Analyzing Gold and Silver Price Setups: What Lies Ahead?

Analyzing Gold and Silver Price Trends Amidst Rising Treasury Yields: Investor Caution Advised for Coming Weeks.

As of October 3, 2023, gold and silver are teetering on the edge of their multi-week ranges, indicating potential further declines soon. The escalating US Treasury yields, which reached a 16-year high last week, are attributed to this decline. The market’s growing confidence in prolonged higher interest rates has significantly impacted these precious metals, yielding no interest.

The US Treasury 10-year yield recently surged above the 2018 high of 3.26%, signaling a path toward the pre-Great Financial Crisis high of 5.33%. Rising nominal interest rates, decreasing price pressures, and inflation expectations have elevated actual rates. This has, in turn, increased the opportunity cost of holding gold, making it less attractive for investors.

Federal Reserve Governor Michelle Bowman’s recent hawkish stance, indicating a willingness to support another increase in the central bank’s policy rate if inflation progress stalls, has further weighed down on gold’s safe-haven appeal.

Analyzing Gold and Silver Price Setups

Gold Outlook: Bearish Signals and Support Levels

Gold, represented by XAU/USD, has breached a critical support level at the 200-day moving average, approximately around the June/August low of 1885-1890. This breach has paved the way for a potential decline toward the February low of 1805, closely aligned with solid support on the 200-week moving average. Subsequent support levels are at 1785 and 1720, representing the 76.4% retracement of the 2022-2023 rally.

The 14-day Relative Strength Index (RSI) indicates oversold conditions, suggesting a possible corrective bounce. However, a decisive break below 1805 could confirm that the remarkable one-year rally since early 2022 was merely a corrective phase rather than the beginning of a new uptrend.

Silver Outlook: Bearish Patterns and Trend Reversal

Silver, denoted by XAG/USD, has broken below crucial converged support levels, including an uptrend line from late 2022 and a horizontal trendline from June, around 22.00. This breach has triggered a bearish head and shoulders pattern, signaling a potential decline toward the March low of 19.85. Furthermore, the fall below the 200-day moving average suggests that the uptrend observed since late 2022 has reversed, indicating a significant shift in market sentiment.

In summary, gold and silver face considerable downward pressure due to rising US Treasury yields and the overall market sentiment. The breach of key support levels and the emergence of bearish patterns highlight the challenging path ahead for these precious metals. Investors should closely monitor evolving market dynamics and prepare for potential further downside in the coming weeks.

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