Gold slides to four-week lows as trade and economic optimism weigh on haven demand, boost dollar
OUTSIDE MARKET DEVELOPMENTS: U.S. data continue to reflect an economy on a solid footing. This is stoking risk appetite, but may have implications for interest rates as the FOMC hashes out monetary policy ahead of this afternoon's decision.
U.S. GDP rebounded to 3.0% in Q2, after tariff front-running led to a contraction of 0.5% in Q1. The GDP price index surprised with a drop to 2.0% from 3.8% in Q1. Better-than-expected growth and a significant slowdown in inflation; that's a great report.
The ADP employment survey showed a rebound of 104k to private payrolls, exceeding expectations. The labor market continues to look resilient. Median expectations for Friday's jobs report are +102k.
The Fed is widely expected to hold steady on policy, but today's data provides some additional fodder for consideration. The sharp drop in the price index arguably provides some clearance for easing, but the Fed's favored measure of inflation doesn't come out until tomorrow.
The potential for dovish dissent could provide some drama today. One FedWatcher I know and respect suggested Powell could tailor the statement to get a unanimous vote, but that suggests to me that it would have to be a statement with a dovish tilt.
The Bank of Canada held steady in line with expectations, amid ongoing trade uncertainty and a looming deadline. "While some elements of US trade policy have started to become more concrete in recent weeks, trade negotiations are fluid, threats of new sectoral tariffs continue, and US trade actions remain unpredictable," said the statement.
President Trump is holding to the August 1 deadline, when tariffs will increase for trading partners that have not struck trade deals. Trump called out India specifically, saying that 25% tariffs will take effect on Friday. He also threatened an additional "penalty" because India buys so much military equipment and energy from Russia.
MBA Mortgage Applications fell 3.8% in the week ended 25-Jul, versus +0.8% in the previous week. The 30-year mortgage rate ticked down to 6.83% from 6.84%.
ADP Employment Survey rebounded to +104k in July, above expectations of +82k, versus a revised -23k in June (was -33k).
GDP (Advance) rebounded 3.0% in Q2, above expectations of +2.3%, versus -0.5% in Q1. The chain price index fell to 2.0%, below expectations of 2.6%, versus +3.8% in Q1.
Pending Home Sales Index fell 0.8% to 72.0 in June, below expectations of +0.3%, versus -1.8% in May. The annualized rate fell to -2.8%.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$2.94 (+0.09%)
5-Day Change: -$82.08 (-2.42%)
YTD Range: $2,607.16 - $3,495.89
52-Week Range: $2,369.10 - $3,495.89
Weighted Alpha: +33.41
Gold has slipped below $3,300 to four-week lows as trade and economic optimism pushed the dollar index to nine-week highs. Today's solid economic data further eroded safe-haven interest in the yellow metal.
Secondary support at $3,284.61 (9-Jul low) is within striking distance. A breach of this level would shift focus to the 100-day moving average at $3,267.60 and solid chart support at $3,256.02 (30-Jun low). If these levels are taken out, the $3,200 zone would be in play.
Gold remains entrenched in the range, and while decisively in the lower half, today's Fed decision could spark an intraday rebound. A close above $3,300 would set a more favorable tone within the range. The midpoint is at $3,311.51.
New highs for the week above $3,343.81 would put gold back above the 20- and 50-day moving averages, and bode well for renewed tests above $3,400. Formidable chart resistances at $3,435.01 (23-Jul high) and $3,449.13 (16-Jun high) must be negated to put the record high around $3,500 back in play.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$0.217 (-0.57%)
5-Day Change: -$1.673 (-4.26%)
YTD Range: $28.565 - $39.517
52-Week Range: $26.524 - $39.517
Weighted Alpha: +33.54
Silver fell to a three-week low, weighed by weakness in gold, softer copper, and nine-week highs in the dollar. Nearly 50% of the recent leg-up to 14-year highs has now been retraced, and the white metal is trading below the 20-day moving average. 
Further slippage seems likely, unless the Fed adopts a more dovish bent this afternoon. Economic data seem to provide some cover to do so, but despite recent trade agreements, uncertainty prevails ahead of the August 1 and August 12 (China) tariff deadlines.
If the 50% retracement level at $37.443 is penetrated, focus would shift to the 61.8% Fibonacci level at $36.954. Below the latter, the rising 50-day MA at $36.408 would be in play.
A close today back above the 20-day MA would ease pressure on the downside somewhat, but $38.00 will probably have to be regained to reinvigorate the bull camp. New highs for the week above $38.316 would suggest a corrective low is in place.
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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