Gold poised for best weekly close in six on heightened trade, geopolitical, and fiscal worries

OUTSIDE MARKET DEVELOPMENTS: President Trump has recommended that tariffs on Europe be lifted to 50% after conceding via TruthSocial that trade talks with the EU "are going nowhere." These new tariffs could take effect on June 1.

"Their powerful Trade Barriers, Vat Taxes, ridiculous Corporate Penalties, Non-Monetary Trade Barriers, Monetary Manipulations, unfair and unjustified lawsuits against Americans Companies, and more, have led to a Trade Deficit with the U.S. of more than $250,000,000 a year, a number which is totally unacceptable," wrote the President.

Trump also threatened to impose tariffs of at least 25% on Apple if it doesn't start manufacturing iPhones in the United States. Apple CEO Tim Cook said on a recent earnings call that “the majority of iPhones sold in the US will have India as their country of origin.” Apple shares, along with the broader markets, are under pressure.

The escalation of trade tensions has swung sentiment back toward risk-off ahead of the long Memorial Day weekend. Treasuries are recovering some of their recent losses, and the dollar index has fallen to new lows for the week.

New Home Sales surged 10.9% to a 38-month high of 0.743M in April, above expectations of 0.698M, versus a downwardly revised 0.670M pace in March (was 0.724M). The median price rose 0.9% to $407,200. Home inventories retreated 0.6% to 504k, versus a 17-year high of 507k in March.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CST: +$33.84 (+1.03%)
5-Day Change: +$148.32 (+4.63%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,287.64 - $3,495.89
Weighted Alpha: +46.81

Gold has reached new two-week highs, and is on track for the best weekly close in six. Heightened trade, geopolitical, and fiscal concerns have revived the haven bid this week, with lower yields and a weaker dollar providing additional lift.



Trade data released this week revealed that Chinese gold imports surged to an 11-month high of 127.5MT in April. "The rise in imports is likely due to the People’s Bank of China allocating fresh quotas to some commercial banks in April, as the authority responds to strong demand from institutional and retail investors at the height of the trade war," according to Bloomberg.

Goldman Sachs suggested that arbitrage activity stemming from the premium offered on the Shanghai Gold Exchange versus the LBMA also contributed to the strong imports.

With more than 61.8% of the corrective decline now retraced, significant technical credence has been returned to the dominant uptrend. Tests back above $3,400 are now considered likely, with the next tier of Fibonacci resistance coming in at $3,416.97.

Penetration of the latter would bode well for a retest of the $3,500 zone. Beyond that, a Fibonacci projection highlights $3,596.20/$3,600.00.

Initial support is noted at $3,324.25/23.80. More substantial support is found just below $3,300, where the lows from the past three sessions correspond with the 20-day moving average.

Silver appears to be on track for its first weekly close above $33 in four weeks. While Thursday's seven-week high at $33.662 remains protected, this week's price action suggests more serious challenges of the upside in the week ahead seem increasingly likely.



The white metal is being bolstered by strength in gold and a weaker dollar, but heightened trade and growth worries do provide headwinds. The gold/silver ratio is back above 100 to end the week as silver continues to underperform.

The relative cheapness of silver is making it an increasingly appealing alternative to gold jewelry. A survey of jewelry retailers showed that 53% of respondents reported marginally increased sales in 2024 over the previous survey from 2022. 

The average store growth for silver jewelry sales was 20% in 2024, versus 14% in 2022. The gold/silver ratio was 76.09 at the end of 2022 and 90.77 at the end of 2024.

One might anticipate that a ratio above 100 this year will have a positive impact on silver jewelry demand. Jewelry accounts for roughly 17% of overall demand.

The $33.662 level is now the short-term barrier protecting more important highs at $34.543 and $34.853. Penetration of the latter is needed to truly reestablish the uptrend.

The $33.00/$32.955 level marks first support. Thursday's low at $32.694 corresponds with the 50- and 20-day moving averages and is the more important level to watch. Penetration would favor further consolidation back to the $32 zone.


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.