKET DEVELOPMENTS: A CNN report suggests Israel is preparing to strike Iranian nuclear facilities, citing "multiple US officials familiar with the latest intelligence." This is a geopolitical risk that surfaces with some regularity, but it understandably leads to some risk aversion as it raises the stakes for a broader regional conflict in the Middle East.

Israel certainly always has an evolving plan to take out Iran's nuclear program, although it seems unlikely that they'd act without at least the tacit approval of the U.S. As long as talks between the U.S. and Iran are ongoing, I think Israel is on hold.

That being said, Iran's top diplomat unequivocally stated his country will never stop enriching uranium, a key U.S. demand for a deal. Iran's supreme leader has expressed pessimism about a positive outcome. Maybe that's what's ramping up the probability of an Israeli strike.

Much of the political focus this week has been on getting President Trump's 'One Big Beautiful Bill" across the finish line in the House. A vote could come as soon as today. Speaker Johnson wants the legislation to clear the House by Memorial Day.

Markets are also keen to see further progress on trade. It's been more than a week since the UK trade deal and talks with China were announced. Without some good news on that front, the trade will start tilting back toward risk-off.

MBA Mortgage Applications fell 5.1% in the 16-May week, versus +1.1% in the previous week. It was the first decline of the month. The 30-year mortgage rate rose to a 13-week high of 6.92%.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$21.01 (+0.64%)
5-Day Change: +$130.27 (+4.10%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,287.64 - $3,495.89
Weighted Alpha: +44.41

Gold is trading higher for a third straight session, underpinned by an uptick in geopolitical risks and continued weakness in the dollar. While last week's range remains intact, the haven bid could increase if more trade deals are not forthcoming.



The rise back above the 20-day MA and into the upper half of the range takes some pressure off the downside and lends credence to a scenario that suggests the corrective low is in place at $3,127.12. Penetrations of secondary resistances at $3,325.08 (12-May high) and $3,346.19 (9-May high) would further bolster confidence among the bulls, favoring renewed tests above $3,400.

More than 61.8% of the corrective rally in the dollar index has been retraced, returning focus to the downtrend. Renewed weakness in the dollar provides additional underpinning to gold.

Today's low at $3,289.50 is bolstered by the 20-day MA and marks initial support. Congestion around $3,250 provides an additional barrier ahead of the lows for the week at $3,206.90/$3,203.52.

Silver has moved more convincingly above $33, setting four-week highs, and bringing important resistance at $33.662 (25-Apr high) within striking distance. The white metal is garnering support from strength in gold and a weaker dollar. Fresh monetary stimulus from China this week provides an additional boost.



However, without the benefit of progress on the trade front, gains above $33 seem technically inspired and remain suspect. Even if new seven-week highs are reached above $33.662, formidable upside barriers loom at $34.543 and $34.853.

Initial support at $33.00/$32.995 now protects the 50- and 20-day moving averages at $32.766/739. Penetration of the latter would leave silver vulnerable to further consolidation back toward $32.


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com

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