PRECIOUS METALS: Silver Continues Divergence, Breaks Another Resistance Level
Gold prices trended lower over Tuesday but remained range bound unable to find support from a lower US dollar (BBDXY -0.1%) and lower 2-year yield. It is already priced for a 10 December Fed cut. Bullion finished down 0.6% to $4205.85/oz off the intraday low of $4163.95 which followed a rise to around $4230. In contrast, silver continued to rally rising 0.8% to $58.462 and is almost 10% higher than last Thursday.
- Increased speculation that President Trump will choose his National Economic Council Director Bessent as the next Fed Chair is adding support to non-yield bearing assets, such as precious metals, as he is expected to be more dovish.
- Silver has benefited not just from increased Fed easing expectations but also market tightness has encouraged speculators. There has been strong physical demand for the production of renewables and stockpiles are low as a result. Prices are signalling overbought again though.
- Silver broke above initial resistance at $57.843, 1 December high, opening up $59.563, a Fibonacci projection. This sustained move reinforces the bullish trend. The metal has started today around $58.54.
- On Tuesday, gold traded between initial support at $4116.7, 20-day EMA, and resistance at $4264.7, a retracement point. It also remains in a bullish structure and has started Wednesday slightly higher at $4211.2.
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US STOCKS: Russell Index - Momentum Stalling Above 2500
The Russell 2000 Friday night range was 2455.98 - 2484.20, closing +0.54%. The Russell 2000 has not really managed to extend higher after its break above the previous all-time highs and momentum looks to potentially be stalling above 2500. The bulls will be looking for dips to be supported and the 2400 area to continue to hold as it tries to regain momentum higher. The risk is a break sub 2400 which would indicate a false break and signal a deeper pullback, but while this level holds the bulls remain in charge.
Fig 1: Russell 2000 Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
AUSSIE BONDS: Cheaper Ahead Of Tomorrow's RBA Policy Decision
ACGBs (YM -3.0 & XM -3.5) are slightly weaker despite cash US tsys closing last week on a firm note, with US yields flat to 3bps richer and the curve steeper.
- Reminder, Japan Holiday today, Culture Day, should keep Trade on the quiet and thin side until at least London arrives.
- NI Policy: RBA Board To Hold, Push Out Midpoint Return. The Reserve Bank of Australia Board is expected to keep the cash rate at 3.6% next Tuesday, following stronger-than-expected Q3 inflation. It is likely to push back the anticipated return of inflation to the midpoint in updated forecasts released alongside the decision.
- Cash ACGBs are 3-4bps cheaper with the AU-US 10-year yield differential at +25bps.
- The bills strip is -2 to -3 across contracts.
- RBA-dated OIS pricing is showing a 25bp rate cut in November at a 3% probability, with a cumulative 3bps of easing priced by year-end.
- Today, the local calendar will see the Melbourne Institute Inflation Gauge shortly.
- The AOFM plans to sell A$1200mn of the 4.25% 21 March 2036 bond on Wednesday and A$800mn of the 3.00% 21 November 2033 bond on Friday.
JGB TECHS: (Z5) Tilts Higher
- RES 3: 140.08 High Jun 13
- RES 2: 139.05 High Aug 4
- RES 1: 137.30 - High Sep 8 and key short-term resistance
- PRICE: 135.96 @ 16:17 GMT Oct 31
- SUP 1: 135.61 - Low Oct 08
- SUP 2: 135.39 - 1.618 proj of the Aug 4 - Sep 2 - Sep 8 swing (cont.)
- SUP 3: 134.69 - 2.000 proj of the Aug 4 - Sep 2 - Sep 8 swing (cont.)
Prices started last week well, growing the gap with next support into the 135.61 Oct 08 low. Despite this stability, prices remain inside the firm downtrend that’s dominated prices since mid-September, and prices will need to challenge resistance before signaling any broader reversal. Key short-term resistance has been defined at 137.30, the Sep 8 high. Further weakness would open 135.39 next, a Fibonacci projection.
