Metals Under Pressure Ahead of FOMC
It’s been a soft start to the week for the metals market as fresh strength in USD sees gold and silver both sold over the European open on Monday. Traders’ focus this week will be fixed firmly on the FOMC on Wednesday. The US Dollar was seen back in demand following the recent August US CPI report. With inflation shown to have risen again in August. Following a dip in July, the market moved to price in a larger hike at the September FOMC. Ahead of the CPI release, expectations had been split between a .5% hike and a .75% hike. However, on the back of that CPI release, traders moved to price in a .75% hike while also giving a 30% likelihood of a larger 1% hike.
Gold prices were seen breaking down to fresh 2022 lows last week in response to the news. While price action in silver has been a little more resilient, both metals are under pressure this week as traders await the Fed. Given that a .75% hike is now priced in, the main focus will be on the guidance issued at the meeting. If the Fed is seen to remain resolutely hawkish in its forecasts, signalling its intention to push ahead with rates increases as laid out previously, this should keep USD well supported, further weighing on metals prices. However, if there is any sense that the Fed has moderated at all, in terms of hawkishness, this will no doubt weigh on USD near-term, allowing for a recovery in metals markets.
Additionally, traders will be keen to hear how the bank views growth over Q3. Given two quarters of consecutive negative growth readings (marking a technical recession), traders will be keen to see if the bank projects a continuation of this trajectory in Q3 or if a rebound is seen.
Technical Views
Gold
Gold prices have turned lower once more from the latest test of the bear-channel top from YTD highs. Price has now broken down below the prior 2022 lows at 1679.77 and, while below here, the focus is on a continued move lower towards the 1634.74 level in line with bearish MACD and RSI readings. Only a break back above the 1722.37 level will negate this view.
Silver
Silver prices are looking more encouraging here. Following the false break of the 2022 lows at 18.4421, price has since reversed higher and is now attempting to breakout above the bear channel top. Currently, the market is hovering around the 19.5643 level and, with both MACD and RSI bullish, a break higher here will put 20.6398 in focus next.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.