Written by: Salma El-Saqqa
Precious metals markets are witnessing stability and growth supported by the decline in crude oil prices, which has strengthened expectations for a slower pace of interest rate hikes by the Federal Reserve. The drop in oil prices has reduced concerns regarding inflationary pressures, which has positively reflected on the attractiveness of gold and silver as investment assets, as traders await the next steps of U.S. monetary policy.
Interest rate expectations and their impact on markets
Available data indicates a lower probability of an interest rate hike during the current month, given the varying estimates regarding upcoming Fed meetings. Recent statements by Federal Reserve officials have helped reshape market expectations, leading traders to closely monitor future moves. All eyes remain on upcoming economic data, especially the Personal Consumption Expenditures (PCE) index, which is a key pillar in assessing macroeconomic trends.
Recovery in physical demand for gold
Physical markets, particularly in India, have seen a noticeable recovery in demand for gold after a period of falling prices. With the approach of the holiday and wedding seasons, distributors have begun imposing price premiums after months of offering discounts. Despite limited physical supply and lower import volumes compared to the previous year, this shift reflects consumer desire to acquire gold amidst recent price changes. In China, cautious buying activity was also observed in spot markets, with gold continuing to trade at varying price premiums.
Technical analysis of gold and silver performance
Technically, gold is trading within a specific range through which it is attempting to break key resistance levels, with the $4201 level representing a critical test point for the upward path. If this level is surpassed, prices may open horizons toward higher levels, while the $4176 level remains important support to maintain a positive short-term outlook.
As for silver, it is also benefiting from the decline in expectations regarding interest rate hikes, but it remains more prone to volatility compared to gold. Silver faces technical challenges at certain trend lines, as analysts monitor the metal's ability to exceed resistance points to turn towards a more clear upward trend. Expectations remain dependent on the ability of metals to retain their technical gains amidst volatility in energy markets and global monetary policies.
