Gold & Silver Outlook: PCE Inflation Takes Center Stage as Fed Hike Bets Pressure Metals
Gold and Silver are set to open the session with the focus on central banks and monetary policy, with the U.S. inflation data probably the most important prints of the week. The data could influence the Fed’s policy moving forward.
One of the most important prints of the week for the precious metals market is the Core PCE Price Index, which will be released on Wednesday. recently released Fed Funds rate futures data indicate that the markets are pricing in around a 47% chance of a 0.25% rate hike in October, and around a 92% chance of a rate hike in December.
Earlier rate hike expectations pushed the prices of Gold and Silver lower. More recent comments by New York Fed President John Williams indicated that the Fed will likely only raise rates by 0.25% on one more occasion in 2022.
Challenges remain in the bond market. The 10-Year Treasury yield has risen to levels not seen since 2007, and July through September have seen rising yields due to increasing inflation and government debt issuance and strong economic data. The U.S. dollar has also risen this quarter.
Higher yields and a rising dollar increase the opportunity cost of holding non-yielding investments such as gold and silver. The dollar is also less attractive to foreign investors.
Geopolitical factors also affect gold and silver prices. However, these factors are supporting, and not controlling, prices. The U.S. is considering easing sanctions on Iran in exchange for changes to their nuclear policy. There is also the potential for an increase in global oil supply. However, if this happens, it could also contribute to renewed inflation.
While monetary policy is controlling silver prices, the same can not be said for gold.
Fundamental view: Expect gold and silver prices to move lower. The focus is on the PCE Inflation Report.
Gold Technical Analysis: XAU/USD Holds $4,160 as $4,190 Becomes the First Recovery Test
Gold has bounced from the $4,112 support and is trading at $4,176 at the moment. I would say the important support is at $4,160 and while gold is above this, I believe the larger, more bearish trend is still in effect as gold is still below both the moving averages and the trend line. The recent bounce has improved the short term trend.
The first major resistance is expected at $4,190. A break above that would allow further upward movement to $4,214 and then $4,238. If gold is moving higher, $4,160 is the first major support. Below that, $4,112 and then $4,073 should find support.
Rising bearish momentum has allowed gold to retest $4,190 and $4,214, and given the current larger bear trend, a move below $4,160 would accelerate the larger trend lower. A move above $4,238 would likely alleviate the bearish trend.
Gold Price Forecast
Every new Gold analysis as it publishes, today's technical signal and key levels, live price — on one page.
See all Gold forecastsSilver Technical Analysis: XAG/USD Stalls Below $61.45 as $60.31 Support Remains Critical
Currently, silver is trading around $61.08, having bounced from the $60.31 region. For the time being, I’m working under the assumption that the $61.45 region is still acting as resistance. This means the overall short-term trend is still trending lower.
For the moment, silver remains lower than both the moving averages and the trendline, which is also falling. Additionally, the $61.08 region is also still below the $62.18 and $63.15 regions.
Depending on the level of uncertainty, $62.18 and $63.15 may be targeted. If silver breaks $60.31, lower targets may be $59.52 and $58.77.
RSI has also moved into oversold territory. While the trend is still lower, this may indicate that a larger move lower may not be Immediate bears still may be rewarded, as long as $61.45 remains resistance. If $62.18 is broken, this would shift the trend to the upside.
