Metals Down From YTD Highs But Is Recovery Coming?
Will Metals Rally Again Following Powell Outlook Shift?
Both gold and silver came under heavy selling pressure last week amidst a fresh round of strength in the US Dollar. The DXY was seen printing 6-month highs against a backdrop of hawkish Fed commentary and some better-than-forecast US data. Several Fed members were seen calling on the need for further tightening and rates to stay high for longer in a bid to bring down inflation. With market pricing for a June hike soaring to around 40% from under 10% previously, metals came off sharply. Gold and silver prices have fallen 5.5% and 10.5% respectively from their YTD highs and look vulnerable to further weakness should USD strength continue.
Near-term, however, there might be room for a recovery higher. On Friday, Fed chairman Powell appeared to push back against recent hawkish expectations and indeed, even hawkish comments from his own policymakers. Powell noted support for a slower pace of hike explaining that tighter credit conditions meant that the Fed would not need to tighten as much as it would otherwise. On the back of these comments, pricing for a June hike has fallen back to around 17%.
Debt Ceiling Developments
US debt ceiling negotiations are also a key factor for metals traders currently. Part of the driver behind the USD rally was the surge in safe-haven demand linked to uncertainty around the negotiations. However, with most players now looking at the current difficulties as mere political posturing and brinkmanship, with a deal expected to be done, USD looks to have room to weaken. If seen, this should help metals rebound near-term.
Technical Views
Gold
The correction lower in gold prices saw the market testing briefly below the 1973.51 level. However, price is now attempting to reclaim the level which, if seen, will keep the bullish view intact putting focus back on a test of the 2069.41 highs. To the downside, should we see the bull channel bream 1871.04 is the next support to note.
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Silver
The latest failure at the 26.0974 level has seen the market reversing sharply lower. Price is now trading back below the 24.0073 level and while below here, is at risk of a deeper drop lower. However, the retest of the broken bear trend line has held as support for now, keeping the focus on upside for now.
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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.