Gold price gives up $1,900 and silver falls below $24 an ounce, analysts see room for lower prices
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(Kitco News) - Gold and silver are starting the week with some heavy selling pressure as gold prices drop below $1,900 an ounce and silver falls below $24 an ounce.
According to some analysts, the drop below the critical psychological level opens the door to further losses as bearish sentiment rises in the marketplace.
James Stanley, senior market strategist at DailyFX, said that if gold prices see a sustained break below $1,900, he could see prices testing support at $1,879 or even $1,842.
Ole Hansen, head of commodity strategy at Saxo Bank, said he is watching support at $1,890 an ounce.
"Gold led by silver has joined the weakness seen across metals and commodities in general on concerns a succession of aggressive rate U.S. hikes will boost the dollar while sending real yields higher as inflation is being brought under control," Hansen said.
Precious metals are seeing renewed selling pressure as the U.S. dollar index pushes to a new multi-year high above 101 points. According to some analysts, the greenback is testing resistance at a 21-year trendline.
Market analysts note that the U.S. dollar is attracting strong momentum as the Federal Reserve continues to aggressively raise interest rates through the rest of the year. Last week in a panel discussion during the International Monetary Fund's spring meeting, Fed Chair Jerome Powell said that the central bank is on pace to raise interest rates by 50 basis points at its May meeting.
"With little over a week remaining for the Fed to hike by 50bp and to begin quantitative tightening as we expect, demand for bullion from the investor community is likely to ease. While the yellow metal's prices have remained extremely resilient against an aggressively hawkish Fed, as a protracted war in Ukraine simultaneously raised both geopolitical uncertainty and inflation risks and thereby fueled demand for havens, we see few participants left with appetite to buy gold," said commodity analysts at TD Securities.
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According to the CME's FedWatch Tool, markets see interest rates rising as high as 3.25% by the end of the year.
Although the U.S. dollar is testing critical resistance points, U.S. bond yields have dropped from last week's highs. Yields on 10-year yields last traded at 2.78%. However, lower bond yields are not providing much support for gold or silver.
Although the bearish sentiment is growing in the marketplace, some analysts have said that the current pullback could be seen as a long-term buying opportunity.
Daniel Briesemann, precious metals analyst at Commerzbank, noted that investors are still buying gold-backed exchange-traded funds. He added that the ETF market saw inflows of 13 tonnes, the 14th consecutive week of buying.
Phillip Streible, chief market strategist at Blue Line Futures, said that gold still has a long way to go before its long-term uptrend is at risk. He added that he sees the current selling pressure as excess speculators leaving the market after they were disappointed gold didn't break above $2,000.
"I don't think now is the time for long-term gold investors to panic," he said. "Gold remains in a bullish uptrend as long as it holds above $1,850 an ounce. That is the line in the sand to watch."