20 May, 2024

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

• Gold pulls back from new all-time high as Fed speakers spoil the rally
• ‘Higher for longer’ stance from prominent Fed speakers trims rate cut bets
• Silver retreats from the yearly high at the start of the week
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Gold Pulls Back from New All-time High as Fed Speakers Spoil the Rally

Gold achieved another new milestone, trading above the prior all-time high of $2431, but immediately withdrew back beneath the prior high as Fed speakers warned that rate cuts are still some way down the road from here.

Atlanta Fed President Raphael Bostic recounted the hot inflationary pressures of Q1 reiterating that there is still some work to do, but ultimately he sees inflation continuing to ease into 2025. Governor Michael Barr drove home the same points while Governor Philip Jefferson commented that the softer inflation print in April is encouraging. In summary, the tone reflected a preference to keep interest rates elevated until the committee can comfortably say the general level of prices is heading back to the target.

Markets have stepped back from fully pricing in two rate cuts this year and have shifted from a likely September cut to a November cut. Keep in mind the Fed tends not to change policy during a presidential election so effectively, the FOMC will have to look at September and December or 2025.

Market Implied Rate Cuts (in Basis Points) for the Remaining Meetings in 2024

A lesser chance of rate cuts tends to support the dollar and the small move higher in the dollar and yields sees the precious metals retreat from their intra-day highs. Higher yields makes the non-interest bearing metal less attractive and can see flows out of gold. Gold however, is experiencing a phenomenal bull run and it would take a real resurgence in inflation to see sharper moves lower over the coming days and weeks.

The 161.8% Fib level at $2360 marks the next level of support, followed by the upper trendline (former resistance, now support) of the former channel.

Gold Daily Chart

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Silver Retreats from the Yearly High at the Start of the Week

Silver on the other hand, appears to be benefitting both as a precious metal and industrial metal. Silver is a less well-known component within the clean energy transition, used most notably in solar panels.

Silver traded to an 11 year high earlier in the session only to pullback intra-day, trading flat at the time of writing. The immediate level of support appears at the psychological $30 mark which coincides with the top of the 2020- 2021 ascent from which the orange Fibonacci levels are drawn.

Silver Daily Chart