Gold (XAU/USD) & Silver Price Forecast: Fed Rate Path Takes Center Stage as Metals Recover

Gold & Silver Outlook: Yields Ease Before Fed Decision as Rate-Hike Path Takes Center Stage

Wednesday showed minor improvement in the fundamentals of gold and silver as easing oil prices diminished immediate inflation concerns and US Treasury yields moved lower from their recent multi-year highs. The relief is short lived as traders wait for the decision from the Federal Reserve which may set the monetary backdrop for the precious metals through the end of 2022.

The markets place a 90% to 93% probability of a 25 basis points increase by the Fed today, meaning that increase is now largely priced in. The focus now is on the press conference of Kevin Warsh and the updated projections by the Fed. The market wants to know if the policymakers view this increase as a one off and more measures are needed or if this is the start of a series of liftofs.

For precious metals, the importance of this distinction is paramount. US Treasury yields shoot up beyond 5% earlier this week as the energy shock from the Middle East together with persisting inflation drove expectations for tighter policy. Oil prices eased back on Wednesday following a surprise build in US crude inventories which provided some relief from the non-yielding assets.

Even though the dollar is at multi week highs, it still remains at at the upper end of the recent trading range, primarily due to the upcoming moves by the Fed. This would also keep both metals under pressure.

Gold still continues to have support as traders are concerned about the sustainability of the US fiscal policy. This also provides support to Gold as traders feel uncertain due to the ongoing geopolitics of Iran, the Gulf region and the energy infrastructure.

Silver also has similar support from monetary policies, but would be more negatively impacted from long prolonged cycles of manufacturing demand diminishing.

Gold neutral, silver neutral: The Fed’s expected hike does not impact outlook as much as possible signals of future tightening.

Fundamental bias: Gold neutral ahead of the Fed, provides insight into overall outlook which is expected to develop throughout the meeting, if the Fed’s forecast projects tighter monetary policy.

Gold Technical Analysis: XAU/USD Rebounds From $4,283 as $4,354 Resistance Comes Into Focus

Currently, Gold is trading around $4,335 on the 2-hour chart. Price has bounced from the $4,283 support zone. I like to see fighters defend zones, and buyers have done that time and again in this lower zone. Price still does not have confidence to trade above the moving averages and the descending trendline. For now, the structure remains biased to the downside even though the most recent price action has been higher.

$4,354 is my first resistance level. Once this level breaks, we would expect $4,403 and $4,433 to come into play. Below, $4,316 is our first support level with $4,283 coming into play on a break. A break below this level would have us looking at the $4,256 and $4,217 levels.

RSI has now recovered part of the way toward the center and is now in no man’s land. For now I am neutral with a slight bias to the downside on Gold price action while it remains below $4,354. A close above $4,403 would be very constructive. A break below $4,283 would confirm a bear market.

Silver Technical Analysis: XAG/USD Holds Above $64.40 as $65.28 Becomes the Next Upside Test

Silver is currently trading at $64.88 on the 1 hour chart after breaking the $64.40 resistance zone. Price is now above the rising trendline bullishly and has now broken the downtrend which has now turned bullish from the lower lows.

However, Silver must clear the next resistance zone in order to confirm a stronger recovery.

I have $65.28 as my first resistance. Trading above that would put $65.98 and $66.74 in play. $64.40 would be the first major support with $63.45 coming into focus as a support if the breakout began to fail. $62.57 would be a potentially deeper retreat.

RSI is in a good position, holding the upper half of its range, improving momentum, but not looking stretched. I am bullish while silver is above $64.40 and the rising trendline. If silver were to break and sustain $63.45, I would become more bearish. Conversely, a clean break through $65.28 would strongly suggest a run to $65.98-$66.74.