Gold and silver are softer but confined to Friday's ranges amid mixed signals on Middle East conflict

OUTSIDE MARKET DEVELOPMENTS: U.S.-Iran peace talks remain stalled on core issues like reopening the Strait of Hormuz, Iran's nuclear program, and regional security guarantees. While mediators such as Pakistan are trying to get the two sides back to the negotiating table, regional tensions remain elevated.

Iran submitted a new proposal to reopen the Strait in exchange for the U.S. ending its blockade and postponing nuclear program talks, but no agreement has been reached yet. The blockade continues, and commercial traffic through the Strait is largely halted, underpinning oil prices. However, the ceasefire is holding, and elevated risk appetite is suggestive of lingering optimism.

The dollar index jumped to a three-week high on the initial reports that peace talks had stalled, but quickly reversed course when Iran proffered the new proposal to open the Strait. 

War/oil-related inflation risks will certainly be a hot topic at this week's FOMC meeting. The Fed is widely expected to hold steady on policy, with guidance continuing to reflect a “higher for longer” tilt. The market will hone in on any perceived shift in that generally hawkish bias.

This is expected to be Jerome Powell’s final FOMC meeting as Chair. His term expires on May 15, and Kevin Warsh has been nominated as his replacement. Warsh is anticipated to be confirmed by the Senate in the coming weeks.

While Kevin Warsh has adopted a more dovish tone in recent years, favoring lower rates, he has a longstanding reputation as an inflation hawk. It will be particularly interesting to see how Fed policy guidance evolves in the early months of a Warsh chairmanship, especially given President Trump’s strong pro-growth agenda. Tensions between the White House and the central bank could either intensify – heightening concerns over the fiscal outlook – or lead to lingering questions about Fed independence.

This weekend’s third reported assassination attempt on Donald Trump reinforces perceptions of deeply entrenched and escalating political and social tensions in the United States. With midterm elections approaching in November, concerns about further attacks and public safety at high-profile events are likely to intensify, raising fresh questions about the durability of America’s social fabric in this new era of media (social and otherwise)-fueled rage-baiting.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$0.12 (0.00%)
5-Day Change: -$142.95 (-2.97%)
YTD Range: $4,100.32 - $5,595.02
52-Week Range: $3,127.12 - $5,595.02
Weighted Alpha: +39.97

Gold began the week on defense after notching its first lower weekly close in four on Friday. The yellow metal was initially weighed by worries that peace talks had broken down, leading to higher oil prices and a haven bid in the dollar. While those concerns have moderated somewhat intraday, gold remains under pressure.



With the market back below the 100- and 20-day moving averages, some vulnerability for further losses is suggested. However, the market will continue to key off Middle East headlines, while looking ahead to the FOMC meeting later in the week.

As long as the ceasefire is holding, and at least diplomatic back-channels are open, I expect the market to continue coiling in the lower half of the broad range established earlier in the year. 

A close back above the 100-day MA at $4,4754.72 is needed to set a slightly more favorable short-term tone. Such a move would return focus to last week's highs at $4,827.49/32.70.

On the other hand, a breach of last week's low at $4,658.77 would favor a retreat to the $4.600 zone. The 13-Apr low at $4,645.10 provides a decent intervening barrier.

A New York Times investigation over the weekend revealed that the U.S. Mint has allegedly been sourcing gold through opaque intermediaries from illegal mines controlled by Colombia's Clan del Golfo drug cartel, a U.S.-designated terrorist organization. The Mint and the Treasury Department have yet to formally respond, although Treasury Secretary Bessent said he would investigate.

Calls for "clean" provenance standards are likely to intensify, requiring more stringent supply chain documentation and driving up compliance costs. This could lead to higher premiums on physical products. This is a developing story.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$0.216 (+0.29%)
5-Day Change: -$4.535 (-5.69%)
YTD Range: $61.036 - $121.630
52-Week Range: $31.701 - $121.630
Weighted Alpha: +114.83

Silver is consolidating within Friday's range, tracking the 20-day moving average, as the market looks ahead to this week's FOMC meeting. Last week, silver notched its first lower weekly close in five amid waning optimism about a U.S.-Iran peace deal. A firmer dollar poses an additional headwind, although broad supply/demand dynamics remain supportive.



Look for choppy price action to continue into Wednesday's Fed policy decision and presser, with Middle East headlines an ongoing wildcard. The downside is perhaps slightly more vulnerable given the market's inability to sustain recent gains above the 100- and 50-day moving averages.

A close below the 20-day MA would open up the possibility of a return to the $70 zone. Friday's low at $73.984, and the previous week's low at $72.792 mark intervening downside barriers.

A climb back above the 100-day MA at $79.627 would shift focus to the 17-Apr high at $83.046. Above the latter, the $90 zone, and the important halfway back point of this year's plunge at $91.333 would be back in play.


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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