Gold (XAUUSD) & Silver Price Forecast: Fed Pressure Builds – Will Gold Smash $5,020 or Stall?

Market Overview

Despite the bullish US dollar, Gold (XAU/USD) managed to stop its previous-day losses and gained modest bullish traction around the 4,990 level, but it is still below the $5,000 level. However, the reason why gold is not able to cross the $5,000 level is definitely the hawkish Minutes of the US Federal Reserve’s (Fed) January monetary policy meeting.

The hawkish tone pushed US Treasury yields higher and underpinned the greenback. But on the other hand, gains in the dollar are slowing down as worries about the Fed’s independence put pressure on the US currency.

This is because investors think political interference weakens the Fed’s ability to control rates, reducing confidence in the dollar and providing some support to Gold. Another factor supporting gold prices is the rising geopolitical tensions.

Strong US Data and Hawkish Fed Minutes Underpin Greenback

On the US front, the broad-based US dollar gaming some ground and hitting a one-week high. However, the upward trend was mainly supported by the hawkish Minutes of the US Federal Reserve’s (Fed) January monetary policy meeting. This was bad news for gold but good news for dollar, and that is why gold is still below the $5,000 level.

Notably, the minutes showed the Fed is not all on the same page as some officials think more rate cuts might be needed if inflation cools, while others worry that cutting too soon could mess with their 2% inflation goal.

Moreover, the gains in the US dollar were further bolstered by the strong US economic data. Well, industrial production actually came in stronger than expected in January, and manufacturing output had its best month in almost a year.

That pushed Treasury yields up and gave the dollar another boost. Despite this, markets are keeping in mind that the Fed could cut rates three times this year.

Gold Gains Support as Global Tensions Rise and US Economic Data Looms

On the geopolitical front, the latest US-led talks between Ukraine and Russia ended in Geneva, but honestly, there was not any real progress as they are still stuck over eastern parts of Ukraine under Russian control.

Meanwhile, the latest reports say the US military could be ready to strike Iran as soon as this weekend. Hence, these kinds of tensions create uncertainty in the market that usually helps gold because people look for safer assets in uncertain times.

Now if you look ahead, traders are turning to US data. On Thursday, there will be jobless claims, the Philly Fed report, and pending home sales. Plus, some Fed officials are speaking, which can always move the dollar. But really, the big thing everyone’s waiting for is Friday’s PCE inflation data.

That’s the Fed’s favorite inflation measure, so it could shape expectations around rate cuts.

Gold (XAU/USD) Eyes $5,020 as Trendline Support Holds Above $4,975

Gold is currently hovering around $5,017 on the 4hr chart after bouncing back from the support zone at $4,975 to $4,990 where the trendline & the 200 period EMA converge roughly at $4,950 – to be more precise.

Recent candles have shown higher lows, indicating steady buying power since the big drop to $4,685, the price is keeping its head above the .382 fib level at $4,859 & the 50 EMA near $4,990 is starting to flatten which usually signals short-term consolidation in the charts.

The nearest resistance comes at $5,141 (.618 fib) & then there’s $5,303 – if gold can break through $5,020 that could really add some momentum to the price while a drop below $4,975 could see it test $4,859 then $4,685.

Trade Idea: Look to buy at $5,020 or higher & aim for $5,141, close the trade if price takes a swing below $4,975

Silver (XAG/USD) Price Forecast: Technical Outlook

Silver is sitting right around $78.99 on the 4hr chart just about to test that descending trendline from $120 high – but lucky for silver fans it’s still holding up above the rising support from $64, and with a series of higher lows you can see the decent buying power building up, some of that building up to a tightening triangle pattern. The last few bumps to the upside pushed the price back above $76 & the momentum is starting to build towards taking on that $79.21 resistance.

The 50 period moving average is acting as a bit of a hurdle right around $79, while the 200 period EMA lingers way up at $86 just out of reach. The key support levels are down at $72, followed by $70.37. If silver can make a clean break above $79 that could get us to $86.11.

Trade Idea: Buy when silver hits $79.20 or higher & target $86, just close out the trade if the price starts to slide below $76