Gold, Silver Technical Analysis
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Gold Surges to New All-Time High on Rate Cut Hopes, Geopolitical Uncertainty
Gold’s recent ascent to a fresh all-time high comes at a time when markets anticipate the Fed is on the cusp of the rate cutting cycle. The FOMC minutes relating to last months Fed meeting is due tomorrow, followed closely by the Jackson Hole Economic Symposium, starting on Thursday, with the main event taking place on Friday with an appearance by Jerome Powell.
The event presents an opportunity for Powell to talk up a September rate cut but the question around the size of the first cut still very much in question. Earlier this month, markets favoured a 50 basis point cut in September but the probability of such an outcome has moderated to around 25% currently. Gold tends to be viewed more favourably when interest rates drop, as the opportunity cost of possessing the non-interest bearing metal subsides.
The down-trending US dollar has also helped spur on gold bulls as foreign purchases of the metal get a helping hand from the improved exchange rate. Lastly, while tensions in the Middle East have subsided, the threat of an Iranian retaliation towards Israel still exists. Such uncertainty helps buoy the safe-haven commodity.
Gold (XAU/USD) Technical Analysis
Since mid-July, gold has attempted to reach a new high but found stern resistance at $2,480, until Friday last week when price action rose and closed above $2,500. Markets for upside potential become tricky from here as gold has never traded this high before and given the recent bullish momentum, could enter a period of consolidation before bulls attempt a push higher.
The RSI nears overbought territory, suggesting a fresh catalyst may be needed to continue the current bullish impetus. Such a catalyst may come from the FOMC minutes or Jackson Hole. A bullish surprise may even materialize via a largely anticipated downward revision to the total number of jobs added to the US economy between April 2023 and March 2024, which comes out on Wednesday. While upside targets remain a mystery, Support reappears back at $2,480 followed by $2,450 and then the 50-day simple moving average
Gold Daily Chart
Source: TradingView, prepared by Richard Snow
Silver Maintains Bullish Advance to Break Above Key Trendline
Silver has lagged behind gold but attempted to bridge the gap. Silver has drifted lower since failing to test the yearly high at $32,51 in July and dropped to $26.45 – near the 200-day simple moving average where it ultimately rebounded.
The near-term trendline acting as resistance proved ineffective in keeping bulls at bay, seeing the metal push through it with relative ease. The RSI is still some way from indicating the market is overbought, meaning the bullish move may still have some room left to run.
Rising above the 50 SMA, price action now looks to test the full retracement of the major 2021-2022 decline once again ($30.06). The next level of interest to the upside emerges at $31.75 – the July high.
Silver Daily Chart
Source: TradingView, prepared by Richard Snow
| Change in | Longs | Shorts | OI |
| Daily | 3% | 0% | 3% |
| Weekly | -3% | 1% | -3% |
— Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnowFX
