Gold and silver are defensive despite heightened risk aversion

Outside Market Developments: The government shutdown has reached day 35 – tying the all-time record – as Senate Democrats continue to filibuster the House-passed continuing resolution. President Trump vowed in a 60 Minutes interview that aired on Sunday that he “won’t be extorted” by Democrats.

Senate majority leader John Thune (R-SD) expressed optimism that a deal could be reached to end the government shutdown by the end of the week, citing ongoing talks with Democrats and rank-and-file members. Senate Democrats may actually get their motivation to end the shutdown from today's elections.

Today’s off-year elections have the potential to set the tone for next year's midterms. If Democrats win the Virginia and New Jersey governorships, Mamdani wins the mayoral race in New York City, and Prop 50 passes in California, it bodes ill for GOP prospects in 2026.

A blue sweep today would set the stage for a potential Democratic majority in the House for the latter half of Trump's second term. That would hamstring his Presidency and likely lead to further impeachment efforts. Such an outcome would probably prompt the Dems to end the filibuster immediately and vote to reopen the government.

If Republicans can hold one of those governorships, it might be enough to keep their donor base engaged into the midterms. Prediction markets suggest the odds of that happening are long.

Today's reported drop in economic optimism is weighing on risk appetite. “Concerns about inflation and the impact of tariffs remain high, with food prices standing out as the leading economic worry. Additionally, the government shutdown is having a profound impact on the national psyche. An over-cautious monetary policy is paralyzing weaker sectors of the economy, such as housing, and dampening public confidence,” said Raghavan Mayur, president of TechnoMetric.

The trade continues to believe another rate cut in December is probable, but they're not nearly as certain as they were before last week's Fed decision. Fed funds futures put the probability for a 25 bps cut at the next FOMC meeting at 67.9%, up slightly from yesterday, but down from 90.5% a week ago.

RCM/TIPP Economic Optimism Index tumbled 9.1% to 43.9 in November, below expectations of 48.1, versus 48.3 in October. “Americans’ economic confidence sharply declined in November for the third consecutive month,” said Raghavan Mayur, president of TechnoMetrica, which conducted the survey.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$29.29 (+0.73%)
5-Day Change: -$1.37 (-0.03%)
YTD Range: $2,607.16 - $4,381.21
52-Week Range: $2,541.42 - $4,381.21
Weighted Alpha: +49.14

Gold has failed to benefit from today's risk-off sentiment, amid uncertainty associated with today's elections, some hope for an end to the government shutdown, cautious FedSpeak, and a stronger dollar. The yellow metal is defensive at the low end of the recent range after upticks above $4,000 over the past week attracted selling interest.



If risk aversion is sustained, we could see some renewed haven interest develop. The convergence of Fibonacci resistance and the 20-day moving average at $4,075.81/$4,086.30 is the level that needs to be cleared to reinvigorate the bull camp. Friday's high at $4,045.01 provides a solid intervening barrier.

On the downside, $3,915.82 (30-Oct low) stands in front of the cycle low thus far at $3,887.03 (28-Oct). If the latter gives way, the rising 50-day MA at $3,844.64 would be the initial attraction.

The dollar index has regained the 100 handle for the first time since August. The 100.26 high from 01-Aug corresponds closely with the declining 200-day moving average at 100.38.

 

A breach of this level would suggest potential for further dollar gains and an intensified headwind for gold. At this point, it seems like revived hopes for a December rate cut are needed to take the bid out of the dollar.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$0.308 (-0.64%)
5-Day Change: +$0.493 (+1.05%)
YTD Range: $28.565 - $54.465
52-Week Range: $28.565 - $54.465
Weighted Alpha: +60.56

Silver has retraced more than 61.8% of its recent rebound, weighed by risk aversion, weakness in gold and copper, and strength in the dollar. The fade in economic optimism poses an additional headwind.

 

J.P. Morgan expressed concerns earlier in the year that Chinese regulatory curbs on solar installations could lead to an unwinding of earlier front-loaded demand for both silver and copper. They thought the potential drag in silver demand could be 5–8%, amid fewer housing-integrated systems and project delays.

This could shrink the projected supply deficit by more than 25%. While the silver market is expected to remain in deficit for a ninth consecutive year in 2026, it may be less severe than originally forecast.

Scope is seen for a short-term run at last week's cycle low at 45.563, which now corresponds closely with the rising 50-day MA at $45.780. A breach of this area would shift focus to Fibonacci support at $44.571.

A rebound above the 20-day MA at $49.633 is needed to return a measure of credence to the underlying uptrend. Solid intervening barriers are noted at $48.083, $48.106 (3-Nov high), and $49.359 (31-Oct high).


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.