Gold and Silver continue to drop as the Fed remains hawkish

A stronger dollar and higher bond yields weighed on gold and silver on Wednesday. The precious metals have been struggling to regain a bullish drive in recent weeks as save-haven demand has tapered off giving way to a resurgence in expectations that the Fed will not cut rates in 2024. On Tuesday, Fed Governor Michelle Bowman emphasized that maintaining the current policy rate for an extended period would likely suffice to control inflation, though she remains open to further rate hikes if necessary.

This dynamic has weighed on gold and silver as investors have moved to higher-yielding assets. That said, both precious metals continue to have ample support as there is no sign that this has become a seller’s market. At the end of the day, rates are expected to come down at some point and it is believed that when the time comes it will allow gold and silver to flourish. If we get confirmation from the Fed – or even increased speculation in markets – that there will be a cut in 2024 then we could see the bullish momentum return.  For now, as long as US treasury yields remain supported we can expect to see subdued momentum in precious metals. For gold, this has been hovering on either side of $2,330 whilst the moves have been contained above $2,280. A dip below this level could open up the chance for a further pullback towards $2,250. The RSI has started to show signs of exhaustion in the bullish momentum as it remains tipped to the downside below the mid-line. 

Gold (XAU/USD) daily chart

(Past performance is not a reliable indicator of future results.)

For silver, the momentum has been more choppy in recent weeks. The fact that the metal is applied in industrial production adds a different element to its performance when compared to gold. Resilient economic data has allowed it to attract buying interest but the stronger dollar and higher yields scenario has also weighed on its performance, seeing strong moves over the past few weeks. 

On the chart, XAG/USD has adopted a bearish bias in the short term, with most daily advances being countered with deeper pullbacks. Price has dropped below two ascending trendlines from the February 29 low which suggests that sellers have started to take over. The RSI has also been falling and is now below the mid-line with a continued bearish bias. 

Silver (XAG/USD) daily chart

(Past performance is not a reliable indicator of future results.)