Gold Hits Yet Another All-Time High, Silver Surges Ahead of US CPI

Gold Hits Yet Another All-Time High, Silver Surges Ahead of US CPI

Teaser: Precious metals soar, with gold printing another new high and silver picking up where it left off last week. Prices appear immune to warnings of delayed rate cuts

Gold (XAU/USD), Silver (XAG/USD) Analysis

• Markets eying FOMC minutes and US inflation data for clues on rate path
• Gold appears impervious to USD strength and overbought conditions
• Silver breaks out of prior shackles, eying levels not seen since 2021
• Gold has become a highly monitored asset during anticipated monetary policy normalisation and elevated geopolitical tensions. Find out what out analysts forecast for the precious metal in Q2

Markets Eying FOMC Minutes and US Inflation Data for Clues on Rate Path

Today is rather quiet on the economic calendar because tomorrow provides a whole host of data, minutes and even a central bank decision. Market participants can loom froward to US CPI, the FOMC minutes from the March meeting and the Bank of Canada interest rate decision.

The big focus will be whether US CPI data will continue to taunt the Fed and their forecast of needing to cut interest rates three times this year. Recent robust data and an economy on track for 2.5% (annualized) growth despite elevated interest rates, has forced a reassessment of the timing and magnitude of US rate cuts this year.

PCE data for February proved to be rather stubborn and a similar CPI print may provide support for the US dollar and potentially send it back towards the swing high around 105. Gold has been largely impervious dollar strength as central bank buying has remained strong alongside solid retail buying out of China.

Current economic conditions are not exactly primed for rate cuts, especially with commodity prices, like oil, pushing higher.

Customize and filter live economic data via our DailyFX economic calendar

Gold Appears Impervious to USD Strength and Overbought Conditions

Gold is on track for its eighth successive day of record gains, barely slowing down to provide better entry points for a bullish continuation. The precious metal shows little sign of even a minor pullback, but a potentially hot CPI print may pose the sternest challenge in recent times.

However, even hotter CPI data may have little effect on what looks like a one-way market as rising US treasury yields have been ineffective when it comes to arresting gold’s rapid ascent. It is not often that the dollar and US yields move in opposite directions, but this is exactly what has been observed over the last week, with the weaker dollar actually presenting a discount to foreign buyers of the dollar-linked metal.

With no prior target levels, upside levels of consideration are up to interpretation. Yesterday the Bank of America raised its gold outlook, expecting the metal to average $2,500 an ounce by Q4. The bull case even sees prices hitting $3,000 an ounce in 2025. Citi also revised its 2024 outlook to $2,400 despite anticipating a near-term decline.

The RSI shows gold trading deeper into oversold territory – which usually precedes a market correction, even a minor pullback. However, solid central bank purchasing and the safe-haven appeal of the metal suggests it may take time for the market to cool. Tensions in eastern Europe and the Middle East stepped up a notch over the last week and continues to provide a tailwind for gold.

Gold (XAU/USD) Daily Chart

Source: TradingView, prepared by Richard Snow

Silver Breaks out of Prior Shackles, Eying levels not Seen Since 2021

Silver bulls really came to the party last week, elevating the metal above the prior level of resistance at $26.10. The metal finds immediate resistance at the $28.40 zone which came into play at the end of 2020 and the first half of 2021.

Support naturally appears at the 78.6% Fibonacci retracement of the major 0221-2022 decline at $27.41. Silver, unlike gold, has previously traded higher than where we are now, meaning price targets can be identified a lot easier. For not, this appears at the full retracement of the aforementioned major move, a little over $30. This is however, conditional upon a close and hold above $28.40.

Silver (XAG/USD) Weekly Chart

Source: TradingView, prepared by Richard Snow

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX