Gold poised for lower weekly close on resilient risk appetite and firmer dollar
OUTSIDE MARKET DEVELOPMENTS: Israel and Iran continue to exchange strikes a week into the conflict as President Trump opened a two-week window to find a diplomatic solution. “I will make my decision whether or not to go within the next two weeks,” according to a statement from President Trump.
The U.S. joining the fight on the side of Israel would be a major escalation. Nonetheless, the two-week reprieve and talks between Iran and European diplomats in Geneva have prompted a rebound in risk appetite.
President Trump continues to take Fed Chairman Powell to task for failing to cut interest rates. “Europe had 10 cuts, and we had none. And I guess he’s a political guy, I don’t know. He’s a political guy who’s not a smart person, but he’s costing the country a fortune,” Trump said.
While "uncertainty about the economic outlook has diminished," according to Powell, it "remains elevated." That uncertainty is reflected in the wide dispersion on the dot plot.
Powell acknowledged the recent good inflation prints, but believes it can take some time for tariffs to be fully reflected in prices. "Ultimately, the cost of the tariff has to be paid, and some of it will fall on the end consumer," he said. Powell pointed out that the Fed is "adapting in real time" to ever-changing tariff policies.
Fed Governor Waller (hawk) told CNBC this morning that he doesn't see tariffs boosting inflation significantly, and the central bank should consider easing as soon as the next meeting in July. "I’m all in favor of saying maybe we should start thinking about cutting the policy rate at the next meeting, because we don’t want to wait till the job market tanks before we start cutting the policy rate,” he said.
The market isn't buying into Waller's dovish tilt just yet, with Fed funds futures showing just a 14.5% probability of a 25 bp cut in July. A quarter-point cut isn't fully priced in until October, with 48 bps in easing priced for year-end.
Philly Fed Index was unchanged at -4.0 in June, below expectations of 0.0, versus -4.0 in May and a two-year low of -26.4 in April.
Leading Indicators -0.1% in June, in line with expectations, versus a negative revised -1.4% in May (was -1.0%).
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$14.48 (-0.43%)
5-Day Change: -$87.17 (-2.54%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,295.86 - $3,495.89
Weighted Alpha: +44.21
Gold is poised for its first lower weekly close in three, and the biggest loss since the 12-May week. With the Fed still on hold, the dollar is set to close higher on the week, which has provided some pressure on the yellow metal. Resilient risk appetite has also weighed on gold this week, despite elevated geopolitical risks and ongoing tariff uncertainty.
Additional information on the large metals discovery in Argentina may also be providing a headwind. Lundin Mining issued an update to the Mineral Resource estimate on Monday, essentially affirming its original estimates from May. Jack Lundin called it “one of the most significant greenfield discoveries in the last 30 years."
Estimates include the following: 13-million tonnes of measured and indicated copper, with 25-million tonnes inferred; 32-million ounces of gold measured and indicated, and 49-million ounces inferred; and 659-million ounces of silver measured and indicated, with 808-million ounces inferred.
Despite being under pressure this week, gold's corrective action below $3,400 has been limited. The 20-day moving average attracted some buying interest and kept more important supports at $3,320.62/19.56 and $3,300.00/$3,297.69 at bay.
A move back above $3,400 early next week would favor a retest of Monday's eight-week high at $3,449.13. Penetration of the latter, would bode well for a resumption of the dominant uptrend and a decisive push above $3,500.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$0.271 (-0.74%)
5-Day Change: +$0.304 (+0.83%)
YTD Range: $28.565 - $37.288
52-Week Range: $26.524 - $37.288
Weighted Alpha: +25.49
Silver is set to close lower on the week, despite having set a 13-year high at $37.288 on Wednesday. Combined with an outside week (higher high, lower low), this creates some technical downside risk for the week ahead, with the gold/silver ratio holding support at 90.
While tests below $36 did attract some buying interest today, the $35.317/225 level (20-day MA and 23.6% retracement level) may be the initial short-term attraction. Today's overseas low at $35.570 now marks an intervening barrier.
A close above $36 to end the week would be somewhat encouraging. However, a move back above the midpoint of this week's range at $36.429 is needed to shift focus back above $37.
The February 2012 high at $37.430 is now protected by this week's high at $37.288. The former must be negated to keep silver on track for a push to the $38.750 Fibonacci objective.
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.