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The metals market has certainly had an interesting start to the year. While gold futures have been broadly higher, breaking out to fresh YTD highs in consecutive weeks, price action in silver has been much more labored. With gold prices starting the new week with a more offered tone, we are now looking at the prospect of a correction lower near-term. This is more interesting given the subdued action we’re seeing in US Dollar. In short, current price action reflects a great deal of uncertainty and indecision in the market ahead of the upcoming FOMC meeting next week.

Recently, there has been a growing view that the Fed will look to pivot further when it meets next week, opting for a smaller .25% hike (down from December’s .50% hike). If seen, this would certainly send USD lower near-term, creating room for metals prices to advance higher. However, if the Fed surprises markets and sticks with a further .5% hike, this would likely be firmly bullish for the USD near term, fuelling an unwinding of short positions which would see metals prices moving quickly lower once more.

With the Fed now in its pre-meeting blackout period and with Chinese markets offline all week for the holiday there, the focus will likely turn to incoming economic data. A slew of global PMIs this week as well as US advanced GDP and core PCE will be the headline readings to watch. Additionally, developments within the US earnings backdrop will be closely watched. Any fresh concern around recession risks will likely lend themselves to increased safe-haven support for metals.
 

Technical Views

Gold

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The rally in gold prices has become a little more labored recently though, for now, the focus remains on further upside. Price is currently holding above the recently broken 1916.34 level and, while above here, the focus is on a further push higher towards 1973.51 next. Worth noting we are seeing some bearish divergence in momentum studies, however. If the price moves back under the current level, 1871.04 is the next support to note.

Silver

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The price action we’ve seen in silver recently has been very frustrating for bulls and bears alike. Price is essentially caught in a choppy range, oscillating around the 24.0073 level. While still within the bull channel off last year’s lows, the focus remains on a further push higher and an eventual move up to the 26.0974 level next. However, should we slip lower from here 22.3205 is the next support to note? 

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