Gold prices see bullish reversal, silver prospects clouded by recession fears
GOLD PRICE FORECAST: SLIGHTLY BULLISH
SILVER PRICE PREDICTION: NEUTRAL TO SLIGHTLY BEARED
- Gold prices fall for the second week in a row, silver also falls but suffers more severe losses
- fall US Yields and an increased appetite for defensive positions may start to push gold higher. Silver is unable to take full advantage of this situation due to fears of economic development downturn demand for industrial metals will cool down
- This article looks at the key technical levels gold should watch over the coming week
Most read: Gold prices falter as inflation and recession chances send conflicting signals
gold prices (XAU/USD) suffered modest losses over the past five sessions, falling around 0.6% to $1,830 and falling for the second straight week amid weakness in the commodity complex, though the decline has likely been contained increased fear of recession. Silver (XAG/USD)meanwhile also performed negatively, but posted a larger one fall on To care that there will be an economic slowdown cool demand for raw materials with industrial applications.
Looking to next week, the The trajectory of gold and silver can show some divergence, although the two assets tend to trade in parallel due to their similar safe-haven characteristics and comparable interest rate sensitivity. However, there is a chance that gold could stabilize upward trend, but silver will struggle to regain ground. Let’s see why.
There are several important events on the US calendar in the coming days, including Durable Goods Orders in May and ISM Manufacturing in June. Preliminary figures from regional surveys and the S&P Global PMIs reports suggests incoming data is likely to surprise to the downside, which lifts it specter of a recession in the largest economy in the world.
Feared that the The US is headed for a hard landing may increase demand for investments that tend to retain their value or appreciate during market turbulence. This narrative can also put pressure on US interest rates, or at least prevent them from rising significantly.
After FOMC raised borrowing costs 75 basis points to 1.50-7.75% meeting in June and signaled that it would go through with plans to pre-charge rate hikes, US Treasury yields have started to do so withdraw from their cycle highs that affects Tightening financing conditions will trigger a downturn, before Running a political pivot. These expectations should strengthen in the near term if economic data continues to deteriorate, a scenario that seems likely at this point.
With a lower re-rating of yields and increasing appetite for defensive positions, gold appears well positioned to stage a decent near-term recovery. While both of these factors can boost prices for other precious metals as well, silver will struggle to post gains amid concerns that a potential slowdown in domestic production will significantly dampen demand for base metals. For the reasons above XAU/USD could be trading with a slight bullish bias at the end of the month. For its part, XAG/USD has a neutral to slightly declining profile.
GOLD TECHNICAL ANALYSIS
From a technical perspective, gold volatility has declined over the past few weeks with the metal entering what appears to be an A mark consolidation phase and traded within the $1,875/$1,805 range for the past few months. With XAU/USD now moving towards the lower border of this interval, traders should monitor the price reaction carefully to determine the possible short-term direction. However, a break below $1,805 could open the door for a pullback towards $1,780, followed by $1,755.
On the other hand, if gold prices start to rise, as fundamental analysis suggests, initial resistance appears near $1,860, an area defined by the 50-day simple moving average and a descending trendline extending from the March high extends from. If the bulls manage to clear this barrier, we could see a rally towards $1,880. Further strength shifts focus higher to $1,895, the 38.2% Fibonacci retracement of the March/May decline.
GOLD PRICES TECHNICAL CHART
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— Written by Diego Colman, Market Strategist for DailyFX