Gold Prices (XAU) Retreat from Recent High, Silver (XAG) Follows Suit

Gold (XAU/USD), Silver (XAG/USD) Outlook:

• Gold prices rise to nine-month high – Fed, ECB and BoE rate hikes boost precious metals before retreating to support.
• Silver futures wrestle with resistance around $24.220, a key historic level that continues to keep bulls in check.
• Interest rates rise in-line with expectations – economic outlook remains bleak as inflation pressures mount.

Interest Rate Decisions Bolster Demand for Safe-Haven Metals – Gold & Silver Rise Before Retreating to Prior Levels

The Fed, ECB and BoE have raised rates this week, in-line with market expectations. After the Federal Reserve implemented a 0.25% increase, the European Central Bank and Bank of England were more aggressive with their immediate response, rising rates by 0.50%.

Although higher rates don’t generally bode well for non-yield securities, Gold and Silver rose, reflecting renewed optimism for safe-haven assets.

During economic uncertainty, the precious metals’ have been known to rise against their cash counterparts. Since most commodities are priced in Dollar terms, a weaker USD has contributed to the rise in gold/silver prices in recent months.

Gold (XAU/USD) Technical Analysis

After reaching an all-time high of $2089,2 in August 2020, a rejection of the March 2022 high of $2078.8 drove gold futures back below psychological resistance at the $2000 mark.

As interest rates continue to rise, the same industrial and safe-haven metals that thrived during the Covid-pandemic have regained favor.

However, with the recent renewal of the uptrend losing steam, the four-hour chart highlights the current zone of support and resistance that has formed around $1,930.

Gold (XAU/USD) Futures Four-Hour Chart

Chart prepared by Tammy Da Costa using TradingView

For bullish momentum to gain traction, prices would need to break above $1,944 and head back towards $1,950. If XAU/USD is able to clear this zone, a probable retest of $1,975 could see gold futures rise back to $2,000.

Silver (XAG/USD) Technical Analysis

With the 61.8% Fibonacci retracement of the historic (2008 – 2011) move currently providing resistance for silver futures at $24.220, the descending trendline from the March 2022 move has restricted the upside move at around $24.500. But, as prices continue to threaten this zone, a break of the current daily high at $24.750 could continue to drive further upside momentum.

Silver (XAG/USD) Daily Chart

Chart prepared by Tammy Da Costa using TradingView

While support currently remains at $23.740, the 50-day MA (moving average) rests below at $23.35.

— Written by Tammy Da Costa, Analyst for DailyFX.com

Contact and follow Tammy on Twitter: @Tams707