Gold & Silver Fall As USD Strengthens on Hawkish Fed Views
The yellow metal remains under pressure this week, opening with heavy selling in Europe, as traders digest recent hawkishness from the Fed. Fed chairman Powell last week confirmed that the Fed is looking to hike rates by 0.5% in May and is committed to aggressively tightening policy this year in a bid to bring down inflation. On the back of these comments, the Dollar has been well bid with traders anticipating that the .5% hike in May will likely be the first in a series of larger-than-usual rate hikes.
While gold is under pressure from the rise in USD, it is yet to be seen the extent to which the continued sell-off in equities will help underpin demand for the precious metal. Along with weakened demand as a result of a firmer USD and increased Fed hawkishness, risk appetite remains weaker due to fresh fears over the conflict in Ukraine. Reports last week of an intensified Russian assault on the easter regions there have been followed by news this week of Ukrainian airstrikes against sites in Russia, raising fears of yet a further escalation in the violence.
Silver prices have been equally subdued with the metal falling to its lowest level since mid-February. With the US Dollar expected to continue to rally into the May FOMC meeting, the near-term outlook for both metals looks skewed towards further downside. If the Fed does indeed deliver with a larger hike in May, along with signalling further aggressive action to come, metals are likely to remain under pressure over Q2.
Technical Views
Gold
Gold prices are now once again testing the 1919.92 support zone. We have seen this level acting as a floor over recent weeks. However, with price turning lower again followed the latest failed run at 2014.32, the level is at risk of breaking. With both MACD and RSI bearish, if we do see a move below this level, bears can expect to see a test of deeper support at 1871.04, followed by the 1826.71 level, where we also have the bull channel support sitting.
Silver
The latest move north of 25.5384 was seen running into further, heavy selling pressure. With price having now dipped back below the 24.0073 level, the focus is on a test of the rising trend line and 22.3205 support zone next. Both MACD and RSI have turned bearish now, putting the focus on further downside near term unless bulls can get back above 24.0073 and hold.
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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.