Gold and silver extended losses overseas before recovering somewhat

Outside Market Developments: Markets begin the week in risk-off mode as traders continue to digest last week's underwhelming summit between Presidents Trump and Xi. The talks resulted in modest progress on trade, including Chinese commitments to buy U.S. Boeing aircraft, soybeans, and addressing U.S. access to rare earths, but yielded no breakthroughs on thorny issues like Taiwan and Iran.

Peace negotiations between the U.S. and Iran remain stalled, and tensions are on the rise. The U.S. and Israel are reportedly preparing for possible renewed military strikes on Iran as early as this week, with Trump warning that “the clock is ticking” and urging Tehran to make a deal or face severe consequences.

Oil prices remain elevated, stoking inflation concerns and reinforcing higher-for-longer Fed policy expectations. Markets are still trying to get a clear read on new Fed Chair Kevin Warsh, a challenge that will likely persist ahead of the June FOMC meeting. In reality, investors may have to wait until the minutes are released on July 8 for more substantive clues about his policy approach.

During his confirmation hearing, Warsh called for a “regime change” at the central bank — including less talk, a laser focus on the statutory dual mandate, a smaller balance sheet, and updated approaches to measuring and fighting inflation. Consistent with his desire for reduced communication, he is also expected to significantly scale back or potentially eliminate the regular post-FOMC press conferences.

While Warsh is unlikely to formally restrict speaking by other Fed governors or regional bank presidents, the exact shape of the new communication policy remains unclear. He may significantly reduce the volume and specificity of FedSpeak, making statements more opaque or less frequent. If so, markets could see increased volatility around major economic data releases as investors lose the frequent guidance they’ve grown accustomed to.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$0.19 (0.00%)
5-Day Change: -$166.22 (-3.51%)
YTD Range: $4,100.32 - $5,595.02
52-Week Range: $3,203.52 - $5,595.02
Weighted Alpha: +30.56

Gold extended to six-week lows in overseas trading on Monday, weighed by ongoing uncertainty on several fronts, and an underpinned dollar. While the yellow metal recovered somewhat during the U.S. session, the short-term tone remains vulnerable.



As noted in Friday's commentary, with gold trading below the important moving averages, and key short-term support at $4,503.02 (4-May low) negated, a challenge of the rising 200-day MA at $4,365.14 must be considered. The $4,420.80 (30-Mar low) and $4,401.28 (Fibonacci) levels provide intervening barriers. 

Global gold ETFs notch their first weekly net inflows in four weeks, albeit a scant 1.8 tonnes. North American investors were the lone net buyers, but interest has been subdued in recent weeks, with U.S. investors in particular showing caution amid higher-for-longer rate expectations and the oil/inflation shock.

The price of gold will continue to swing primarily on Middle East headlines. Renewed optimism about the end of the war is needed to put oil, yields, and the dollar under pressure. A rebound above $4,600 would ease pressure on the downside somewhat, suggesting further consolidation within the broad range is in the offing. 

Monday's intraday high at $4,580.00 marks initial resistance. There is a series of daily highs from the latter half of last week that protect the more important $4,773.13 high from 12-May. Last week's failed challenge of the 100-day MA (now at $4,795.49) reinforces its significance as a key technical barrier on the upside.


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$0.221 (-0.29%)
5-Day Change: -$8.555 (-9.94%)
YTD Range: $61.036 - $121.630
52-Week Range: $32.150 - $121.630
Weighted Alpha: +111.57

Silver is probed briefly below the $75 level on Monday, weighed by heightened Middle East tensions, a lack of clarity on trade with China, and ongoing uncertainty about Fed policy (and transparency) under Chairman Warsh. While the white metal recovered intraday to trade higher on the day, last week's failure from in front of $90 favors further choppy consolidation in the lower half of the range.



The move back below the 20- and 50-day MAs is troubling for the short-term technical picture, although silver appears poised to close near these indicators. A retest of the April low at $70.893 can not be ruled out at this point.

Silver will remain sensitive to Middle East headlines, Fed expectations, and the dollar. A rebound above $80 is needed to set a more favorable tone within the range and suggest potential for another run at $90.


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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