Gold and silver set for seventh straight higher weekly closes
OUTSIDE MARKET DEVELOPMENTS: Today's release of the September jobs report and August factory orders were delayed as a result of the government shutdown. The data that was released was mixed, with services PMI revised up and services ISM falling.
That leaves the trade to focus on the shutdown itself and attempting to glean hints about the likely Fed policy path from FedSpeak and the limited data that are being released. The market seems inclined to continue tilting toward risk-on, amid expectations of further easing.
The market is confident that another 25 bps rate cut is in the offing this month and reasonably sure the Fed will ease again in December. The Senate is expected to vote on the GOP CR again today, but the potential for passage remains remote. Senate Majority Leader John Thune plans to keep the chamber in session over the weekend for repeated votes if needed to pressure Democrats.
President Trump has given Hamas until Sunday to agree to his proposed peace plan or "all HELL, like no one has ever seen before, will break out against Hamas." He went on to post on TruthSocial, "THERE WILL BE PEACE IN THE MIDDLE EAST ONE WAY OR THE OTHER." One might infer from that statement that if Hamas rejects the peace deal, Israel would proceed with military operations in Gaza to wipe out the terrorist organization.
S&P Global Services PMI was revised up to 54.2 for September, versus a preliminary print of 53.9 and 54.5 in August.
Services ISM fell 2 points to a four-month low of 50.0 in September, below expectations of 51.9, versus 52.0 in August. Prices edged up to 69.4 from 69.2 in August.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$9.48 (+0.25%)
5-Day Change: +$122.77 (+3.27%)
YTD Range: $2,607.16 - $3,896.48
52-Week Range: $2,541.42 - $3,896.48
Weighted Alpha: +51.37
Gold is consolidating within yesterday's range, but within striking distance of the $3,896.48 record high set on Thursday. The yellow metal is poised for its seventh consecutive higher weekly close, buoyed by haven demand, expectations of further Fed easing, and a softer dollar.
The $4,000 psychological barrier is the next significant upside attraction. A push above $3,896.48/$3,900.00 would lend additional credence to the scenario that calls for a test of $4,000, and a continuation of the long-term multi-decade uptrend.
As I said earlier this week, it's hard not to remain bullish with all the fundamental factors driving the rally still largely in place. Persistent geoplitical, trade, and fiscal risks, sticky inflation, de-dollarization, central bank easing, and gold buying are all underpinning the bull market.
Following a July pause, central banks were buying again in August, adding a net 15 tonnes to global reserves. "[T]he recent slowdown in buying does not necessarily signal that central banks as a whole are losing interest in gold," wrote Krishan Gopaul of the World Gold Council in a blog post.
All that being said, the market remains quite overbought, creating risk for a corrective pullback. However, any such setback is likely to be viewed as a buying opportunity.
Today's Asian low at $3,838.64 marks initial support. Thursday's low at $3,820.24 and the $3,800.00/$3,793.53 zone are the more important short-term levels to watch. Penetration of the latter would clear the way for a challenge of the low for the week at $3,760.05, which should correspond closely with the rising 20-day MA early next week.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$0.554 (+1.18%)
5-Day Change: +$1.675 (+3.64%)
YTD Range: $28.565 - $48.046
52-Week Range: $28.565 - $48.046
Weighted Alpha: +64.04
Silver continues to outperform, helped by strength in gold and copper, easing expectations, and a soft dollar. Like gold, the white metal is poised for a seventh straight higher weekly close.
The breach of the May 2011 high at $48.105 leaves little in terms of chart resistance ahead of the key $50 zone. Call $49 the next psychological barrier on the upside.
Floods and mudslides in Indonesia last month caused the world's second-largest copper mine to shut down, creating a major supply disruption. The company declared force majeure, and full production is not expected to be restored until sometime in 2027. A large copper operation in Peru also shut down due to political unrest, adding to expectations of significant supply deficits.
Silver is frequently a byproduct of copper mining, so the shutdown of some large copper mines will also impact silver supply. The Grasberg mine in Indonesia, for example, produced 6.1 Moz of silver in 2023.
According to the Silver Institute, the cumulative supply shortfall reached approximately 678 million ounces through 2024, and projections indicate another deficit of 117.7 million ounces in 2025, marking the fifth straight year of imbalance. More demand than available supply bodes well for new all-time highs in silver.
A convincing breach of $50 would shift focus to a major Fibonacci objective at $60.417 (127.2% retracement of the decline from $50.000 to 11.703). I'll come up with some intervening targets once we've cleared $50.
Minor intraday support is noted at $47.420. Highs from earlier in the week at $47.172/167 protect today's overseas low at $46.654. Better support is found at $45.927/825. The 20-day MA is well protected below $44.
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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