Gold and Silver Price Forecast: Jackson Hole Sell-Off Tests Key Support

Gold (XAU) continued to drop to $4,400 during early Asian trading on Monday following the hawkish speech by Fed Chairman Kevin Warsh in Jackson Hole. Warsh said that the inflation was not slowing quickly enough and the Fed had work to do. His remarks brought up the odds that the Fed will raise the interest rate in September. The expectations of a 25 basis point rate hike rose from 35% to 60% after the meeting. These expectations put upward pressure on the US dollar and the Treasury yield and downward pressure on gold and silver (XAG) prices.

But the overall picture for gold still remains bullish. The hawkish Fed could cause a short term sell-off but robust market sentiment could keep these losses to a minimum. Tension between the U.S. and Iran could also drive demand for safe havens. But a sudden jump in oil prices could reignite inflation concerns and keep the Fed on its toes to hike rates.

Gold Price Forecast: $4,350 Support in Focus as Rate Hike Odds Rise

The daily chart for spot gold shows that the price failed to break above key resistance area of $4,800 to $5,000 and dropped back toward the $4,350 to $4,400 support area. This drop is driven by the strong surge in short term yields and the US dollar index after the Fed speech in Jackson Hole.

The price has now approached the immediate support zone of $4,400 to $4,350. A break below this support will push the price toward the 50-day SMA in the $4,200 area. The price may remain uncertain in the short term and await the employment data before looking for the next direction. But the RSI indicator is approaching the mid-level, which provides immediate support to the gold market in the short term.

The weekly chart for spot gold also shows that the price has produced a weekly reversal candle at the resistance area. The high was recorded at $4,697 and the price remains under pressure in the short term.

A break below $4,300 will likely push the price toward the $4,200 level. A break below $4,200 will push the price to $4,100, which is now the support of the ascending trend line.

Silver Price Forecast: $64 Support in Focus After Rejection at $72

The daily chart for spot silver shows that the price failed to break above the $72 area. This resistance has been discussed in the previous analysis. The key resistance level in the spot silver market is $72.

This resistance is also marked by the 200-day SMA. A daily close above this level was required to push silver prices higher. But the price formed bearish hammer candle right at the resistance area and moved lower. The $64 to $65 area remains the key support in the short term. A break below this region will likely push the price back toward the $60 area.

The 4-hour chart for spot silver shows that the price has been consolidating within the ascending channel pattern over the past month. The drop after the Jackson Hole meeting has pushed the price toward the support of the ascending channel at $65.50. Any rebound in silver may be limited below $70 until there is clarity about interest rate expectations.

The market may be waiting for the employment data and the inflation report, which may drive the next move. A break below $64 will likely push silver prices toward $60.

Bottom Line

Gold and silver remain under short term pressure as higher rate expectations support the U.S. dollar and Treasury yields. Gold must hold the $4,350-$4,400 support zone to protect the bullish structure. Silver must remain above $64-$65 to avoid deeper drop toward $60. The upcoming employment and inflation data will likely determine the next move. The weaker data could reduce rate hike expectations and support both metals. But strong data could keep yields elevated and extend the current decline in metals.

Read more: Fed Rate Hike Fears Keep Silver Trapped Below $72