Gold and silver could be looking to make big moves at the end of this week as the ancestor of inflation data is released.
US Inflation is released on Thursday and investors will immediately try to determine what the results and subsequent comments from Fed officials might mean for gold and silver.
As it stands, the market expects US inflation (annual to January) to be 7.3% and the US Federal Reserve to strongly signal a 0.25% rate hike during its next meeting, which will be implemented in March.
More forceful and frequent comments from Fed officials regarding an initial rate hike above 0.25% could move gold and silver markets significantly. For now, it’s a scenario that’s largely dismissed when presented to Fed officials like Cleveland Federal Reserve Chair Loretta Mester. However, Atlanta Federal Reserve Chairman Raphael Bostic seems more receptive to the idea, so the possibility of a 50 basis point hike is definitely on the table, especially if the data on the US inflation is recording something closer to 8.00%.
A more aggressive rate hike of 0.50% from the Fed could have diametrical consequences on the price of gold and silver. The direction gold and silver take depends on how investors feel about whether they think the Fed is being unreasonably aggressive.
Technical conditions for gold (XAUUSD) and silver (XAGUSD) could work in tandem, or at least partially influence the aforementioned investor sentiment.
Gold’s recent trading pattern has defined clear support and resistance areas. Price levels to pay attention to for clear breaks higher or lower include US$1,831.00 and US$1,835.50. Further down the levels of US$1,825.60 and US$1,838.50 should be kept in mind by traders for more volatile markets. At the time of writing, XAUUSD is trading at US$1,834.00.
A silver price analysis is more complicated without some good support and resistance levels to reference. We will look to the metal’s moving averages to find where silver can find some resistance in a bullish environment.
XAG is currently trading at US$23.23 per ounce, just below the 20- and 50-day moving average, which has converged at around US$23.25. This is not a strong resistance as the RSI is on the side of some bullish momentum. But it would be prudent to note these price levels in conjunction with the 200-day moving average, which is US$23.13.