Gold and silver prices have experienced a surge recently, driven by geopolitical concerns and escalating tensions in the Middle East. These precious metals have been seen as safe-haven assets, attracting potential safe-haven bids and short-covering.
The dovish comments made by US Federal Reserve officials, suggesting that the central bank has pivoted on interest rates, have also supported gold prices. Investors are eagerly awaiting Fed Chair Powell’s upcoming speech, with the market pricing in a high likelihood that interest rates will remain unchanged at the next Federal Reserve meeting.
While geopolitical uncertainty can keep precious metals in demand, the overall direction of US Treasury yields and real yields will impact the trajectory of gold prices. Unless there is a reversal in these yields, the path of least resistance for gold is expected to remain sideways to down. Geopolitical risks can slow or reverse the decline in gold prices, but they are just one factor to consider.
On technical charts, gold has encountered significant resistance at various levels, including the September high, the 89-day and 200-day moving averages, and the upper edge of the Ichimoku cloud on daily charts. Despite the recent rebound, the 14-Relative Strength Index (RSI) has been unable to surpass the 60-65 range, suggesting that the rally may not mark the start of a new trend. A break below the recent low of 1905 would indicate a fading upward pressure.
To alleviate immediate downside risks, gold needs to rise above the July high of 1987. Furthermore, a crack above the May high of 2072 is necessary for the outlook to turn bullish.
Moving on to silver, it has also seen a rebound but is facing strong resistance at an uptrend line from late 2022 and at the August low. Above this, there is a major converged hurdle involving the 200-day moving average, the late-September high, and the upper edge of the Ichimoku cloud on daily charts. Silver needs to break through the 23.25-23.75 area to lessen immediate downward pressure. For a more positive outlook, it needs to surpass the 25.50-26.25 resistance level.
Any fall below recent lows could lead to further declines, with support levels at the early-October low and the March low.
In conclusion, while geopolitical tensions can boost gold and silver prices, the overall trajectory of US Treasury yields and real yields will have a significant impact. Gold and silver prices face resistance at various levels, and further bullishness will depend on breaking through these barriers. Traders and investors should closely monitor key technical levels and the broader market conditions to form a comprehensive outlook.