Gold and Silver Surge on Middle East Tensions

Gold and silver prices surge amid Middle East tensions, with a focus on FOMC decision and US NFPs for market impact.

In response to growing tensions in the Middle East, gold and silver prices are rising. The United States, pointing fingers at Iran-backed militia, warns of reprisals following deadly drone strikes on US service personnel at a base in northeast Jordan. President Joe Biden pledges retaliation, adding a layer of uncertainty to an already volatile region. Despite Iran’s denial of involvement, concerns linger about potential escalations if the US responds.

Commodity traders are bracing for a busy week with pivotal decisions from the Federal Reserve (Fed) and the Bank of England (BoE). Additionally, the week concludes with the latest US Jobs Report (NFP) release, adding further anticipation to the market. Current market sentiment indicates a nearly 50/50 chance of a 25 basis point interest rate cut at the upcoming March 20th Federal Open Market Committee (FOMC) meeting, with 136 basis points in cuts expected throughout the year.

Gold and Silver Surge on Middle East Tensions

For the past 12 days, gold has remained within a narrow range of $38/oz., indicating a standstill between buyers and sellers. This pattern will likely persist until the FOMC decision on Wednesday unless Middle East tensions intensify further. Chair Jerome Powell will lead the post-decision press conference, providing insights into future actions, although the committee may not disclose a definitive rate-cut timetable. Until then, analysts expect gold to trade sideways.

Retail trader data suggests that 61.96% of traders are net-long, with the long-to-short ratio at 1.63 to 1. The net-long traders increased by 1.97% yesterday but decreased by 6.24% from last week. Conversely, net-short traders rose by 6.17% yesterday but fell by 5.91% from the previous week.

Gold: Bullish

• 60% of clients are net-long.
• Change in longs: Daily (2%), Weekly (-5%)
• Change in shorts: Daily (15%), Weekly (-3%)
• Open interest change: Daily (7%), Weekly (-4%)

In contrast, Silver has shown signs of improvement over the past week after weeks of underperformance, recovering from recent losses. While it still displays a negative outlook, a potential turnaround could occur if Silver surpasses the 20-day simple moving average. However, upward momentum may encounter resistance from a cluster of prior highs and the 50- and 200-day moving averages around the $23.50 mark. Traders and investors closely watch these developments for potential shifts in the precious metals market.

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