Gold
The gold market has started the week under heavy selling pressure as a result of the strength in USD late last week. The greenback was turned higher in response to a better than expected CPI print for May. Headline inflation printed at 0.6% on the month, above the 0.4% expected, while core CPI came in at 0.7%, above the expected 0.5% reading the market was looking for. With US inflation having comfortably beat expectations for two months in a row now, the conversation is likely to once again turn back to the question of Fed tapering, suggesting the prospect of a higher USD in the near term.
While the Fed has downplayed any near term inflationary rises as likely temporary and unlikely to require a shift in monetary policy, some Fed speak recently has pointed to the beginning of tapering discussions. As vaccination numbers climb and the country’s full-scale reopening continues, tightening expectations are likely to advance, limiting the upside potential for gold in the near term.
The big focus this week will of course by the FOMC on Wednesday. If the Fed is seen taking a more hawkish shift, perhaps signalling that some form of tapering might be necessary this year, this is likely to see USD sent sharply higher, pulling gold prices down. On the other hand, if the Fed continues to downplay these risks and dismisses tapering talks, USD could continue lower again, allowing gold to recover.
Silver
As with gold, the rise in USD has capped the recent move higher in silver. While price is holding above recent support for now, the prospect of a further move lower this week in response to any Fed hawkishness is likely to keep silver pressured ahead of the event. Before the FOMC traders will also receive the latest US retail sales print. A strong reading over May will likely send USD higher and metals lower into the FOMC, increasing the chances of a hawkish shift.
Technical Views
Gold
The rally in gold prices was capped into a test of the channel top, 1919.92 level and 78.6% retracement. Price is now testing below the channel low, turning focus to the 1826.71 support next. Should price slip below here, the 1763.88 level is the next support to watch.
Silver
The breakdown below the rising channel in silver has failed to break back below the 27.4502 level for now. However, with MACD bearish and RSI turning lower, the chances of a fuller breakdown are growing. Below that level, 26.5711 is the next support to note.
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.