Precious Metals Updates by Solid ECN

Commercial Content Analysts
21

On the daily chart, the development of the third wave of the higher level (3) of 3 started, within which the first wave of the lower level 1 of (3) has formed, and a local correction develops as the wave 2 of (3). Now, the wave c of 2 is developing, within which the first wave of the lower level (i) of c of 2 has formed.

If the assumption is correct, after the end of the correctional wave (ii) of c the price will fall to the levels of 23.52 - 22.73. In this scenario, critical stop loss level is 25.25.

22

The XAUUSD pair is actively losing value against the background of strengthening the position of the US currency on the eve of the May meeting of the US Fed, at which the parameters of the current monetary policy can be significantly adjusted in order to combat record inflation, which reached 8.5% compared to March 2021. Analysts expect an interest rate increase of 0.5%.

Another important factor that has a serious negative impact on gold quotes is the difficult epidemiological situation in China. Official authorities report an outbreak of COVID-19 in Beijing, which again threatens a large-scale lockdown and will lead to a noticeable reduction in industrial production. Earlier, 22 non-imported cases of coronavirus infection were detected in the capital, against this background, the country’s authorities ordered mandatory testing of the population in the districts of Beijing, and not which of them were closed according to the results of the inspection. This led to a fall in Chinese stocks, commodities and the yuan, while the XAU/USD pair declined to the level of 1900.

Strict anti-COVID restrictions can cause serious problems in the supply chains between Asia, the USA and Europe. The congestion of Chinese ports, combined with the military conflict in Ukraine, threatens to inflict a double blow that could undermine the recovery of the national economy, which is already experiencing inflationary pressure. Against this background, the demand for gold is falling, the price is declining, and if the situation with the delivery of goods is not resolved, the downward trend may continue up to the level of 1850 and below.

The long-term trend remains upward. The key support level is at around 1900.00 and, if it is held, the growth of the XAU/USD pair will continue with a target at the April maximum. Otherwise, it will be possible to expect a decline in quotations to the level of 1850.

The mid-term trend is downward. Last week, market participants tried to break through the resistance zone 1969.30–1962.10, but without success, and the price returned below the level. The current week began with the achievement of the first sales target in the area of the March minimum in the area of 1890.00. The second target is the zone 1872.40 - 1865.8.

Resistance levels: 1993, 2062 | Support levels: 1900, 1872, 1850

23

Silver quotes show a local downtrend, trading around 23.56.

The pressure on the instrument is still exerted by expectations of further tightening of monetary policy by the US Federal Reserve. Already during the May meeting, members of the Fed can raise the key interest rate by 50 basis points, as well as launch a quantitative tightening program. High interest rates have always been an obstacle to the growth of the precious metals market. The second negative factor is the US bond market, which has been at its highs of 2018. The high yields of Treasuries look much more attractive to investors than riskier assets such as gold and silver. Finally, a more long-term negative factor is the withdrawal of the London Metal Exchange (LME) from the global precious metals trading market. The day before, representatives of the trading platform announced the termination of all transactions with these assets until July 11 due to a drop in demand for contracts for gold and silver; however, experts attribute this event to recent reports of the withdrawal of contracts for nickel.

Over the past week, the demand for silver, according to the US Commodity Futures Trading Commission (CFTC), remained virtually unchanged: the number of net speculative positions in the precious metal amounted to 46.4K against 46.0K a week earlier.

The price is trading within the global ascending corridor, approaching the support line. Technical indicators have already reversed and issued a sell signal: the fast Alligator indicator EMAs crossed the signal line from above, and the histogram of the AO oscillator is forming descending bars in the sales area.

Support levels: 23, 21.4 | Resistance levels: 23.95, 25.8

24

Quotes of XAUUSD have suspended growth and are being corrected down ahead of the May meeting of the US Federal Reserve on monetary policy, where a decision can be made to raise the key rate by 0.50%. Now the asset is trading around 1873.0.

Nevertheless, despite the local decline, gold continues to fulfill its main function of protecting investor capital from depreciation in the face of critically high inflation, which in the US reached 8.5% year on year. It is for this reason that the demand for the asset from the side of large market players continues to be consistently high, and since the beginning of March, ETFs denominated in gold have purchased another 100 tons of metal. Of course, in the context of the “hawkish” policy of the US Fed, XAU/USD is slowly declining, and in the event of a sharp increase in interest rates during the meeting scheduled for May 3, an acceleration of downward dynamics is possible; however, the likelihood that quotes will trade above at 1800 dollars an ounce is also quite high.

Investors’ interest in trading the assets of the metal group and, in particular, gold is also confirmed by the data of the US Commodity Futures Trading Commission (CFTC). According to last week’s report, the number of net positions backed by money remains in favor of buyers at 180,607 contracts, while sellers have a value of 55,640.

On the daily chart, the price is correcting as part of a local decline wave, approaching a solid support line located in the area of 1810. Technical indicators have already reversed and issued a sell signal: the fast Alligator indicator EMAs crossed the signal line from above, and the histogram of the AO oscillator moved to the sales area, having formed several bars below the transition level.

Support levels: 1865, 1810 | Resistance levels: 1916, 1978

25

On the daily chart, the development of the third wave of the higher level (5) of 3 continues, in which wave 3 of (5) has formed. At the moment, there is a downward correction as the fourth wave 4 of (5), within which wave c of 4 is being formed.

If the assumption is correct, after it is finished, the growth of XAUUSD will continue to the levels of 2100 - 2200. The level of 1827.33 is critical and stop-loss for this scenario.

26

Quotes of the precious metal are being corrected in a downtrend, being at around 1883.

Investors are showing an active interest in gold as a defensive asset after the freezing of Russia’s gold and foreign exchange reserves against the backdrop of sanctions imposed after the start of a special military operation in Ukraine. According to the statistics of the World Gold Council, in Q1 2022, demand increased by 34%, reaching 1.234K tons, while the volume of supply in the same period was fixed at 1.157K tons. Despite the positive statistics, at the moment one can observe a downward correction in XAU/USD, which is caused by the market’s expectation of the US Federal Reserve meeting scheduled for May 4 and the tightening of the US monetary policy parameters.

Additional pressure on the metal comes from its main consumer, China. The outbreak of coronavirus in the country has not yet been contained, and last week there were reports of an increase in the incidence in its capital. Investors are seriously afraid that the authorities may impose quarantine restrictions, similar to those currently in effect in Shanghai (a total lockdown has been introduced in the industrial center, and residents are undergoing daily mass testing for COVID-19). Against this background, according to the data of the National Bureau of Statistics of the People’s Republic of China, the index of business activity in the Chinese manufacturing sector in April fell to 47.4 points from 49.5 points, continuing to fall from the psychologically important level of 50 points separating growth from recession. Business activity in the non-manufacturing sector fell even more and amounted to 41.9 points against 48.4 points in March.

Thus, the number of gold contracts decreased to 218.0K from 239.8K a week earlier, according to the US Commodity Futures Trading Commission (CFTC).

On the daily chart, the price is correcting as part of a local decline wave, approaching a global support line located in the area of 1810. Technical indicators have already reversed and issued a signal to open short positions: fast EMAs on the Alligator indicator continue to expand the range of fluctuations, and the histogram of the AO oscillator, having moved into the sell zone, forms descending bars.

Support levels: 1870, 1810 | Resistance levels: 1916, 1978

27

High probability of pair growth.

On the daily chart, the development of the third wave of the higher level (3) of 3 has begun, in which the first wave of the lower level 1 of (3) has formed and the local correction continues to develop as wave 2 of (3). At the moment, wave c of 2 is being built, within which the formation of the fifth wave of the lower level (v) of с of 2 is being completed.

If the assumption is correct, the price of XAGUSD will continue to move towards the area of 24.12 - 26.2. The level of 21.4 is critical and stop-loss for this scenario.

28

XAUUSD, the instrument rushed to local lows

Gold prices are consolidating near the level of 1865 after an attempt at corrective growth the day before, which did not allow XAUUSD to consolidate on new local lows from February 16. The pressure on quotes is exerted by the growth in the yield of US Treasury bonds: the indicator for 10-year bonds last Monday exceeded 3% for the first time since December 2018 and remains in this area at the present time.

The investment attractiveness of the precious metal is decreasing before the start of the US Federal Reserve’s meeting on monetary policy, which will be held today at 20:00 (GMT+2). US officials are expected to raise interest rates by 50 basis points at once, and also announce the launch of a quantitative tightening program, which should help to reduce the almost 9 trillion dollars balance sheet. Higher short-term interest rates and US bond yields tend to increase the opportunity cost of holding zero-yield bullion.

This week, the Bank of England will also hold a meeting on monetary policy, which will allow it to maintain parity, but the European Central Bank (ECB) again looks somewhat apart from this background. The regulator has not officially announced plans to tighten monetary policy, but its representatives have repeatedly spoken out in favor of such a scenario. In particular, Isabelle Schnabel, a member of the executive board, commenting on the problem of growing inflation in the region, noted that she allows the launch of a program of gradual rate increase as early as July this year.

On the daily chart, Bollinger Bands are steadily declining. The price range is changing slightly, but remains rather spacious for the current level of activity in the market. MACD is also decreasing, maintaining a relatively strong buy signal, being located below the signal line. Stochastic, having demonstrated an unsuccessful attempt at corrective growth is again reversing into a downward plane, still indicating the risks of the instrument being oversold in the ultra-short term.

29

Despite the fact that the US Fed has moved to a decisive tightening of monetary policy and yesterday raised the interest rate immediately by 50 basis points to 1.00%, commodities reacted to this with an increase in quotations. Most likely, traders put the regulator’s decision in the prices of trading instruments long before the official announcement. Since the analysts’ forecast on the adjustment of the rate value was justified, the USD began a downward correction.

An additional factor that prevented the exchange rate of the XAG/USD pair from continuing the April decline is the restoration of production processes in China. While cities such as Shanghai and Beijing continue to adhere to the principles of a dynamic zero tolerance policy for COVID-19, regardless of the economic costs, Hong Kong announced the easing of anti-COVID measures from May 5. On Monday, the number of new cases of coronavirus infection in the metropolis fell below 300 for the first time in almost three months — to 283. Thus, from May 19, cafes, nightclubs and some other establishments that have been closed since the beginning of the year, when the fifth wave of the epidemic covered the country, will resume work. Against this background, we can count on the fact that other large cities will gradually open up, and this, in turn, will support the demand for precious metals.

The long-term trend remains upward. Last Monday, the bidders tested a strong support level of 22.20, which was held, after which the price of the XAG/USD pair rose to the resistance level of 23.25. If this level is broken out, the upward trend will continue with a target at 24.25.

The mid-term trend is downward. As part of the decline last week, the quotes reached the target zone 2 (23.14–22.95). This week, the “bears” tried to break it, but the price returned to the area of 23.14–22.95. In case of consolidation above the range, the upward correction will continue with a target at the trend boundary of 24.06–23.89.

Resistance levels: 23.25, 24.25, 26.1 | Support levels: 22.20, 21.45

30

On the daily chart, the development of the third wave of the higher level (5) of 3 continues, in which wave 3 of (5) has formed. At the moment, there is a downward correction as the fourth wave 4 of (5), within which wave c of 4 is being formed.

If the assumption is correct, after it is finished, the growth of XAUUSD will continue to the levels of 2100 - 2200. The level of 1827.33 is critical and stop-loss for this scenario.

31

On the daily chart, the development of the third wave of the higher level (3) of 3 started, within which the first wave of the lower level 1 of (3) formed, and a local correction developed as the wave 2 of (3). Now, the wave c of 2 has formed, within which the fifth wave of the lower level (v) of c of 2 has developed.

If the assumption is correct, the XAGUSD pair will move to the area of 24.12 - 26.2. In this scenario, critical stop loss level is 21.4.

32

Gold prices show moderate corrective growth, consolidating after an active decline yesterday, returning the XAU/USD pair to the local lows of May 3. Currently, the instrument is testing 1860, receiving support from technical factors.

The strengthening dollar and the growth in the yield of US Treasury bonds put pressure on the positions of the metal. Thus, the underlying 10-year securities reached 3.185%, which is the highest level since November 2018, but now, it has corrected to the area of 3.040%, while the USD Index exceeded the high of December 2002 at 104.120, but now it has fallen to 103.590. Also, last week, the US Federal Reserve expectedly increased interest rates by 50 points to 1.00% and announced the start of a phased reduction in its balance sheet. In subsequent comments, the head of the regulator, Jerome Powell, dispelled reports that in the future, officials could accelerate the pace of monetary tightening and, for example, adjust the rate by 75 percentage points. Against this backdrop, gold quotes are supported by the prospects for continued growth in consumer inflation in the US during the current quarter, although it has already reached its highest level in 40 years, around 8.5%. Tomorrow, American investors will be watching the April statistics, which may show the first signs of weakening. In particular, it is assumed that the consumer prices will be only 0.2% MoM after rising by 1.2% for March and may fall 8.5% to 8.1% YoY.

Bollinger Bands show a moderate decline on the daily chart: the price range narrows, reflecting the emergence of ambiguous trading dynamics in the short term. MACD falls, keeping a poor sell signal below the signal line. Stochastic falls close to its lows, indicating that instrument may become oversold in the ultra-short term.

Resistance levels: 1877.83, 1900, 1930, 1952.53 | Support levels: 1850.2, 1823.09, 1800, 1760.74

33

The precious metal quotes show a local downward trend, trading around 21.5.

The key factor that led to the global sell-off in commodity markets was the US Federal Reserve’s inflation forecast for April, which suggests a decline to 8.1% from 8.5% a month earlier. The main US statistics on the dynamics of consumer prices will be published today at 14:30 (GMT+2). Adjusting the interest rate to 1.00% could not have had such an early effect, and there are no prerequisites for reducing real inflation now: oil quotes are held above 100 dollars per barrel, contributing to fuel price growth, which increases the cost of delivering goods and increases their final cost. Thus, the key factors of inflation, such as fuel and food prices, are rising, but the regulator insists that inflation should come down. Uncertainty in the market forces traders to get rid of their assets in the stock market and commodity market.

A serious outflow of investors from silver is also confirmed by data from the US Commodity Futures Trading Commission (CFTC), according to which, over the past week, the number of net speculative positions decreased to 28.1K from 35.4K a week earlier. Over the past three weeks, the number of positions has decreased from 46.5K to the current 28.1K for the first time since 2020.

The price left the limits of the rising global channel with dynamic boundaries at 26.50–22.00, breaking the support line yesterday. Technical indicators reversed and gave a sell signal: the range of EMA fluctuations on the Alligator indicator actively expands downwards, and the histogram of the AO oscillator forms downward bars in the sell zone.

Resistance levels: 22.15, 24.4 | Support levels: 21.17, 19.5

34

On the daily chart, the fifth wave of the higher level (5) of 3 develops, within which the wave 3 of (5) formed. Now, a downward correction is ending as the fourth wave 4 of (5), within which the development of the wave c of 4 is ending.

If the assumption is correct, after the end of the correction, the pair XAUUSD will grow to the levels of 2070.42 - 2200. In this scenario, critical stop loss level is 1770.2.

35

Quotes of XAU/USD are under pressure from “hawkish” rhetoric from the US Federal Reserve and high prospects for the continuation of an aggressive monetary policy at the June meeting, in particular, a sharp increase in the rate by another 0.50%. The “bearish” momentum is expected to push gold prices towards psychological support at 1800. In addition, investors have become more inclined towards risky assets, redirecting their capital from protective ones, which also puts pressure on quotes, while the fundamental picture changes slightly.

Pressure on the position of gold is also exerted by the rising dollar, which is supported by technical factors and high yields on US Treasury bonds. However, the deteriorating economic outlook and the ongoing conflict in Eastern Europe are giving the precious metal some support. At the first sign that central banks will ease their “hawkish” rhetoric, one can expect a noticeable increase in demand for a “defensive” asset.

Among the macroeconomic factors at the beginning of the week, weak Chinese statistics should be singled out, providing additional support to the US currency. Retail Sales in China plunged to a record 11.1% in April after declining 3.5% in March. Analysts had expected a much more modest 6.0% decline.

Bollinger Bands in D1 chart demonstrate a stable decrease. The price range is expanding from below; however, it fails to catch the surge of the “bearish” sentiment at the moment. MACD is going down preserving a stable sell signal (located below the signal line). Stochastic has been in close proximity to its lows for several days already, which indicates the risks of gold being oversold in the ultra-short term.

Existing short positions should be kept until technical indicators are clarified.

Resistance levels: 1823.09, 1850.2, 1877.83, 1900 | Support levels: 1800, 1775, 1752.87, 1730

36

On the daily chart, a downward correction of the higher level develops as the second wave (2), within which the wave C of (2) forms. Now, the third wave of the lower level iii of C has formed, and a local correction has started to develop as the fourth wave iv of C.

If the assumption is correct, after the end of the correction, the price will fall to the levels of 18.40–15.71. In this scenario, critical stop loss level is 23.25.

strong text

37

XAGUSD, silver prices are consolidating around 21.5

Silver prices show a slight decline during the Asian session, testing the level of 21.5 for a breakdown. The instrument managed to update the local highs of May 11 the day before; however, the “bulls” failed to consolidate on new levels, as a result of which XAGUSD returned to the opening levels. Pressure on the positions of the instrument was exerted by optimistic macroeconomic data from the USA.

Tuesday’s statistics on the dynamics of Retail Sales in the US was better than market expectations. In April, Retail Sales volumes slowed down from 1.4% to 0.9%, while analysts expected a decline to 0.7%. Retail Sales excluding Autos for the same period slowed down from 2.1% to 0.6%, which turned out to be twice as good as experts’ forecasts. Retail Sales Control Group declined marginally from 1.1% to 1.0% in April, while forecasts suggested a sharp slowdown to 0.5%. Thus, sales figures do not yet reflect a dramatic slowdown in consumer activity within the country. This removes some of the risks from investors who are concerned about a possible slowdown in the pace of monetary tightening by the US Federal Reserve.

Bollinger Bands on the daily chart show a steady decline. The price range is narrowing, reflecting the emergence of multidirectional trading dynamics in the short term. MACD indicator is growing, while preserving a rather stable buy signal (located above the signal line). Stochastic is showing similar dynamics; however, the indicator line is already approaching its highs, indicating the risks of overbought instrument in the ultra-short term.

Resistance levels: 22, 22.4, 22.7, 23 | Support levels: 21.39, 21.12, 20.81, 20.39

38

The precious metal quotes are being corrected in a downtrend, being around 1814 dollars per ounce.

The asset is declining amid fears for global demand due to the coronavirus outbreak in China, which led to serious restrictions. The negative effect on the Chinese economy can be assessed now. Yesterday, industrial production data were published in April, which fell by 2.9% after rising by 5.0% in March. Retail sales fell 11.1%, well above the 3.5% decline in March. Due to the introduced lockdown, the unemployment rate also increased, which amounted to 6.1% compared to 5.8% in March.

According to the Commodity Futures Trading Commission (CFTC), since mid-March, the number of net speculative positions in gold has decreased from 274.5K to 193.3K, and over the last week, the outflow amounted to 5.9K positions. Thus, the overall speculative position in gold is approaching the minimum levels of the middle of last year at 165–175K positions, which indicates an extremely low demand for the metal.

On the daily chart of the asset, the price is moving within the global ascending channel, approaching its lower border. Technical indicators maintain a stable sell signal: indicator Alligator’s EMA fluctuations range expands, and the AO oscillator histogram, having moved into the sell zone, continues to form downward bars.

Resistance levels: 1850, 1917 | Support levels: 1790, 1700

39

On the daily chart, the fifth wave of the higher level (5) of 3 develops, within which the wave 3 of (5) formed. Now, a downward correction has developed as the fourth wave 4 of (5), within which the wave c of 4 has formed.

If the assumption is correct, the pair will grow to the levels of 2070 - 2200. In this scenario, critical stop loss level is 1785.69.

40

On the daily chart, a downward correction of the higher level develops as the second wave (2), within which the wave C of (2) forms. Now, the fourth wave of the lower level iv of C has formed, and the development of the fifth wave v of C has started, within which a local correction of the lower level is forming as the wave (iv) of v.

If the assumption is correct, after the end of the correction, the price will fall to the levels of 18.40–15.60. In this scenario, critical stop loss level is 23.20.