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| Gold and Silver Prices Retrace After 10% Rallies, Bulls Still Favored Amid Banking Crisis and Federal Reserve Decision |
Gold and silver prices are retreating after their recent rallies, but market strategists believe that precious metals still have more room to continue rallying. Gold reached a peak of over $2,000 on Monday before pulling back below $1,970, while silver achieved a relative monthly high below $23 before experiencing a 1% retracement. Precious metals have benefitted from the international banking crisis, which has triggered surging open interest and volume in the futures markets for gold.
The Federal Reserve interest rate decision on Wednesday is a crucial event for understanding how the biggest central bank in the world understands the dilemma between combating relentless inflation and alleviating the stress the international banking system is suffering. Institutional market strategists believe that any dovish hints in the Federal Open Market Committee (FOMC) statement and projections will provide a bullish impetus for gold. However, the tension is far from over.
Despite banking regulators rushing to shore up market confidence, the uncertain macro backdrop continues to entice buying. All eyes are now shifting to the Fed’s two-day meeting, and any dovish commentary should help support the precious metals sector. The recent breakout through the $21.65-$21.70 confluence resistance for silver was seen as a fresh trigger for bullish traders, and a subsequent move and acceptance above the 50% Fibonacci retracement level of the recent sharp pullback from a multi-month peak further add credence to the constructive outlook.
The technical scenario in XAG/USD remains with bullish potential intact despite the recent retracement. The path of least resistance for the XAG/USD is to the upside, according to bullish oscillators on 4-hour and daily charts. Any subsequent dip towards the overnight swing low, around the $22.20 area, which coincides with the 50$ Fibo. level, could be seen as a buying opportunity. Thus, while precious metals are continuing their retracement, market strategists are still optimistic about their prospects going forward, with any dovish commentary from the Fed likely to provide further impetus for their rally.
