Gold and silver recover from Monday's sharp selloff
OUTSIDE MARKET DEVELOPMENTS: Risk appetite has waned into year-end as investors book profits. While precious metals have been particularly volatile, U.S. share prices are displaying some resilience.
US stock markets have traded only modestly lower so far this week, with major indices pulling back from recent record highs in light, holiday-thinned volume. Investors are reportedly locking in gains on big tech names and rotating to less overvalued sectors.
President Trump met with Ukrainian President Zelenskyy at Mar-a-Lago on Sunday to discuss a proposed peace framework to end the war with Russia. Both leaders expressed optimism afterward that a deal was "maybe very close" despite persistent sticking points, particularly around territorial concessions in the Donbas region. Markets remain skeptical.
Geopolitical tensions remain broadly elevated heading into 2026. Top risks include the U.S. reshaping of trade/alliance relationships, intensified U.S.–China competition (especially in AI), the ongoing war in Ukraine, the tenuous ceasefire in Gaza, rising tensions between the U.S. and Venezuela, and the latest U.S. saber rattling toward Iran.
Fed funds futures continue to suggest the central bank's easing campaign will be on pause early in the new year. However, the trade continues to price in 50 bps of rate cuts in 2026, with the first 25 bps cut likely to come in June. The minutes from the December FOMC meeting will be released later today, but are not likely to provide any additional clarity.
The dollar index remains defensive, having set a 12-week low last week. The magnitude of the downside retracement has returned considerable credence to the long-term downtrend, despite expectations for lower rates next year, amid mounting fiscal pressures and concerns about debasement.
S&P/Case-Shiller 20-City Home Price Index declined 0.3% to 337.3 in October from 338.3 in September; +1.3% y/y. It was the fourth consecutive monthly decline.
FHFA Home Price Index rose 0.4% in October to a new record high at 436.8, above expectations of +0.1%, versus a revised 435.2 in September (was 435.4); +1.7% y/y, versus +1.8% in September.
Chicago PMI rebounded 7.2 points to 43.5 in December, above expectations of 39.5, versus 36.3 in November.
GOLD
OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$52.50 (+1.21%)
5-Day Change: -$105.48 (-2.35%)
YTD Range: $2,607.16 - $4,549.77
52-Week Range: $2,599.23 - $4,549.77
Weighted Alpha: +65.16
Gold has rebounded modestly from Monday's selloff, but price action remains confined to yesterday's range. Heightened geopolitical tensions and a generally soft dollar provide support. Volatility, particularly in silver and the PGMs, is probably tempering bullish sentiment somewhat.
This week's losses are seen as corrective within the dominant uptrend. All of the fundamental factors that have gold on pace for its best year since 1979 are still very much in place, including sustained central bank buying, persistent ETF inflows, expectations of further Fed easing, geopolitical hedging, and a weakening dollar.
Monday's setback to the 20-day moving average is actually a healthy event, although I would have preferred it happen over the course of several sessions.
Today's probe back above $4,400 is encouraging to the bull camp. However, a breach of the halfway-back point of the retreat at $4,429.26 would help confirm the 20-day and Monday's low at $4,308.75 as key short-term support.
A fresh round of lows would suggest potential back to the $4,200 zone before renewed buying interest emerges. Look for gold to continue taking cues from the silver market.
SILVER
OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$2.707 (+3.75%)
5-Day Change: +$4.776 (+6.68%)
YTD Range: $28.565 - $86.637
52-Week Range: $28.565 - $86.637
Weighted Alpha: +193.34
Silver is up nearly 7% today as extreme volatility continues. The white metal surged to a record high of $86.637 in Asian trading on Monday, before profit-taking and news of CME margin hikes triggered a sharp selloff in thin holiday conditions.
It's encouraging that silver was able to hold above support at $70.127/$70. However, the magnitude of recent volatility is likely to give pause to traders on both sides of the market heading into year-end. Clearly, that market went too far too fast.
That being said, the fundamentals remain broadly supportive, including strong industrial demand (especially in solar, EVs, and electronics), chronic supply deficits, massive speculative inflows, central bank interest, U.S. rate cuts, and heightened geopolitical hedging, and Chinese export controls slated to take effect on January 1.
Ideally, I'd like to see a period of consolidation before the market starts testing the upside again. A breach of the midpoint of Monday's range at $78.600 is needed to clear the way for renewed tests above $80. Above the latter, the 61.8% retracement level at $80.496 would attract. New record highs would target $90 and $91.009.
On the downside, intraday supports at $75.133 and $74/$73.873 protect the more important $70.127/$70 area. Penetration of the latter would suggest additional corrective potential toward the rising 20-day moving average, currently around $66.
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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