What to Know
- Gold fails to break above the $4,500 resistance level
- Rising U.S. Treasury yields pressure non-yielding metals
- Gold breakout above $4,500 could target $4,600
- Silver consolidates around its 200-day EMA
- Middle East tensions and the Strait of Hormuz remain key market risks
The current backdrop right now is one of higher interest rates as time goes on, and quite frankly, it looks like a situation that is a bit of a feedback loop. A lot of the interest rate rising situation comes down to the mess in the Middle East that is never-ending, and of course the idea that the Strait of Hormuz is going to put a choke point on energy.
Most of this is pricing in energy inflation, and until there is some type of resolution in the Strait of Hormuz, it's probably going to be very difficult for clarity for traders. Furthermore, we also have to keep in mind that this time of year does tend to be somewhat quiet, so that's coming into play as well.
Gold
Gold markets have tried to break above the crucial $4,500 level but failed, showing signs of hesitation, and the $4,500 level is also an area that back in early June we had fallen apart from. That suggests to me that a little bit of market memory is at play, but I also think rising rates are a bit of a problem as well.
We are getting pretty close to the 4.75% level in the 10-year in the United States. That is a bit of an issue. If the market can break the $4,500 level though, the $4,600 level could end up being targeted.
Silver
Silver finds itself hanging around the 200-day EMA as we just simply have nowhere to be. The market suffers from a lot of the same problems the gold market does in the sense that the uncertainty out there is just a killer.
Higher interest rates work against these non-yielding metals, and while silver and, for that matter, gold both rallied quite nicely recently, now we are digesting those gains.
The question is, will consolidation lead to continuation? Longer-term, I like both markets, but in the short term, there's a lot of uncertainty out there, and interest rates will continue to be a bit of a problem.
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