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Silver and Gold Prices May be at Risk of a Short-Term Pullback

Silver and Gold Prices May be at Risk of a Short-Term Pullback

Dimitri Zabelin, Analyst

Silver Prices, Gold Price Chart, XAU/USD, XAG/USD – TALKING POINTS

  • Silver prices may retreat as XAG/USD feels the pressure at key technical cross-section
  • Gold prices at risk short-term pullback as slope of appreciation shows signs of fragility
  • Is the appeal of silver and gold as an anti-fiat hedge still present after Fed’s comments?

Silver Price Outlook

Silver prices have risen a little over 32 percent after bottoming out at a multi-year low, though the precious metal’s ascent may soon face a short-term pullback. XAG/USD is approaching a key inflection range between 16.177 and 16.541. As the area between it and the uptrend narrow, capitulation or a push forward could reveal and underlying bearish or bullish bias.

XAG/USD – Daily Chart

Chart showing silver prices

XAG/USD chart created using TradingView

If XAG/USD is unable to clear that zone, a break below the uptrend could precede a larger pullback and lead to a possible retest of the September downtrend that the precious metal only recently recovered from. Conversely, a turn higher would open the door to flirting with the lower tier of a key congestive range between 17.440 and 18.110. Having said that, the path of least resistance suggests a bearish tilt.

To see more analysis on commodities, be sure to follow me on Twitter @ZabelinDimitri

Gold Price Forecast

Much like silver, gold prices too have managed to nurse their losses after incurring a double-digital decline following the selloff in risk-oriented assets in March. This also helped to illustrate that gold is incorrectly mislabeled as a haven-linked asset, for if it was, traders would have seen the precious metal rise.

Amid the selloff, the appeal of gold as an anti-fiat hedge waned since interest rates appeared to have hit the lowest point policymakers were willing to let them go. See my prior piece outlining the Fed’s comments on using negative interest rates here.

XAU/USD – Daily Chart

Chart showing gold prices

XAU/USD chart created using TradingView

Consequently, its utility as an anti-fiat hedge evaporated and its relative illiquidity as compared with the US Dollar made it less attractive to hold in uncertain times and led to heightened liquidation pressure. Digression aside, gold prices have managed to rise a little over 17 percent from the December 2019-lows and was helped by a steep, upward-sloping support channel.

However, recent price action suggests the precious metal may be losing steam as it trades within the range of the slope of appreciation. If it cracks under the weight of increased selling pressure, XAU/USD may encounter some downside friction between 1671.81 and 1671.84 before turning lower. If that area also succumbs to the force of sellers, the next floor to clear may be at 1641.20.

--- Written by Dimitri Zabelin, Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitriTwitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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