Gold rebounds from losses early in the week to probe back above $5,000

Outside Market Developments: Risk appetite is elevated as fears of "AI disruption" have abated once again. Arguably, the tech/AI overvaluation trade is overdone, and the announced multiyear, strategic partnership between Meta Platforms and Nvidia has helped foster a more balanced view of the sector.

The Munich Security Conference (held February 13 - 15) also provided some lift for the sector, albeit a result of rising concerns, by highlighting the erosion of the post-1945 rules-based international order. The conference report specifically cited "wrecking-ball politics," including U.S. tariffs, trade coercion, wavering Ukraine support, and transatlantic strains. This is likely to prompt Europe to accelerate defense spending, industrial capacity buildup (especially in drones, AI, and tech), and greater strategic autonomy, which has boosted European defense stocks and related sectors.

The conference reinforced expectations for heightened geopolitical risks and global market uncertainty, and warned that the U.S. abandoning benign hegemony could further erode the dollar's reserve currency status. This will lead to broader headwinds for global growth-sensitive assets, while underpinning safe havens like gold.

The dollar peaked in September 2022 as pandemic concerns waned, and the dollar index hit four-year lows in late January amid a rising interest in global de-dollarization. While the greenback is garnering some support from less dovish Fed expectations, the dollar's trend still looks pretty bearish.

The trade was eagerly anticipating today's release of the FOMC minutes from the January meeting. The committee voted 10-2 in favor of holding rates steady at 3.50% - 3.75% after three 25 bps cuts in late 2025. Participants were divided on the future path, with several indicating that further cuts would depend on inflation declining as expected. In contrast, others favored maintaining rates for some time or even considering hikes if disinflation stalls.

The tone of the minutes is deemed to be mildly hawkish, emphasizing patience and a "wait-and-see" approach to assess incoming data and the effects of prior easing. Nonetheless, Fed funds futures continue to reflect expectations for 50 bps in easing by year-end, with the next rate cut not fully priced until September.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$35.44 (+0.73%)
5-Day Change: -$105.84 (-2.08%)
YTD Range: $4,310.83 - $5,595.02
52-Week Range: $2,835.23 - $5,595.02
Weighted Alpha: +73.83

Gold has recovered from the losses earlier in the week, probing back above $5,000. The yellow metal is getting support from bargain hunting on dips, and haven interest stemming from global concerns expressed at the Munich Security Conference. The yellow metal is shrugging off the slightly more hawkish tilt of the Fed minutes and a firmer dollar amid diminished volumes during the Lunar New Year holidays in Asia.



While I suspect short-term volatility within the range will persist, a close back above the midpoint of that range at $5,000.85 and the 20-day moving average at $5,004.95 would provide some encouragement for the bull camp. Such a close would bode well for further tests above $5,100.

A breach of last week's high at $5,117.94 is needed to put the next retracement level at $5,141.08 back in play. Above the latter, focus would shift to $5,200 and the 78.6% retracement level at $5,340.72.

Global ETFs saw net inflows of 14.8 tonnes last week, with Europe and Asia leading the charge at +5.6 and +5.5 tonnes, respectively. Perhaps, surprisingly, there has been just a single week of net outflows (so far) in the wake of the recent massive surge in volatility. This suggests some degree of investor resilience.



Failure to sustain and extend gains above $5,000 into the end of the week would send the bulls back to the sidelines to await their next buying opportunity. Intraday support at $4,906.74 protects the lows from earlier in the week at $4,855.15/$4,847.74. New lows for the week would target $4,800 initially, but potential at that point would be to the 06-Feb low at $4,656.30.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$1.925 (+2.62%)
5-Day Change: -$7.560 (-8.97%)
YTD Range: $64.14 - $121.630
52-Week Range: $28.565 - $121.630
Weighted Alpha: +146.19

Silver has recovered from the drop earlier in the week to a two-week low of $72.092, buoyed by revived AI/tech sector optimism and perhaps a bit of haven interest as well. The white metal has set a new high for the week, but today's nearly $6 range reflects persistent volatility, warranting ongoing caution.



The next level of resistance is marked by the 13-Feb high at $79.330. A breach of this level would favor tests back above $80, with potential to the 50-day MA at $81.339. More important resistance is presently well protected at $86.287 (11-Feb high), which should correspond closely with the declining 20-day MA by early next week. An eventual penetration would shift attention to the halfway back point of the decline at $92.885.

At this point, a return to the $70 zone can not be ruled out. Minor supports at $75.349 and $74.002/000 stand in front of the recent lows at $72.336/092.

The iShares Silver Trust (SLV) – the primary and largest silver ETF – has seen significant outflows. Those outflows are estimated to be in the $400–$800M range based on available recaps. This reflects an investor base that got steamrolled in recent weeks and is unlikely to return unless they sense a real bargain, or renewed strength convinces them of the potential for a move back above $100.


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.