- Precious metals have settled down after big rallies in the past couple of weeks.
- Gold traders await fresh impulse from US PCE inflation, Chinese PMIs.
- Silver price trend has been slower but more constant, bulls to eventually target $24.50.
Precious metals are consolidating this week after seeing enormous gains since the beginning of March. Gold price (XAU/USD) is trading in shrinking daily candlesticks as the week advances while staying above $1,950 after having peaked around the thick $2,000 round resistance in the last week. Meanwhile, Silver price (XAG/USD) has seen a constant uptrend with fewer ups-and-downs and is located above $23, still with room to cover before reaching the year-to-date highs of early January around $24.50.
Gold price indecisive, waits for US PCE inflation, Chinese PMIs
Gold trading has been choppy for most of the week as the volatility seen in the past two weeks, with banking bankruptcies and high-stakes central bank meetings getting all the attention, fades.
The market is now looking ahead to the next Federal Reserve (Fed) meeting in early May, and will spend April trying to figure out the likelihood of more interest rate hikes to combat relentless inflation before the hypothetical easing of the monetary policy by the US central bank starts. The next top-tier event to start figuring that out is the US Personal Consumption Expenditures (PCE) Price Index release on Friday, the Fed’s preferred measure of inflation. Friday should be a high-stakes trading day, featuring also the Chinese Purchasing Managers Index (PMI) releases – China is the biggest Gold market in the world – and end-of-quarter trading flows.
Giles Coghlan, Chief Market Analyst at HYCM and an FXStreet contributor, analyzes how the US PCE inflation data, particularly in its core indicator, can shape short-term interest rate expectations. With two interest rate cuts currently expected for 2023, Coghlan focuses on US Core PCE YoY measure, which the market expects to come in at 4.7%, and explains that any beat above 4.9% could be negative for Gold in the short term, but provide buy-the-dip chances for bright metal bulls:
If the print comes in above the maximum expectations of 4.9% then that will increase the pressure on the Federal Reserve and should weigh on the S&P500, boost the USD, and weigh on precious metals. However, with real yields falling any deep dips in gold could be good buying opportunities.
Gold price (XAU/USD) daily chart analysis by Giles Coghlan, Chief Market Analyst at FXStreet
Until then, Gold price is likely to stay rangebound, together with stable US Treasury bond yields and US Dollar Index value.
Silver price uptrend is solid and has room to the upside
The second most precious metal, Silver, has been developing in a high correlation with Gold, as usual. That said, XAG/USD has not seen as much of a retracement this week, actually making its higher daily close since early February on Wednesday, around $23.30.
Silver had seen a much more profound sell-off during the market turnaround seen in February due to the expected Fed hawkishness. Since the course of financial markets swang again after the collapse of Silicon Valley Bank (SVB), Silver price had more room to recover but has done so with a relentless uptrend, barely noticing any retracements.
XAG/USD has already rallied past the 61.8% Fibonacci retracement level from the January 16-March 8 downtrend, and with its main Simple Moving Averages (20 and 100) in the daily chart nearing a bullish cross, it could soon find a platform for another rally back to year-to-date highs. These levels, around $24,50, are the main target and resistance for Silver bulls, as they coincide with a long-term bearish trendline that has contained price action since May 2021, a technical element that strongly reinforces the importance of this confluence.
The fact that Silver price has managed to stay outside overbought territory helps the continuation of a slow but solid uptrend to these levels if fundamentals remain in favor of precious metals, with Federal Reserve interest rate expectations somewhat limited.
Silver price (XAG/USD) daily chart
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