Gold firm near all-time highs as silver surges to 14-year highs above $42

OUTSIDE MARKET DEVELOPMENTS: Risk appetite remains underpinned as the market looks ahead to Fed easing next week. While consumer inflation for August was slightly warmer than expected, the trade broadly interpreted this week's inflation data as benign, all but assuring a 25 bps cut.

More dovish prospects for the remainder of the year were tempered somewhat by the inflation data. Fed funds futures now imply 67 bps of easing by year-end, and 115 bps through June of next year.

The ECB believes rates are in a “good place,” after they remained on hold for a second straight meeting. With the Fed poised to start easing again, the interest rate differential with Europe will narrow and weigh on the dollar.

Today's economic calendar was light, with just the preliminary September reading on consumer sentiment. Michigan sentiment eased to a four-month low of 55.4, adding to worries about an economic slowdown recently stoked by recent signs of weakness in the labor market.

August retail sales data will be released next Tuesday. The trade is anticipating a gain of 0.3%.

Michicagn Sentiment (prelim) fell 2.8 points to a four-month low of 55.4 in September, below expectations of 58.5, versus 58.2 in August.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$17.32 (+0.48%)
5-Day Change: +$52.89 (+1.47%)
YTD Range: $2,607.16 - $3,673.51
52-Week Range: $2,541.42 - $3,673.51
Weighted Alpha: +44.02

GOLD

Gold is trading higher today, within the range established early in the week, but close to record levels. The yellow metal is poised to notch a fourth straight higher weekly close after setting a fresh all-time high on Tuesday of $3,673.51.



Despite the overbought condition that developed in recent weeks, corrective activity has been limited. Expectations that the Fed will trim interest rates next week, for the first time since December, are helping to underpin gold. There are also reports of strong ETF inflows this week.

Tuesday's high at $3,673.51 stands in front of my next upside objectives at $3,700 (psychological), $3,730.44 (Fibonacci), and $3,743 (measuring objective). Above the latter, $3,800 would attract, and with each new high, $4,000 gold looks increasingly likely.

UBS Global Wealth Management upped its forecast for this year to $3,800 from $3,500 previously. They now expect gold to reach $3,900 by mid-2026. I think we could see $4,000 in Q1'26.

I was interviewed for a MarketWatch article that asks if it's too late to buy into the gold rally. The consensus is that it is not too late. While we will certainly see corrective setbacks in the short to near term, they will likely be viewed as buying opportunities.

Key factors driving the rally are ongoing de-dollarization, central bank buying, persistent inflation risks, worries about the U.S. fiscal situation, and democrat threats to shut down the government at the end of the month. Trade and geopolitical tensions also remain elevated.

Thursday's low at $3,614.69 protects secondary supports at $3,600 and the low for the week at $3,580.13. More substantial support is found at the $3,512.36/$3,500.00 zone, where the low from 4-Sep corresponds with the record high previous to the upside breakout. The 20-day moving average should rise to bolster this area in the week ahead.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$0.723 (+1.74%)
5-Day Change: +$0.928 (+2.26%)
YTD Range: $28.565 - $42.460
52-Week Range: $28.565 - $42.460
Weighted Alpha: +43.99

Silver pushed decisively above $42 to end a fourth straight bullish week at new 14-year highs. The white metal is garnering support from strength in gold, expectations for lower interest rates, and dollar weakness.



With the important Fibonacci level at $41.610 now in the rearview mirror, considerable credence has been lent to the bullish scenario that calls for an eventual retest of the all-time highs around $50. Focus is now on intervening targets at $42.00, $43.352 (Sep'24 high), $44.167 (Aug'24 high), $44.743 (Fibonacci), and $45.00.

Silver is quite overbought at this point, so beware of corrective setbacks. Such action can be quite volatile at times.

Initial support is noted at $41.470/405. Thursday's low at $40.901 and Wednesday's low at $40.734 protect the low for the week at $40.547. The 20-day moving average is tracking higher but is currently below $40.


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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