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Gold And Silver Fall As Rising Interest Rates Dampen Sentiment

  • Rising interest rates aren’t always kind to precious metals investors.
  • Gold and silver are widely seen as a hedge against inflation, and the Fed’s moves could be to blame for recent price weakness. 
  • The U.S. dollar has also shown strength in recent weeks, adding further downward pressure to precious metals.

Rising interest rates tend to dampen investor sentiment toward precious metals. Gold and silver typically act as a store of value, particularly during periods of high inflation. Therefore, the Fed’s half-point interest rate increase can largely be blamed for recent price weakness. In essence, the market has priced in the policies deployed by the Fed.

During times of uncertainty, gold and silver are considered safe-haven assets. In this case, the ongoing conflict in Ukraine, stubbornly high inflation, and the VIX (volatility index) are providing tailwinds for precious metals. Silver, on the other hand, has not seen the same highs. This is precisely why many experts are claiming that its time has come.

However, from a technical analysis perspective, prices have begun to break down. Indeed, the macro trend has already turned to the downside, while price action shows signs of a market structure shifting downward on daily/weekly time frames. Moreover, support levels and price floors have yet to be established. As you can see, this has left silver to plummet through prior lows and take out any retail support.

Gold Prices Look Similar to Silver

The precious metals MMI also shows that gold prices have continued their downward trend as well. This is mostly due to a recent shift in market structure beginning in late April. As prior lows continue to show weakness, price action suggests gold will look for stronger support levels. We suggest these will range between $1780-$1820/troy ounce, as indicated in the graph.

Platinum Also Saw Price Declines

Platinum prices declined by over 5% percent month over month. Of course, platinum’s number one end-use application remains auto exhaust systems. And while global automakers show some month-over-month growth, production remains well below pre-pandemic production levels.

In Other News: The Dollar Gains Strength

The US dollar continued its recent ascent, moving from 98.63 to over 103. Typically, a strong dollar equates to lower commodity prices. Interestingly enough, the CRB index appears to have held onto its gains while shifting into a short-term sideways pattern. Although April’s CPI finally dropped (to 8.3%), the decline was merely a result of drops in energy prices. The remaining core index has yet to find a floor. Still, according to the WSJ, the core price index increased by .6% after March’s .3% gain.

By AG Metal Miner

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