Gold and silver slide as de-escalation optimism wanes once again
OUTSIDE MARKET DEVELOPMENTS: The latest round of optimism about Middle East de-escalation that emerged last week has evaporated once again. The U.S. conducted "self-defense" airstrikes on Iranian radar, drone command centers, and military sites over the weekend, after Iran shot down a U.S. drone over international waters. Iran has suspended negotiations citing ceasefire violations, particularly Israel's expanded ground and air campaign against Hezbollah targets in southern Lebanon.
In a recent TruthSocial post, President Trump maintained that “Iran really wants to make a deal, and it will be a good one for the U.S.A. and those that are with us.” However, investors are growing increasingly weary of the repeated swings in peace deal expectations.
Oil prices have rebounded on the last increase in geopolitical tensions, stoking persistent inflation concerns and expectations for higher-for-longer rates. The next FOMC meeting is still more than two weeks away on June 16-17. It will be the first meeting under the leadership of new chairman Kevin Warsh. Fed funds futures suggest a 99.6% probability of steady policy.
Stocks remain underpinned near record highs by strong investor enthusiasm for AI, with capital flowing into transformative technologies and next-generation infrastructure. Nvidia is climbing on its new RTX Spark PC chip, lifting partners like Microsoft, Arm, Dell, and HP.
Focus this week will be on U.S. employment data, culminating with the May nonfarm payrolls report on Friday. The trade is expecting an increase of 78k and a steady jobless rate, suggestive of ongoing labor market resilience. Geopolitical developments around U.S.-Iran negotiations will also remain a major focus.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CT: -$36.30 (-0.80%)
5-Day Change: -$106.48 (-2.33%)
YTD Range: $4,100.32 - $5,595.02
52-Week Range: $3,25602 - $5,595.02
Weighted Alpha: +26.85
Gold begins the week on the back foot, weighed by rising Middle East tensions, higher oil and a bounce in the dollar. Last week's optimism about a deal between the U.S. and Iran failed to garner a rebound above $4,600, and that optimism has dissipated once again.
The market is being squeezed between the declining 20- and 50-day moving averages and the rising 200-day MA. This leaves the yellow metal firmly entrenched in the lower half of the $5,595.02/$4,100.32 range that was established earlier this year, with the next move within the range likely to be dictated by the latest batch of Middle East headlines.
The 20-day MA now corresponds closely with last week's high at $4,594.43. A breach of this level would highlight the 50-day at $4,633.45 initially. Above that, the May high at $4,773.13 and the 100-day MA at $4,803.59 would be in play.
On the other hand, a short-term close below the 200-day MA at $4,423.48 would suggest potential for a downside extension beyond last week's low at $4,367.12. Sights would be on the $4,268.92 Fibonacci level initially, but a retest of the $4,100.32 low would have to be considered at that point.
Malaysia has announced a 10% import duty on LBMA gold bars of .9999 fineness. Gold jewelry and non-LBMA bars are reportedly unaffected. However, this is the country's first-ever import duty on gold bullion. While the new duty doesn't take effect until next week, it is already disrupting some shipments.
The new Malay tax is thought to be driven primarily by a desire to regulate large inflows of physical gold, preserve foreign exchange reserves, and curb speculative/import-driven demand. While Malaysia is currently running a current account surplus, surging gold imports were putting pressure on the goods trade balance.
India hiked its import duties on gold and silver in May to an effective rate of 15%, seeking to curb imports and support the rupee. The new duty regimes are likely to significantly dampen physical demand in both India and Malaysia by raising domestic prices and reducing affordability.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$0.407 (+0.54%)
5-Day Change: -$3.652 (-4.68%)
YTD Range: $61.036 - $121.630
52-Week Range: $32.978 - $121.630
Weighted Alpha: +87.30
Silver remains well contained within its recent range, weighed today by heightened geopolitical concerns and a firmer dollar, but underpinned by the tech/AI tailwind. However, after three consecutive lower weekly closes, the technical bias is tilted to the downside.
The inability of the white metal to maintain gains above $75 leaves last week's low at $71.808 vulnerable to a retest. Minor intervening support is noted at $73.585 and $73.153.
A close above $75 is needed to set a more favorable short-term close, shifting focus to the 50-day MA at $76.031 and the 20-day MA at $78.172. Good chart resistance at $78.820/886 is currently well protected.
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.