The Goldclub Review

Metals Cool Off: Market Update

As cold weather and high winds disrupts many in the western and north-central parts of the country, gold and silver prices are also cooling off as U.S. trading draws to a close on Thursday, with gold reaching its lowest level in seven weeks and silver projected to finish slightly above its seven-week low. This is attributable, in part, to indications that the U.S. Federal Reserve will prolong its schedule of elevated interest rates, resulting in unfavorable demand implications for the metals markets.

In the current session, April gold witnessed a 0.47% decline and was last trading at $1,832.8, while March silver saw a dip of $0.337 and was priced at $21.34. Today’s updated fourth-quarter U.S. gross domestic product (GDP) report revealed inflation components that were slightly higher than anticipated. Although the report did not elicit much response, it briefly led to an increase in U.S. bond yields and bolstered gains in the U.S. dollar index.

This development comes after the FOMC minutes were released on Wednesday afternoon, which the market interpretation of both the FOMC minutes and the GDP inflation components being that the Federal Reserve will maintain a hawkish monetary policy stance for an extended period to combat rising inflation. This development is typically unfavorable for gold and silver prices, which tend to thrive in a low-interest-rate, high-inflation scenario. Select FOMC members proposed increasing the Fed fund range by 50 basis points during the January meeting, whereas a 25 basis point rise was implemented at that meeting.

Today’s trading in gold revealed a resistance level at the day’s high of $1,841.20, followed by another resistance level at this week’s high of $1,856.40. Meanwhile, support was noted at $1,824.80, with additional support at $1,815.00. The April gold futures prices have recently hit their lowest point in seven months, suggesting a bearish sentiment in the short term, supported by a downtrend. However, the bulls aim to break through the strong resistance level at last week’s high of $1,881.60 and achieve a closing price above it. Despite this goal, the current technical outlook for gold is not favorable for bullish investors. In the near term, the bears will target pushing futures prices below the robust technical support level of $1,800.00. However, the market may find some support at oversold levels around the $1,780 mark due to strong physical demand, which could lead to a rally.

March silver futures are expected to close today near their seven-week low. The current resistance levels for silver are at $21.67 and $22.00, with support levels at $21.155 and $21.00. Unfortunately, the technical outlook for silver is not in favor of bullish investors. The silver bears have the upper hand in the near term, with a steep downtrend. The next objective for silver bulls is to surpass the solid technical resistance at $23.00, while the bears aim to achieve a closing price below the solid support level at $20.00.

Meanwhile, global stock markets were generally positive, although mixed. In contrast, the U.S. stock indexes experienced a midday sell-off, with the SPX maintaining above the 4k mark. Meanwhile, the U.S. dollar index remained stable, practically unchanged.  Nymex crude oil futures prices were up by almost $1.5, trading at around $75.50 per barrel, at the same time, the yield on the benchmark U.S. 10-year Treasury note is presently at 3.881%.

So, what does all of this mean for investors in gold and silver? The combination of a hawkish Fed, rising bond yields, and a stronger dollar all point to further downside for gold and silver prices in the near term.  This could also present a great buying opportunity.

Looking to Friday, new home sales numbers and January PCE data should be released. This should shed more light on consumer spending habits and market confidence.

All Updates and Market info are provided as a third party analysis and do not necessarily reflect the explicit views of GoldClub Direct LLC. and should not be construed as financial advice.