(Kitco News) - Gold prices are experiencing some mild selling pressure as they approach critical support around $2,300 an ounce. However, there appears to be very little conviction in the price action as the precious metal remains caught in a narrow range.
Meanwhile, the silver market has attracted some bargain hunters after falling 2% on Tuesday, dropping below its 50-day moving average. However, the precious metal is struggling to hold gains above $29 an ounce.
August gold futures last traded at $2,318.70 an ounce, down 0.52% on the day; at the same time, July silver futures last traded at $28.85 an ounce, roughly unchanged on the day. The gold/silver ratio remains relatively unchanged as it trades just below 80 points.
While gold and silver are experiencing some light volatility due to the persistent strength of the U.S. dollar, analysts note that the precious metals remain generally directionless as investors wait for more guidance.
Analysts have noted all week that gold and silver could remain listless until Friday when the May Personal Consumption Expenditures (PCE) Index is released.
In a note Wednesday, Ricardo Evangelista, Senior Analyst at ActivTrades, said in a low-volume environment, the path of least resistance for gold and silver is slightly lower.
“Markets have leaned towards the greenback following the release of economic data highlighting the resilience of the U.S. economy, creating room for the Fed to maintain elevated interest rates for longer,” he said. “This scenario supports higher treasury yields and a stronger dollar, penalizing the non-yielding precious metal. Against this backdrop, gold prices will likely remain supported above the $2,300 level but with limited upside until Friday’s PCE data release.”
Alex Kuptsikevich, Senior Market Analyst at FxPro, is slightly more bearish on gold as he sees momentum starting to shift.
“The downside momentum in gold is hard to ignore. There were strong selloffs on April 22, May 22-23, and June 7. On June 21, the decline was not so impressive but very instructive, as it prevented the price from returning above the 50-day moving average and absorbed the previous day's bullish candle,” he said in a note Wednesday. “Clearly, the bears in this market are strongly forming a reversal pattern to the downside. A rising dollar, helped by a further hawkish shift by FOMC members, is additionally playing on the sellers' side. If the third attempt to go below $2,300 is successful for the bears, the gold price could move into the $2,200 area rather quickly, as the area between these levels does not contain any previous significant stops. The next destination could be the $2,070 area, which has been working as resistance for a long time.”
Some analysts have said that they are watching a bearish technical head-and-shoulders pattern forming in the gold market with the neckline trading between $2,300 and $2,280 an ounce. Analysts have said that a break below this critical support level could lead to some significant selling pressure as investors lock in profits from the March rally.
Although Wednesday’s economic calendar is fairly light, some analysts expect that U.S. New Home Sales data could create some volatility in the marketplace.
Disappointing housing data has helped to provide some support for gold and silver as hedges against economic weakness.
Economists are not expecting to see any major changes in home sales. The sector has struggled as the Federal Reserve’s aggressive interest rates have driven mortgages higher. At the same time, low housing inventories have kept prices elevated, pricing many potential home buyers out of the marketplace.
