Gold and silver may be looking to make some big moves at the end of this week, as the heavyweight of inflation data is released.
US inflation is released on Thursday, and investors will immediately be trying to determine what the results and the subsequent commentary from Fed officials could mean for gold and silver.
As it stands, the market is expecting US inflation (YoY to January) to be 7.3%, and for the US Federal Reserve to strongly signal a rate hike of 0.25% in its next meeting, to be implemented in March.
Fed officials' more forceful and frequent commentary concerning an initial rate hike greater than 0.25% could significantly move the gold and silver markets. For now, this is a scenario that is largely dismissed when put to Fed officials like Cleveland Federal Reserve President Loretta Mester.
However, Atlanta Federal Reserve President Raphael Bostic appears more receptive to the idea, so the possibility of a 50 bp hike is definitely on the table, primarily if US inflation data records something closer to 8.00%.
A more aggressive rate hike of 0.50% from the Fed could have diametric consequences for the price of gold and silver. The direction gold and silver take depends on investors' sentiment concerning whether they believe the Fed is unreasonably aggressive.
Working in tandem, or at least in part influencing the above-mentioned investor sentiment, could be the technical conditions of gold (XAU/USD) and silver (XAG/USD).
Gold's recent trading pattern has set some clear support and resistance zones. Price levels that should be paid attention to for clean breaks above or below include $1,831.00 and $1835.50. Further afield, the levels $1,825.60 and $1,838.50 should be kept in the back of traders' minds for extra volatile markets. At the time of writing, XAU/USD is trading at $1,834.00.
An analysis of the price of silver is more complicated without any support and resistance levels to reference. We will turn to the moving averages for this metal to find where silver may find some resistance in a bullish environment.
XAG is currently trading at $23.23 per ounce, immediately beneath the 20 and 50-day moving average, which has converged at approximately $23.25. This is not a strong resistance as the RSI is on the side of some upwards momentum. But it would be prudent to note these price levels in conjunction with the 200-day moving average, which is $23.13.
