SILVER, GOLD OUTLOOK:
- Gold and silver prices have declined in recent weeks, but their outlook remains constructive
- If bond yields continue to fall, precious metals could shine through 2024
- This article examines the key XAU/USD and XAG/USD levels to keep an eye on this week
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Gold and silver have declined in recent weeks as the geopolitical premium of both metals begins to dissipate following the Hamas terror attacks on Israel early last month. This is because the situation in the Middle East, while still tragic, has not escalated into a major conflict with other countries such as Iran or Lebanon.
Another factor that has contributed to the weakness of XAU/USD and XAG/USD is lower demand for safe-haven positions. U.S. stocks have been on an upward trend lately, with the Nasdaq 100 rising for eight straight sessions and on the verge of reclaiming its October high. Therefore, the fear of missing out has led traders to focus their attention on the stock market instead of non-yielding assets.
Despite recent market dynamics, there are reasons to be optimistic about precious metals. However, one trigger that could put upward pressure on their prices is the fall in interest rates. Last month the 10-year US Treasury yield was above 5.0%, but has since corrected significantly lower and has fallen below 4.6% today. If this correction accelerates in the short term, the environment for both gold and silver would become more constructive.
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TECHNICAL ANALYSIS OF GOLD PRICE
Gold has seen a slight decline in recent days after failing to overcome resistance in the $2,010/$2,015 area late last month. If losses deepen in the coming trading sessions, support lies at $1,960, followed by $1,945, near the 200-day simple moving average. While there is a chance the metal could stabilize in this area before staging a comeback, a drop could open the door for a move towards $1,920.
On the other hand, if the bulls create a bounce and push prices higher, the upper resistance lies at $2,010/$2,015 as mentioned earlier. Clearing this technical barrier to the upside would reignite bullish sentiment and set the stage for a rally towards $2,060. With further strength and sustained momentum, buyers could gain the confidence to challenge this year’s high of $2,085.
GOLD PRICE CHART (FRONT MONTH FUTURES)
Source: TradingView
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TECHNICAL ANALYSIS OF SILVER PRICE
Silver sold off on Tuesday, falling toward confluence support around $22.55, where an intermediate-term ascending trend line converges with several recent swing lows. Buyers need to strictly protect this area to counteract the current selling pressure. If this floor is not met, the price could potentially fall to $22.20. If weakness continues, the focus shifts to October lows near $21.00.
Conversely, if buyers return and trigger an upward reversal, we could see a move towards trendline resistance at $23.40. This crucial level, which coincides with the 200-day simple moving average, could pose a strong barrier against upside moves, but in the event of a breakout, XAG/USD could move towards the $24.00 threshold.
SILVER PRICE CHART (FRONTMONTH FUTURES)
Source: TradingView