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(Kitco News) - Spot gold and silver prices are holding on to modest gain in a quiet trading session Tuesday as U.S. markets are closed for Independence Day.
Although gold prices remain in a downtrend, some analysts are expecting gold and silver to test near-term resistance levels after holding support at $1,900 an ounce last week. Spot gold last traded at $1,929 an ounce, up 0.38% on the day; spot silver last traded at $23 an ounce, up 0.57% on the day.
Analysts note that rising bond yields, as the 10-year yield pushed closer to 4% Monday, could keep a lid on gold and silver prices this week.
"Gold traders feel the pain of gradually mounting U.S. yields, but buyers are still willing to enter the market below the $1900 in hope that we are nearing a top in the U.S. yields' upside trajectory," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in her daily research note.
Ozkardeskaya noted that a weaker U.S. dollar also reflects the market's growing anticipation that the Federal Reserve is nearing the end of its aggressive tightening cycle. However, the much-anticipated easing pivot also remains elusive.
The CME FedWatch Tool shows markets have all but priced in a rate hike later this month; at the same, there are expectations that rates will remain at elevated levels through the second half of the year.
Some analysts have said higher-for-longer interest rate projections could eventually weigh on gold. In a recent interview with Kitco News, Daniel Pavilonis, senior commodities broker with RJO Futures, said that gold prices might need to fall below $1,900 an ounce to attract new attention.
He added that in the current downtrend, he would not be surprised to see gold prices test support in the mid-to-high $1,700 an ounce range, which could signal the market's bottom.
"The Fed is not done yet, and gold could struggle as interest rates continue to move higher," he said.
Although bond yields have increased, some analysts note that the market continues to flash significant recession warnings. Ole Hansen, head of commodity strategy at Saxo Bank, noted that U.S. 2–10-year yield curve spread has hit a 20-year high, "further strengthening the view the U.S. economy is heading in the wrong direction, potentially curbing the FOMC's ability and willingness to hike rates to lower inflation further."
Gold remains in a downtrend, but with support below $1900 looking solid, an upside attempt to challenge resistance in the $1931-36 area could be seen," he added in a note Tuesday.
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Tavi Costa, portfolio manager at Crescat Capital, also noted, in a comment on Twitter, the growing yield curve inversion.
"It is hard to be structurally bullish on the economy when almost the entire Treasury curve is inverted, despite the fact that yields across the board, short and long-term, have been increasing," he said. "Today's issue in the Treasury curve resembles prior stagflationary times with yields across all durations continuing to move higher."
It is hard to be structurally bullish on the economy when almost the entire Treasury curve is inverted, despite the fact that yields across the board, short and long-term, have been increasing.
— Otavio (Tavi) Costa (@TaviCosta) July 3, 2023
The tech bust and the global financial crisis certainly didn't unfold in this manner.… pic.twitter.com/msPi0UwT4k
Looking at silver, analysts note that the precious metal continues to benefit from solid industrial demand as the green energy transition and the need for solar power dominate the marketplace.
Although analysts see growing technical momentum for silver, some have said that the precious metal needs to see a solid break through $23 an ounce before it will attract new bullish momentum.
