Metals Under Pressure On Monday

It’s another frustrating Monday morning for gold bulls this week. Both gold and silver remain under firm selling interest as the US Dollar sits just off last week’s highs, which marked the highest DXY prices since 2002. Both gold and silver have been heavy losers over the last two months as a result of the rally in USD. Hawkish Fed expectations and safe-haven demand have seen a flood of demand for USD which looks to remain a key theme in the near-term.

On the back of hiking rates by .5% in May, the Fed has signalled that further such hikes are likely needed near-term with the market now pricing in similar moves for June and July. Alongside this, we heard Fed chairman Powell last week opening the door for larger rate hikes saying the Fed stands ready to do more on rates if necessary.

USD has been firmly higher amidst this recent uptick in hawkishness from the Fed. However, weakness in risk-markets is also feeding into a higher US Dollar, further weighing on gold and silver prices. Fears of a global downturn, fuelled by higher inflation and tighter monetary policy, is sending equities and commodities prices lower. With investors moving capital into USD as a safety store, gold has been denied its usual safe-haven demand, further weighing on the metals complex.

Looking ahead this week, the latest US economic data (retail sales tomorrow) holds the potential to exacerbate this dynamic if weakness is seen. Last week’s consumer sentiment data fell to multi-year lows, in a bad omen for retail activity last month. Should tomorrow’s retail sales data miss forecasts, this will no doubt drive risk sentiment lower near-term, driving USD higher and therefore dragging gold and silver prices lower.

Technical Views

Gold

Following the latest failure around the bull channel top, gold prices have since sold-off sharply with the market last week breaking down through the rising channel support. With both MACD and RSI bearish here, the focus is on a continued move lower while price holds below the broken channel bottom. Price is now sitting beneath the 1826.71 level, putting focus on a test of 1763.88 next.

Silver

The breakdown from the latest failure around the 25.5384 level has seen the market dropping heavily. Price recently broken down through the bullish trend line support and has now broken back inside the bear channel from last year’s highs. With both MACD and RSI bearish, the focus is on a further drop lower towards the 19.5643 level while price holds below the 22.3205 level.