Gold & Silver Forecast: Rising Yields Pressure Precious Metals

What to Know

• Rising U.S. Treasury yields continue to pressure gold and silver prices.
• Gold faces resistance near $4,200 while $4,000 remains key support.
• A potential death cross is developing on gold’s daily chart.
• Silver remains more sensitive to U.S. dollar strength than gold.
• Silver could decline toward the $50 level if bearish momentum continues.

The backdrop that we find ourselves in during the early part of the Tuesday session is going to be one with higher interest rates as the 10-year yield continues to climb in the United States near the 4.5% level. That puts a little bit of pressure on precious metals, and a rising US dollar as a result of those rates continues to be one of the bigger problems.

That being said, the correlation or negative correlation, if you will, certainly seems to come and go as of late. One thing is for sure: we’ve recently seen quite a bit of downward pressure on metals, although we’ve also seen them bounce. In the last couple of sessions, the reality is we are still very much in a downtrend.

Gold

The gold market has filled the gap from the Monday opening and is now looking a little bit anemic. It looks as if the $4,200 level will continue to offer resistance. The $4,000 level should end up being support as it is a large, round, psychologically significant figure and an area that has been pretty important for some time.

If we were to take off to the upside now, I think you have to keep an eye on that 200-day EMA, which sits at $4,344 and is falling. For what it’s worth, the 50-day EMA also looks as if it’s going to start falling from here, perhaps kicking off the so-called death cross when the 50-day EMA drops below the 200-day EMA.

Silver

The silver market has also filled the gap from the Monday session, but silver, I think, is going to be much more sensitive to the US dollar than the gold market—it typically is. And of course, there are a lot of concerns out there when it comes to pricing silver; it just got too far ahead of itself.

If a non-yielding asset like silver is performing poorly, or you have the option of buying a yield-based asset such as a bond, it makes quite a bit of sense that the bond market continues to attract more of the inflows. Furthermore, the strengthening of the US dollar most certainly works against silver. Silver, you can say, is probably much more sensitive to the US dollar than gold is. So, I think we continue to see some trouble here and perhaps may even find our way down to the $50 level before it’s all said and done.

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