Precious Metals Updates by Solid ECN

Commercial Content Analysts
41

Gold prices show a slight increase during the morning session, developing a fairly strong “bullish” momentum formed in the middle of last week and trading at 1855.9. The main driver of the instrument’s recovery was the weakening USD Index, which sharply corrected from multi-year highs around 105, losing more than 2.5%, to a low of 102, despite the “hawkish” rhetoric of the US Fed members.

Demand for XAU/USD is holding up as global tensions escalate as fundamentals change little. Many economies are facing record inflation amid soaring prices for energy and other resources, forcing investors to look for safer alternatives to risky assets. In turn, rising inflation prompts the world’s central banks to sharply tighten monetary policy, making gold ownership less attractive, since it does not generate interest income. Meanwhile, a special military operation in Ukraine continues, and the negotiation process is actually stopped, so the conflict is becoming more and more protracted.

Today, investors are waiting for the publication in the US of May statistics on business activity, as well as April data on the dynamics of New Home Sales. During the day, the Chair of the US Federal Reserve, Jerome Powell, is also scheduled to speak.

Bollinger Bands in D1 chart demonstrate active decrease. The price range is narrowing, reflecting the emergence of ambiguous dynamics of trading in the short term. MACD indicator is growing, while preserving a rather stable buy signal (located above the signal line). Stochastic approached the level of “100” and reversed into a horizontal plane, indicating a strongly overbought instrument in the ultra-short term and signaling in favor of the development of a corrective decline.

Resistance levels: 1877.83, 1900, 1930, 1952.53 | Support levels: 1850.2, 1823.09, 1800, 1775

42

The escalation of the conflict in Ukraine, high rates of global inflation, and lower forecasts for the recovery of the economies of developed countries create obstacles for further upward dynamics in the XAGUSD pair. However, analysts predict a 5% increase in silver demand in 2022 due to further structural progress in industrial production, which is expected to reach another record level this year, and jewelry sales growth after the coronavirus pandemic. On the supply side, higher mine productivity is expected due to increased production capacity and increased production at existing mines, leading to a 3% increase in global supply in 2022.

Thus, it can be assumed that the fall in metal prices will be stopped when geopolitical tensions decrease and the US Federal Reserve rate stabilizes in a specific target range. Up to this point, the growth of XAGUSD quotes should be taken as a correction.

From the technical analysis position, silver is trading in a long-term downtrend, in which market participants reached the support level of 20.57. Then the RSI technical indicator signaled that the instrument was in the oversold zone, which led to the development of a correction, in which market participants tested the resistance level of 22.2. As long as this level is held by the “bears,” further sales of the precious metal will be a priority. The target for short positions will be the May low. If 22.2 is broken upwards and the consolidation above, we should expect the quotes to rise to the next resistance level of 24.25.

As part of the medium-term downtrend, market participants reached the target zone 3 (21.24–21.05) but failed to consolidate below it, after which a correction began, in which market participants tested the key resistance of the trend at 22.32–22.15. Currently, the zone is holding, which signals the possibility of new sales with the target at the May low of around 20.50.

Resistance levels: 22.20, 24.25 | Support levels: 20.57, 19.61

43

Quotes of the precious metal are being corrected in a sideways trend, being at around 1845.0.

XAUUSD is holding above the mid-year level at 1800 and, despite the downtrend of the last two months, investments in gold continue to bring income to investors. This can be clearly seen if we compare the dynamics with the main stock markets of the world. The yield of the Dow Jones index over 4 months of this year decreased by 9.63%, the German DAX 30 declined by 12.99%, and the French CAC 40 decreased by 10.97%, while gold over this period increased by 3.75%, which demonstrates that the precious metal performs the function of protecting against fluctuations in financial markets during a period of uncertainty.

According to a report by the US Commodity Futures Trading Commission (CFTC), over the past week, short positions of swap dealers in gold were reduced by 18349 contracts, and this is the largest volume of fixing positions over the past year. In the same period, the number of buy positions increased by 25 thousand, which fully reflects the mood of investors who consider the prospects for strengthening the asset’s rate to be very high.

On the daily chart of the asset, the price is trading within the global ascending channel, starting to form a reversal after reaching the global support line. Technical indicators continue holding a sell signal, which is starting to weaken actively: fast EMAs on the Alligator indicator are approaching the signal line, and the AO oscillator histogram is forming upward bars being in the sale zone.

Support levels: 1810, 1770 | Resistance levels: 1866, 1917

44

On the daily chart, the fifth wave of the higher level (5) of 3 develops, within which the wave 3 of (5) formed, and a downward correction developed as the fourth wave 4 of (5). Now, the formation of the fifth wave 5 of (5) has started, within which the first entry wave of the lower level (i) of i of 5 is developing.

If the assumption is correct, the price will grow to the levels of 2000 – 2070.42, In this scenario, critical stop loss level is 1785.69.

45

Gold prices show quite active growth during the Asian session, recovering to the previous local highs, updated last week. The instrument is testing 1860 for a breakout, receiving support from a rather weak dollar. However, the USD Index is up 0.05% intraday at 101.68, rebounding from Friday’s monthly low of 101.43, as markets weigh Friday’s US data to predict the next move by the US Fed. Demand for gold remains stably high, given that the fundamental picture in the markets is changing slightly. Investors are still watching the development of the Russian-Ukrainian conflict, which has generated many additional risks and does not yet give any hope for a quick improvement in the situation.

The pressure on the US currency increased last week amid the incident in the Persian Gulf. Earlier, the Greek authorities seized a tanker with Iranian oil, after which they handed it over to the United States. Iran responded to this by detaining two Greek tankers, which could lead to a new escalation of tension in the Middle East. At the same time, as monetary policy tightens in various regions, the demand for risk is gradually recovering, putting pressure on “safe” gold.

Bollinger Bands in D1 chart demonstrate flat dynamics. The price range expands from above, freeing a path to new local highs for the “bulls”. MACD is growing preserving a weak buy signal (located above the signal line). Stochastic, on the contrary, maintains a confident downward direction and at the moment practically does not react to the resumption of growth.

Resistance levels: 1869.49, 1885, 1900, 1930 | Support levels: 1850.2, 1840.26, 1823.09, 1800

46

Silver prices show a slight decrease during trading in Asia, developing a corrective momentum formed at the beginning of the current trading week. XAGUSD is testing 21.45 for a breakdown. Risk-driven market sentiment continues to shift to equities as yields rise on US government bonds, which investors currently prefer as alternative sources of additional funds, putting pressure on safe-haven assets such as silver. Since the dynamics of asset quotes of the metal group is inversely proportional to the movement of the US currency, XAGUSD is actively losing value.

Optimistic macroeconomic statistics from the USA provided moderate support to USD on Tuesday. The S&P/Case-Shiller Home Price Indices accelerated from 20.3% to 21.2% in March, ahead of market forecasts of a decline to 20%, and the Chicago PMI strengthened from 56.4 to 60.3 points in May, while the market expected a slight decline to 55 points. At the same time, Dallas Fed Manufacturing Business Index fell from 1.1 to -7.3 points in May, contrary to the forecast of growth to 4.9 points.

Silver, in turn, reacts positively to the long-awaited reopening of manufacturing facilities in Shanghai from June 1. Only 67 new cases of COVID-19 infection were detected in the country’s largest financial center last Sunday, according to the Ministry of Health of the People’s Republic of China. The authorities also eased some quarantine restrictions in Beijing. In general, the pace of industrial production in China is recovering, which increases the demand for silver as an industrial raw material.

Bollinger Bands in D1 chart show moderate growth. The price range is narrowing, reflecting ambiguous dynamics of trading in the short term. MACD is declining, forming a new sell signal (trying to consolidate below the signal line). Stochastic keeps a steady downward direction but is rapidly approaching its lows, which indicates the risks of oversold silver in the ultra-short term.

Resistance levels: 21.69, 22, 22.40, 22.7 | Support levels: 21.39, 21.12, 20.81, 20.39

47

The XAUUSD pair holds above the key level of the previous 1800 and are currently being corrected after a slight increase.

Despite significant fluctuations in world markets, precious metals remain one of the most reliable investments. If traders preferred contracts for gold a year ago, today, buyers are showing particular interest in bullion and coins. According to the US Mint, sales of the most popular American Golden Eagle series in May of this year significantly exceeded previous periods: 200.5K coins or 147K ounces of gold equivalent were sold, significantly higher than 122.5K or 88K ounces sold in April. Also, if we consider the dynamics of sales in May 2021 with a figure of only 20.5K ounces, then the positive trend becomes more and more obvious.

According to the latest report from the US Commodity Futures Trading Commission (CFTC), over the past week, the global downtrend for the precious metal has been reversed, and after six weeks of constant decline, an increase in the number of gold contracts was recorded to 183.8K from 175.4K, which is quite expected, given the sharp outflow of short swap dealers, which was reported a week earlier.

On the daily chart, the price is moving within the global ascending channel, forming a reversal near the global support line. Technical indicators maintain a weakening sell signal: fast EMAs on the Alligator indicator are approaching the signal line, and the AO oscillator histogram forms upward bars in the sell zone.

Resistance levels: 1866, 1917 | Support levels: 1810, 1770

48

Gold prices are holding around 1840 during the Asian session, trying to correct after a slight decline on Monday. XAUUSD remains under pressure after the release of fairly strong data from the US labor market: employment rose by 390K, which is better than the projected value of 325K, and the Unemployment Rate, instead of the expected decline to 3.5%, remained at 3.6%. The statistics highlighted the stability of the sector and its readiness to cope with the increase in interest rates from the US Federal Reserve, which may contribute to further tightening of monetary policy. In addition, the uptrend in the yield of 10-year US bonds makes the dollar an extremely attractive asset for investment.

An additional negative factor for gold is the current position of the European Central Bank (ECB). The regulator has recently been actively speaking out in favor of raising interest rates in order to curb the sharp rise in inflation. The ECB will meet on Thursday, and some analysts believe that it will announce the start of a reduction in the quantitative easing (QE) program. An increase in the interest rate, according to current forecasts, is possible in Q3 2022, provided that the situation in the markets does not change radically.

Bollinger Bands in D1 chart demonstrate flat dynamics. The price range is slightly narrowing from below, reflecting the mixed dynamics of trading in the short term. MACD is declining, forming a new sell signal (trying to consolidate below the signal line). Stochastic shows a slightly more active decline and at the moment does not contradict the further development of the downtrend in the short and/or ultra-short term.

Resistance levels: 1850.2, 1869.49, 1885, 1900 | Support levels: 1823, 1800, 1775, 1752.87

49

Silver is trying to recover its positions

Silver prices are moderately declining during the morning session, again testing 22 for a breakdown. The day before, the instrument made another attempt to grow, reacting to a corrective decline in the yield of US Treasury bonds, which retreated from their previous highs at 3.038% to 2.979%.

At the same time, trading participants are in no hurry to open new trading positions for the instrument, preferring to wait for the decisions of major global financial regulators on monetary policy issues. In particular, a meeting of the European Central Bank (ECB) will be held this week, at which, as expected, the regulator may announce the start of a quantitative tightening program, and next week the key issues will be discussed by the US Federal Reserve and the Bank of England, from which the market expects a “hawkish” rhetoric. In turn, the Bank of Japan, judging by the recent comments of its Governor Haruhiko Kuroda, will maintain a soft position.

Moderate demand for silver is also supported by the gradual recovery of industrial activity in China. However, the situation is ambiguous here, as growth in Asia may be offset by a noticeable drop in industrial activity in Europe, where supply chain disruption, high inflation and rising energy prices are causing many factories to stop working. Disruptions are especially noticeable in high-tech areas, where the use of silver as a raw material has always occupied a fairly high percentage.

Although the number of positions in gold for the last week began to gradually increase, the statistics for silver remains at the levels of the previous week. According to the latest report from the US Commodity Futures Trading Commission (CFTC), the advantage in open positions remains in favor of sellers (37.877K positions), while buyers have only 7.797K open contracts. In addition, last week, buyers liquidated 0.926K positions, while sellers, on the contrary increased their number by 0.997K.

On the D1 chart, Bollinger Bands are gradually reversing horizontally. The price range is slightly narrowed from below, being spacious enough for the current activity level in the market. MACD is growing preserving a weak buy signal (located above the signal line). Stochastic, having not reached its boundary level of “80”, reversed into a horizontal plane, reacting to the emergence of “bearish” trend during the Asian session.

Resistance levels: 22.40, 22.7, 23, 23.32 | Support levels: 22, 21.69, 21.39, 21.12

50

The XAUUSD pair is correcting within a sideways trend, trading at 1850 with no signs of a possible change in the current trend.

Yesterday, the World Gold Council (WGC) published a new report on government stocks from March to April 2022. Thus, Turkey’s reserves increased by 6.5 tons to 436.7 tons, Kazakhstan – by 5.3 tons, and the total volume reached 373.4 tons of metal, while Uzbekistan’s reserves were replenished by 8.7 tons to 346.2 tons. Only the Philippines should be singled out among the major sellers during this period, which managed to sell 5 tons of the precious metal, reducing the available resources to 151.3 tons.

The data released yesterday by the US Commodity Futures Trading Commission (CFTC) disappointed the experts. According to the report, at the beginning of this month, investors reduced the number of net speculative positions in gold to 172.6K from 183.8K, although a week earlier, the figure for the first time in the last two months increased from 175.4K to 183.8K.

As a result, even with an increased interest in physical gold from the central banks, the demand for contracts from market participants continues to remain low, which does not allow the quotes of the XAUUSD pair to strengthen their positions.

The daily chart shows that the price is moving within the global ascending channel, near the support line. Technical indicators maintain a weakening sell signal: fast EMAs on the Alligator indicator are approaching the signal line, and the AO oscillator histogram, being in the sell zone, is forming upward bars.

Resistance levels: 1870, 1917 | Support levels: 1836, 1790

51

The pair grow.

On the daily chart, the fifth wave of the higher level (5) of 3 develops, within which the wave 3 of (5) formed, and a downward correction developed as the fourth wave 4 of (5). Now, the formation of the fifth wave 5 of (5) has started, within which the first entry wave of the lower level (i) of i of 5 has formed, and the correctional wave (ii) of i of 5 is developing.

If the assumption is correct, after the end of the correction, the XAU USD pair will grow to the levels of 2000 – 2070. In this scenario, critical stop loss level is 1785.69.

52

Gold prices show a corrective decline, retreating from their local highs from May 9, updated at the beginning of the week. Investors are taking profits on long positions opened last Friday, when the demand for XAU/USD increased again after the publication of multidirectional macroeconomic statistics on inflation in the US. The released data showed an acceleration of the indicator in May to 8.1%, which was a new record high since December 1981. On a monthly basis, the country’s Consumer Price Index accelerated from 0.3% in April to 0.7%, and the Core CPI excluding Food and Energy, slowed down to 6.0% from 6.2%, which is quite obvious, because the reason for the current negative dynamics in the United States is the rise in energy prices.

In turn, the revision of inflation data is likely to lead to a more aggressive policy of the US Federal Reserve, aimed at tightening monetary conditions. In particular, the regulator may decide to either raise interest rates more quickly, for example, by 75 basis points at once, or continue the planned correction of the value after two meetings in June and July. Earlier it was assumed that officials would take a break after two rate hikes in the summer, to assess the impact of the measures taken on the economy and consumer price growth.

Bollinger Bands in D1 chart demonstrate flat dynamics. The price range is expanding; however, it fails to catch the surge of last week’s “bearish” sentiments. MACD is growing preserving a weak 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: 1869.49, 1878.84, 1900, 1920 | Support levels: 1850.20, 1823.09, 1800, 1775

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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 fifth wave v of C is developing, within which a local correction of the lower level has formed as the wave (iv) of v, and the development of the wave (v) of v has started.

If the assumption is correct, the XAG USD pair will fall to the levels of 18.4 - 15.6. In this scenario, critical stop loss level is 22.52.

54

XAG USD, silver is trying to recover positions

Silver is trying to recover from a sharp decline at the beginning of the week, when the asset retreated to local lows of May 16. Positive dynamics are due to technical factors and expectations of the US Federal Reserve’s decision on interest rates. Experts do not doubt that the US regulator will again increase the cost of borrowing, but the pace of tightening monetary policy is still in question. Previous forecasts suggested a rate hike of 50 basis points. However, after the data on inflation in the country for May was published at the end of last week, the agency may decide to add 75 basis points to the indicator. Additional pressure on the trading instrument is exerted by the growth in the yield of US Treasury bonds: thus, this value for 10-year securities yesterday renewed annual highs for 2022, approaching 3.45%.

The deterioration of the epidemiological situation in China also hurts metal quotes. Only two weeks have passed since the lifting of quarantine restrictions, and Beijing and Shanghai are once again forced to carry out mass testing and restrict the work of enterprises due to a new outbreak of the disease. On Tuesday, the city Health Committee reported that 25 new cases of COVID-19 infection and 38 asymptomatic carriers of the infection were recorded in the capital of the country. Analysts fear that industrial activity in China will again decline, negatively affecting the demand for silver as an industrial raw material.

On the daily chart, Bollinger bands moderately decrease: the price range expands from below but not as fast as the “bearish” trend develops at the moment. MACD develops a downward trend, maintaining a fairly strong sell signal (the histogram is below the signal line). Stochastic maintains a strong downward direction but rapidly approaches its lows, indicating that silver may become oversold in the ultra-short term.

Resistance levels: 21.21, 21.4, 21.69, 22 | Support levels: 20.86, 20.58, 20.39, 20

55

XAU USD, demand for gold remains low

XAU USD is correcting sideways, trading at 1830 and showing no signs of a trend reversal. Gold quotes are in a rather narrow range of 1800 – 1880, having shown a slight increase the day before after the decision of the US Federal Reserve to raise the interest rate from 1.00% to 1.75%, which indicates the market’s inability to calculate the consequences of the actions of the American regulator.

In any case, even a local increase in quotes does not mean a global change in trend, which remains negative. This clearly demonstrates the ratio of the positions of sellers and buyers on the stock exchange. According to the latest report of the US Commodity Futures Trading Commission (CFTC), the balance of contracts continues to remain on the side of sellers and, based on current positions, they hold 71.880K contracts, while buyers retain 23.852K contracts. There is a significantly larger gap in the positions of swap dealers: 83.939K contracts were registered for purchase, and 245.231K for sale. In the previous week, however, the dynamics of the change in the balance was in favor of buyers: they liquidated 3.376K positions, while sellers reduced 4.580K positions. Neither side is building up its assets, suggesting low overall demand for the metal.

On the daily chart of the asset, the price is trading within the local side channel, holding in the middle of the range. Technical indicators are in a quite strong sell signal state: the fast EMAs of the Alligator indicator are below the signal line, and the histogram of the AO oscillator is trading in the sell zone, forming descending bars.

Support levels: 1807, 1752 | Resistance levels: 1848, 1895

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56

Gold - The pair may grow

If the assumption is correct, the XAU USD pair will grow to the levels of 2000 – 2070.42. In this scenario, critical stop loss level is 1803.62.

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Gold - Quotes are preparing to renew the June maximum

On the one hand, investors see gold as a proven inflation hedge, but on the other hand, the US dollar is actively gaining in value against the backdrop of the “hawkish” rhetoric of the US Federal Reserve regarding the tightening of the main parameters of the national monetary policy. Last week, the regulator raised the interest rate by 75 basis points to 1.75% and announced its readiness to adjust the rate further if the situation in the economy requires this. The next meeting of the department is scheduled for July 27, and the dynamics of the national currency and the gold rate will depend on its results.

The long-term trend in the XAU USD pair is downwards. Last week, market participants unsuccessfully tested the resistance at 1877, and the price fell to the support level of 1806. After the decision of the US Federal Reserve on the interest rate, the asset strengthened, and at the moment, the trading instrument is in the middle of the corridor 1877 – 1806. If the resistance level of 1877 is broken, then a further increase to 1918 is possible, and in case of the breakdown of the support level of 1806, an update of the May low and a further decrease to the area of ​​1753 is expected.

The medium-term trend is upwards. Last week, market participants tested the key support at 1807 – 1799. The zone was held, which led to positive dynamics to renew the high of June in the 1878 area.

Resistance levels: 1877, 1918 | Support levels: 1806, 1790, 1753

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58

XAU USD - Metal quotes are developing a downward trend

Investors are in no hurry to open new trading positions ahead of the publication of inflation statistics from the UK, as well as the speech of the head of the US Federal Reserve, Jerome Powell, who, as analysts hope, will outline the immediate prospects for monetary policy. So, some agency representatives said they were not opposed to another rate hike by 75 basis points, and a more conservative position still suggests an increase of only 50 basis points, after which a pause will be required to assess the measures taken.

Quotes of gold, traditionally protective assets, are supported by growing fears about a slowdown in the global economy. Also, the geopolitical risks associated with the development of a military conflict in Ukraine are not weakening yet, while the countries of the world are forced to deal with the consequences of a sharp increase in energy prices. Analysts are confident that rapid inflation on a global scale and a slowdown in economic growth can catalyze stagflation in the US economy, and the US Federal Reserve’s measures to tighten monetary policy will be insufficient. It, in turn, will allow gold to regain investor interest and overcome the level of 2000.

An additional negative factor for the metal is the increase in the yield of US Treasury bonds amid expectations of further actions by the American regulator. As new signals for the asset, there is the talk about a possible restriction of Russian gold imports by European countries in the next sanctions packages from the EU. In particular, Denmark has previously announced such a possibility.

Resistance levels: 1843.37, 1857.27, 1869.49, 1878.84 | Support levels: 1823.09, 1800, 1775, 1752.87

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XAG USD - Fibonacci levels analysis

D1
On the daily chart, the price reversed at 21.95 (correction 23.6%) and continues to decline along the downward “fan,” the targets of which may be the levels 20.60 (correction 0.0%) and 18.95 (extension 61.8%). The key “bullish” level is 21.95, supported by the middle line of Bollinger bands, and if it is broken, the asset will rise to 22.80 (correction 38.2%), 23.50 (correction 50.0%), but this option of movement is seen as less likely, as the indicators point to the continuation of the downtrend: Bollinger bands and Stochastic reverse downwards, and the MACD histogram is stable in the negative zone.

W1
On the weekly chart, the trading instrument overcame 22.30 (correction 38.2%), which allows it to fall to 20.45 (correction 50.0%) and 18.60 (correction 61.8%). In case of a reverse breakout of 22.30, positive dynamics may develop to 23.50 (middle line of Bollinger bands) and 24.60 (correction 23.6%). Technical indicators point to continued decline: Bollinger bands and Stochastic reverse downwards, while the MACD histogram is increasing in the negative zone.

Soon, a price decline to 20.60 (correction 0.0%, D1), 20.45 (correction 50.0%, W1), 18.95 (extension 61.8%, D1) seems more likely. If 21.95 (extension 23.6%, D1) is broken upwards, the upward dynamics will continue to 22.80 (correction 38.2%, D1) and 23.50 (correction 50.0%, D1, middle line of Bollinger Bands, W1).

Resistance levels: 21.95, 22.80, 23.5 | Support levels: 20.60, 20.45, 18.95

60

Gold price loses momentum

Gold price fluctuates around the EMA50 that forms intraday resistance against the price, noticing that stochastic has positive momentum to reach the overbought areas, waiting to motivate the price to rebound bearishly and resume the bearish trend, which targets 1810 followed by 1780.25 levels as next main stations.

Therefore, our bearish overview will remain valid unless the price rallied to breach 1850 and hold above it.

The expected trading range for today is between 1810 support and 1850 resistance.