Gold eases within the range amid heightened risk appetite and a firmer dollar

OUTSIDE MARKET DEVELOPMENTS: According to the New York Times, President Trump has drafted a letter to sack Fed Chairman Powell. The Fed Chair can only be terminated for cause, but recent questions about the $2.5 billion renovation of the Eccles Building could be laying the groundwork.

Trump acknowledged having discussions about replacing Powell, but deemed firing him as highly unlikely. “I don’t rule out anything, but I think it’s highly unlikely, unless he has to leave for fraud,” he said.

The market doesn't seem concerned at this point. Fed funds futures continue to price just under 50 bps in cuts by year-end, although today's generally favorable U.S. economic data tempered dovish expectations somewhat. 

Trump has said he believes the Fed funds rate is 300 bps too high. Presumably, Trump would pick a dove if he were to replace Powell.

The FOMC is pretty centrist at this point, with perhaps a slight hawkish tilt. A Trump-appointed dovish chair would still have to sway a majority of the committee.

Retail sales, Philly Fed Index, and initial jobless claims all beat expectations today. U.S. economic strength and a resilient labor market are stoking risk-on sentiment.

Dmitry Medvedev, deputy chair of Russia’s security council, said Moscow should consider preemptive strikes against countries supporting Ukraine. "We need to act accordingly. To respond in full. And if necessary, launch preemptive strikes," he said. 

Retail Sales rebounded 0.6% in June, above expectations of +0.1%, versus -0.9% in May. Ex-auto rose 0.5% on expectations of +0.3%, versus a revised -0.2% in May (was -0.3%).

Philadelphia Fed Index surged 19.9 points to a five-month high of 15.9 in July, well above expectations of -0.3, versus -4.0 in June. The employment component jumped 20.1 points to 10.3 from -9.8. Prices paid rose to 58.8 from 41.4, while prices received rose to 34.8 from 29.5.

Initial Jobless Claims fell 7k to a 13-week low of 221k in the week ended 12-Jul, below expectations of 230k, versus a revised 228k in the previous week (was 227k). Continuing claims edged up to 1,956k in the 5-Jul week, versus 1,954k in the previous week.

Import Price Index rose 0.1% in June, below expectations of +0.2%, versus a revised +0.4% in May (was unch). Ex-petro unch.

Export Price Index rose 0.5% in June on expectations of +0.1%, versus a revised -0.6% in May (was -0.9%).

Business Inventories were unch in May, in line with expectations, versus unch in April.

NAHB Housing Market Index ticked up to 33 in July, in line with expectations, versus 32 in June. “The passage of the One Big Beautiful Bill Act provided a number of important wins for households, home builders and small businesses,” said NAHB Chairman Buddy Hughes.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$21.54 (-0.64%)
5-Day Change: -$1.38 (-0.04%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,354.48 - $3,495.89
Weighted Alpha: +37.09

Gold retreated to approach the midpoint of the range at $3,311.51, as encouraging economic data stoked risk appetite and the dollar rebounded from Wednesday's losses to set fresh three-week highs.



Gold got a bit of an intraday boost when a key member of Russia's security council said Moscow should consider preemptive strikes against the West for their support of Ukraine. That would be a major escalation of the conflict and could draw NATO into the war.

Gold remains confined to its range, just above the midpoint of the range that has dominated since May, and just below the midpoint of the secondary range from June. Today's inability to sustain losses below the 20- and 50-day moving averages keeps a slight technical tilt to the upside.

Fresh highs for the week above $3,374.11 are needed to clear the way for a move back above $3,400. Penetration of the 16-Jun high at $3,449.14 would put the record high from April at $3,500 back in play.

If today's intraday rebound fades and gold closes below the 20- ($3,332.24) and 50-day ($3,324.27) MAs, it would suggest potential to $3,300, and possibly as low as $3,284.61 (9-Jul low) or $3,256.02 (30-Jun low). The $3,311.73/51 level provides intervening support.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$0.145 (-0.38%)
5-Day Change: +$0.860 (+2.32%)
YTD Range: $28.565 - $39.119
52-Week Range: $26.524 - $39.119
Weighted Alpha: +33.81

Silver continues to consolidate recent gains to 14-year highs above $39. The white metal is trading higher today, buoyed by good U.S. economic data and heightened risk appetite. A firm dollar poses a bit of a headwind.



The retreat from Monday's high at $39.119 is seen as corrective. The overbought condition that had developed has been relieved somewhat, and bulls are testing the upside. Scope remains for an upside extension to $40 with a secondary objective at $41.610 (78.6% retracement of the entire decline from $49.752 to $11.703).

Citi upped its three-month forecast for silver from $38 to $40. “We expect silver availability to tighten on consecutive years of deficit, sticky stockholders requiring higher prices to sell, and robust investment demand,” the Citi analysts wrote.

The analysts went on to say that it's "not just a catch-up trade to gold” but also a reflection of strong silver fundamentals. Fed rate cuts later in the year are also expected to help drive the rally, they added.

On the downside, Wednesday's low at $37.557 reinforces support marked by the previous cycle high at $37.288. Below that, the $37.198/$36.956 zone protects the 20-day moving average at $36.830.


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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