Gold & Silver Up Off Last Week's Lows - FOMC in Focus
Gold and silver prices are seeing a quiet start to the new week. Both metals enjoyed better demand across recent days with a strong recovery seen over the latter-half of last week. Both metals appeared to benefit from the softer forward guidance issued by the ECB at its July meeting. While the bank pushed ahead with a larger .5% hike, its tone on future rate moves was more cautious, leading some to scale back their ECB rate-hike expectations for the remainder of the year.
The focus this week will be on the FOMC meeting on Wednesday. The Fed is widely expected to push ahead with a further .75% hike. However, there are hawkish risks into this meeting, given the forty-year highs we saw in CPI in June. On the back of that report, traders began looking towards a larger 1% hike. While we’ve seen some pushback against this idea within the Fed, a larger hike has not been ruled out.
With this in mind, there is plenty of room for volatility in metals prices this week. Should the Fed stick with the .75bps hike expected, we might see USD a little lower in response, allowing metals prices to continue higher near-term. Alternatively, if the Fed surprises and announces a larger 1% hike, this will no doubt act as a catalyst for higher prices in USD, dragging metals lower.
In both instances, however, the greater focus is likely to be on forward guidance, as we saw with the ECB. If the Fed is seen sticking to its hawkish outlook and reaffirming its commitment to tightening over the rest of the year, this should see USD higher, weighing on metals. However, if the Fed is seen softening its outlook a little, perhaps over economic concerns, then this could easily fuel a USD unwind, allowing metals to rally sharply.
Technical Views
Gold
The rally off the 1679.77 lows has seen the market reversing back above the 1722.37 level. With both MACD and RSI turning higher here, there is room for a continued recovery. The big test for gold will be the 1791.63 level, broken prior-lows and the channel top. Bulls will need to see a break of this level to confirm a shift in sentiment.
Silver
Silver prices are holding at the 18.4421 support for now. The market has been trending heavily lower this year and, while within the bear channel, the focus is on a further drop lower towards the 18.4421 level next. Bulls will need to see a break of the channel top and 19.5643 level to confirm a shift in sentiment.
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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.