What to Know
- Rising interest rates continue to weigh on non-yielding assets such as gold and silver.
- Higher energy prices and inflation concerns remain important drivers of the interest-rate outlook.
- Silver is attempting to recover after a gap lower.
- $60 is a major technical support level for silver.
- Silver's 50-day and 200-day EMAs are both near $65, creating an important resistance area.
- Gold is bouncing from a long-term trend line that extends back to the beginning of the year.
- Gold has a nearby demand zone supporting the current recovery.
- $4,300 is an important technical resistance level for gold.
- A decline in interest rates could provide support for both precious metals.
The macro backdrop right now is one that has been paying close attention to the interest rate markets, as has been the case ever since the war in Iran broke out. The flow of oil has a major influence on whether or not interest rates are rising or falling.
Concerns right now about the overall situation are whether or not there will be enough energy out there to drive down inflation. After all, energy-related inflation is almost impossible to combat because, quite frankly, it's a lack of energy. You can't do anything as a central bank about that other than slow your economy down. In the process, you end up having a bit of a situation where it's just easier to own a guaranteed return than a non-yielding asset. That's where we find silver and gold struggling.
Silver
The silver market is trying to recover from a gap lower. Rates in the United States have climbed again during New York trading. We'll see if they back down a bit. If they do, that should, at least in theory, help silver. The $60 level is a major support level that I think a lot of people pay close attention to. This is an area of congestion that I would anticipate a lot of market memory at.
If we can get those rates to turn back lower, that should help silver, perhaps clearing a move toward the moving averages. The 50-day EMA and the 200-day EMA are both flat right around $65. That would just be the middle of the range that we've been trying to carve out.
Gold
Gold markets are bouncing from a longer-term trend line going back to basically New Year's Day. That is a good technical sign. There is a demand zone right around here as well. But with this being the case, you have to look at this as a market that will continue to be one that has to be watched very closely.
Ultimately, this is a market that's going to be very much like silver. It's going to move with lower interest rates. That opens up the possibility of rallying. The $4,300 level begins a bit of technical trouble. We'll see if market memory sees that as resistance. Overall, this is a market that continues to be intriguing, but also volatile, so it has to be respected as being a bit dangerous.
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