Gold, Silver Forecast: “Perfect Storm” Drives Gold and Silver to Cycle Highs – Where Next?

Gold, Silver Key Points

• For gold and silver, the hurdles will be tomorrow’s UK CPI report and the FOMC meeting minute that could influence when we see interest rate cuts.
• Gold’s outlook remains constructive heading into resistance in the $2460-2500 zone.
• Silver is in an even more bullish technical position, with a bullish bias in place above $30.

This weekend, we discussed the primary factors that are making 2024 “The Year of the Metals.” Between growing industrial demand, slow-responding supply, desires for reserve diversification, and a shift back toward easing monetary policy, it sure feels like metals are well-poised to extend their gains. OF course, experienced traders know even the strongest fundamental theses can be proven wrong, or at a minimum succumb to periods of excessive hype and temporary setbacks.

For this week, the big (scheduled) hurdles for gold and silver bulls to watch will be tomorrow’s UK CPI report (expected at 2.1% y/y, down sharply from 3.2% last month) and the FOMC meeting minutes. Traders will be looking for hints that the Bank of England and Federal Reserve will feel comfortable cutting interest rates later this summer to fuel another leg higher in precious metals. As a reminder, precious metals are often seen as an inflation hedge, but higher interest rates increase the opportunity cost of holding non-yielding metals, and that dynamic is seen as more significant in the current economic environment.

Gold Technical Analysis – XAU/USD Daily Chart

Source: TradingView, StoneX

Looking at the daily chart of gold, the yellow metal’s outlook remains constructive. Gold broke out to set a record closing high above $400 on Friday, and the market appears to have “accepted” that higher price, with XAU/USD trading higher both yesterday and (so far) today.

With prices at record highs, there’s little in the way of previous highs/lows to monitor, but we can still project resistance at the 161.8% Fibonacci extension of the 2011-2015 drop near $2460, followed by the psychologically-significant $2500 round handle as logical near-term targets for bulls. Meanwhile, a break back below $2440 would call the breakout into question and shift the short-term bias back to neutral.

Silver Technical Analysis – XAG/USD Daily Chart

Source: TradingView, StoneX

When it comes to gold’s little brother, Silver is in an even more bullish technical position. For XAG/USD, the key level to watch was $30, the gray metal’s 11-year high; with Friday’s break above that key level, the buying pressure accelerated and the short-/medium-term bias will remain bullish as long as silver remains above that key level.

Unlike gold, Silver is not at a record high – nor is it particularly close – so we can use traditional technical methods to project resistance nearer $35, at the confluence of previous highs and the 61.8% Fibonacci retracement of the 2011-20220 drop.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX