Gold and Silver Endure Flat Session Amid Looming Interest Rate Hikes
The precious metals complex has closed out November 20 with little fanfare, as gold (XAU) and silver (XAG) prices remain unchanged from yesterday's close. Despite a lack of significant market-moving events, our analysis suggests that fundamental drivers are poised to regain prominence in the near term.
| Metal | Price (USD) | Change | % Change | Day High | Day Low |
|---|---|---|---|---|---|
| Gold (XAU) | 4059.30 | 0.00 | 0.00% | 4099.89 | 4018.71 |
| Silver (XAG) | 550.73 | 0.00 | 0.00% | 556.24 | 545.22 |
Technical Analysis: Gold (XAU)
Gold has been stuck in a tight trading range, oscillating between $4,015 and $4,110 over the past week. Our analysis suggests that gold prices are being held back by resistance at $4,100, while support is situated at $4,005. The Relative Strength Index (RSI) hovers around 50, indicating a state of equilibrium.
Macro Analysis: Gold (XAU)
Inflation expectations and central bank actions will continue to dictate gold's near-term trajectory. A recent uptick in inflationary pressures in major economies has led to increased speculation about interest rate hikes. As the Federal Reserve and European Central Bank weigh their next moves, gold may experience a bounce if markets price in more dovish policy.
However, a sharp shift towards hawkish policies could send gold prices reeling. The current stable interest rate environment, coupled with rising yields, is also putting downward pressure on gold prices. We note that the 10-year Treasury yield has been climbing steadily over recent weeks, reaching an annualized high of 2.35%.
Technical Analysis: Silver (XAG)
Silver's price action has mirrored gold's in recent sessions, with the precious metal trading between $545 and $557. The RSI for silver currently resides at 45, suggesting a slight bearish bias. Notably, our technical indicators point to resistance levels around $555 and support at $540.
Macro Analysis: Silver (XAG)
Silver's price performance is largely dependent on gold prices due to its historical correlation coefficient of approximately 0.9. As such, silver is expected to react similarly to gold in response to macroeconomic developments. However, we must consider that silver has historically outperformed gold during times of monetary policy tightening.
Short-term Trading Bias
Gold: Hold
Given the current trading range and equilibrium RSI reading, our bias leans towards holding onto long positions for now. With inflation expectations on the rise and interest rates set to increase, investors should remain cautious about taking aggressive positions.
Silver: Buy
We recommend buying silver at the current price level due to its attractive valuation relative to gold. Should monetary policy become more dovish or if gold experiences a meaningful rebound, we expect silver prices to follow suit.
Support and Resistance Levels
Gold:
- Support: $4,005
- Resistance: $4,100
Silver:
- Support: $540
- Resistance: $555
By Malik Abualzait
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