Gold (XAU/USD), Silver (XAG/USD) Technical Hurdles: The US Fed meeting was the focus this week and the Fed certainly did not disappoint. An upgrade to the Fed projections saw the Central Bank send a hawkish message as it changed its forecast for rate cuts in 2024, 100bps priced in June down to 50bps at this week’s meeting. At the same time growth forecast were upgraded while the Fed also see the labor market remaining robust.
- Dollar Index (DXY) Could Remain Supported Thanks to the Narrative of Higher for Longer.
- US PCE Ahead May Give Further Insight into the Recent Uptick in Inflation.
- GSR Sentiment Has Retails Traders Overwhelmingly Long on Gold, with 71% of Traders Holding Long Positions.
The whipsaw price action and volatility hit Gold prices hard with a +-$30 decline to a weekly low print of $1913. However, Thursday and Friday did bring a recovery as US Yields finally fell and the DXY ran into a key resistance area. As the DXY has stalled it is important to note that we have seen this before while the idea of higher rates for longer could see the Dollar remain supported as with a rate of above 5% may be seen as a good investment as the equity markets come under increasing pressure.
The final data release of the week from the US came on Friday in the form of the S&P Global Composite PMI which edged lower to 50.1. According to Sian Jones, Principal Economist at S&P added to concerns around the trajectory of demand conditions in the US economy. This is something I expect to continue moving forward as US households continue to see a deterioration in savings and with student loan repayments set to resume in October, this will only add further pressure on US Households.
THE WEEK AHEAD: US PCE DATA REMAINS KEY
Heading into next week and it may seem like a slow one after the action-packed week of Central Bank meetings. We have US Durable Goods Ordered which is usually not a leading indicator but following the 5.2% contraction could add to concerns about the state of the US economy. This could also dent market hopes for a ‘soft landing’ and weigh on the US dollar giving gold further impetus for a move higher.
The second half of the week we have GDP numbers which is expected to be revised slightly higher toward 2.2% from the previous estimate of 2.1%. However, the main event for next week will be the Fed’s preferred gauge of inflation the US PCE data which will give a better idea of the inflation picture. This one will be particularly intriguing given the uptick in headline inflation in the US. It would take a significantly higher or lower print than the estimated 0,2% MoM print to have any material impact on the direction of the US Dollar.
We do also have a couple of Fed speakers on the docket which could stoke some short-term volatility. Without any material change there is a real chance we could see Gold and Silver prices remaining rangebound for the foreseeable future.
TECHNICAL OUTLOOK AND FINAL THOUGHTS
Looking at the technical perspective and Gold is on course for a doji candle close on the weekly timeframe following the whipsaw price action this week. Looking at the daily timeframe and Friday’s rally ran into resistance provided by the 200-day MA with the 50-day MA slightly higher.
Gold may remain confined to a range for the foreseeable future between the $1913-$1947 (this week’s high). However, in order for a move higher Gold faces significant challenges around the $1925-$1930 with a daily candle close above opening the opportunity for a run toward the weekly high and the $1950 psychological level.
A break to the downside will run into support around $1913 before the $1900 handle comes into focus.
Gold (XAU/USD) Daily Chart – September 22, 2023
Key Levels to Keep an Eye On:
- 1913 (weekly low)
- 1900 (Psychological Level)
- 1929 (50-day MA)
- 1942 (100-day MA)
Silver (XAG/USD) Daily Chart – September 22, 2023
Silver is facing many of the challenges from a technical perspective. Silver has seen whipsaw price action this week as well running into firm resistance provided by the MAs which have grouped together around the 23.40-23.60 mark. This will prove an interesting area at the start of the week as Silver makes an attempt to move higher.
The bigger picture from silver has the commodity trading in a triangle pattern with a move to the top end of the triangle pattern looking most likely if the immediate resistance can be overcome.
Key Levels to Keep an Eye On:
- 23.60 (50 and 100-day MA)