Anti-fiat gold prices spent the previous 24 hours rallying against the haven-linked US Dollar. The ‘risk-on’ tone during Monday’s Wall Street trading session likely sapped the appeal of the Greenback. Investors looked past domestic and external unrest as Google searches for “protest” and “riots” accelerated. Sentiment-linked crude oil prices were flat as upside momentum faded.

Oil could be in limbo as traders await a meeting between the Organization of the Petroleum Exporting Countries (OPEC) and key allies. Reports crossed the wires on Monday that OPEC+ could bring forward the meeting to June 4. A key issue that is going to be discussed is whether or not record output cuts could be extended between one to three months.

As a reminder, earlier this year a price war was triggered between key producers Saudi Arabia and Russia. The latter’s initial refusal to participate was a detriment to the commodity. Towards the end of last month, Russia hinted that it wanted to push for easing production restrictions. A similar row between Moscow and Riyadh could risk reigniting selling pressuring in crude oil prices.

S&P 500 futures slipped into the red during Tuesday’s Asia Pacific trading session, perhaps pointing towards a ‘risk-off’ tone to come in the remaining 24 hours. If this dynamic rekindles US Dollar strength, that may cap upside progress in gold prices in the near term. Down the road, the medium-term fundamental outlook for the yellow metal seems favorable as central banks around the world refrain from raising interest rates.

GOLD TECHNICAL ANALYSIS
Gold prices have re-entered the key range of resistance between 1730 – 1747. This is as rising support from the middle of April seems to be cautiously guiding the yellow metal higher. Keep a close eye on RSI in the event negative divergence emerges. That is a signal of fading upside momentum which could precede a turn lower. A close under 1703 exposes the key range of support between 1658 – 1678.

CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices have thus far made marginal upside progress after pushing above descending resistance from the beginning of this year – pink line below. This is leaving the commodity facing former lows from August 2016 which could come into play as new resistance. Turning lower likely entails taking out key support which is a range between 29.11 – 31.14 that has its beginnings from peaks reached in April.

GOLD PRICE, XAU, GLD ANALYSIS:
Gold prices are up by more than 50% from the August, 2018 low.
Gold prices have continued to push higher as expectations have built for global Central Banks to remain very loose and passive with monetary policy for the foreseeable future.

GOLD PRICES SOFTEN FROM SEVEN-YEAR-HIGHS, BOUNCE FROM SUPPORT
Gold prices have put in a strong bounce from support over the past two days, and this follows a week of retracement after the precious metal had pushed up to yet another fresh seven-year-high. As looked at last week, just as Gold prices were setting that fresh high-watermark, FOMC Chair Jerome Powell communicating to markets that there was ‘no limit’ to what the Fed could do with the lending programs available helped to fire Gold prices higher. This helped the yellow metal to test above the $1750/oz level for the first time since 2012 and stocks have enjoyed a significant rally, as well.

Since then, however, that bullish trend in Gold had calmed and price action has pushed down towards the second zone of support looked at in that article last week. Yesterday saw price action tip-toe down to the 1692 level, but bulls came in a little early to help set a fresh two-week-low at 1693.55. Prices have since bounced but there’s a very apropos question of whether buyers are yet ready to rekindle that bullish trend or whether a continued retracement is waiting in the wings. For context, we must look at the bigger picture.

GOLD PRICES: THE BIGGER PICTURE
Markets often move in cycles, and depending on the market practitioner’s philosophy, these cycles can occur on short or long-term basis, and perhaps even in tune with grander ‘super-cycles’ that can impact a wide swath of commodities at the same time.

Taking a longer-term, bigger-picture look at Gold prices and at least a couple of cycles become evident. Starting with the March 2008 temporary high, Gold prices sold off by almost 34% during the depths of the financial collapse; eventually bottoming-out in October of 2008 shortly after news of Lehman Brothers impending bankruptcy made its way through markets. From there – Gold prices went on a rip-roaring rally for the next three years, running from a low of 666 up to a high of 1910 – a move of 287% in a little under three years.

But after topping in 2011, as markets were gearing up for the Fed to eventually begin normalizing rates and focusing on tighter policy, Gold prices retraced and, eventually, began to range. That lasted well into 2018 at which point the Q4 open brought an entirely new situation to the table.

In the opening days of Q4, 2018, Jerome Powell spoke about the Fed’s expectations for rates, and the head of the FOMC said that he felt that the neutral rate was ‘a long way off.’ This is key, as the neutral rate is somewhat of a goldilocks destination for the Central Bank, striking that ideal interest rate that is neither simulative nor restrictive. After the Fed had already hiked rates three times in 2018 (and three times in 2017), markets began to show a theme of risk aversion with stocks selling off under the anticipation that the Fed might continue hiking.

Gold prices, however, seemed to take on a different tone, as strength began to show in October of 2018 and continued through the end of the year. When the Fed eventually backtracked from those 2019 rate hike probabilities, Gold prices flew-higher last summer as it became clear that the FOMC was shifting into a dovish stance and, perhaps, might even see the bank cut rates.

That bullish trend in Gold shows quite visibly in the below daily chart of the precious metal. Of particular interest is the significant gyration showing in early-March of this year, as Gold prices sold off by almost a full 15% in about two weeks – followed shortly after by a 20% rally as bulls jumped on the bid.

The Fed, and global Central Banks, have been quite busy lately. And that’s likely to continue, at least as long as the world is wrestling with the novel coronavirus. Literally no one knows for how long that might continue, and even when a vaccine or medicinal treatment is found, it’s going to take time for economies to rebuild to their prior state. They’re likely going to need some Central Bank support and, at this point, there’s nothing to suggest that markets won’t get that.

{{SENTIMENT|Gold|Current Retail Sentiment in Gold}}
This can also be a big driver to Gold prices, perhaps even similar to the 2008-2011 run as the yellow metal was gaining on the back of Central Banks rushing to the aid of global markets.

One significant concern at the moment is just how fast this bullish trend has priced-in and how aggressively buyers have continued to support the bid. Going back to the monthly chart, and RSI is at its most overbought since 2011, right when Gold prices topped-out; and the prior instance of RSI on the monthly chart of Gold going above 75 was in 2008, just before the pre-financial collapse top. In full transparency, the instance of RSI above 75 before that was in 2006 and Gold prices continued to rally for almost two years after.

With the above chart and the bigger-picture backdrop in mind, the trader can then move on to the incredibly challenging aspect of timing. There are a few nearby support zones of interest and that can keep buyers focused on the bid, looking for continuation of this recent bullish theme. On the below four-hour chart, I’ve outlined two possible such areas of interest nearby recent price action, including the support zone mentioned last week that has yet to come into play with buyers showing up ahead of a test at 169.

The price of gold may consolidate throughout the final week of May even though a growing number of Federal Reserve officials warn of a protracted recovery as the Relative Strength Index (RSI) reverses course ahead of overbought territory and establishes a negative slope.

GOLD PRICE OUTLOOK MIRED AHEAD OF JUNE BY NEGATIVE RSI SLOPE
The price of gold may continue to pull back from the 2020 high ($1765) as the advance from earlier this month stalls ahead of the 2012 high ($1796), but the weakness may end up being short lived as bullion has traded to fresh yearly highs during every single month so far in 2020.

It remains to be seen if the bullish behavior in gold will persist in June as the Federal Reserve prepares to launch the Municipal Liquidity Facility along with the Main Street Lending Program, and the central bank appears to be on track to actively expand its balance sheet over the coming months as Vice-Chairman Richard Clarida warns that the US economy is expected to “contract at an unprecedented pace in the second quarter.”

Boston Fed President Eric Rosengren shared similar remarks during an interview with CBS as he anticipates “double digit unemployment through the end of this year,” with the official going onto say that it would take “a vaccine or other medical innovations” to restore the US labor market back to full employment.

In turn, Mr. Rosengren insists that the “Federal Reserve is going to continue to do what it needs to try to get – get us back to full employment as quickly as possible,” and the Federal open Market Committee (FOMC) may stick to a dovish forward guidance at the next interest rate decision on June 10 even though the balance sheet climbs above $7 trillion in May.

It remains to be seen if the FOMC will deploy more unconventional tools in 2020 as Chairman Jerome Powelltames speculation for a negative interest rate policy (NIRP), but the low interest rate environment along with the ballooning central bank balance sheets may act as a backstop for goldas marketparticipants look for an alternative to fiat-currencies.

With that said, the price for gold may continue to exhibit a bullish behavior in June as it trades to fresh yearly highs during every single month so far in 2020, but the precious metal may consolidate over the remainder of the month as the Relative Strength Index (RSI) reverses course ahead of overbought territory and establishes a negative slope.

The opening range for 2020 instilled a constructive outlook for the price of gold as the precious metal cleared the 2019 high ($1557), with the Relative Strength Index (RSI) pushing into overbought territory during the same period.
A similar scenario materialized in February, with the price of gold marking the monthly low ($1548) during the first full week, while the RSI broke out of the bearish formation from earlier this year to push back into overbought territory.
However, the monthly opening range for March as less relevant amid the pickup in volatility, with the decline from the monthly high ($1704) leading to a break of the January low ($1517).
Nevertheless, the reaction to the former-resistance zone around $1450 (38.2% retracement) to $1452 (100% expansion) instilled a constructive outlook for bullion especially as the RSI reversed course ahead of oversold territory and broke out of the bearish formation from February.
In turn, gold cleared the March high ($1704) to tag a new yearly high ($1748) in April, with the bullish behavior also taking shape in May as the precious metal traded to a fresh 2020 high ($1764).
The RSI highlighted a similar dynamic as the oscillator broke out of the downward trend carried over from the previous month, but the bullish momentum has largely abated as the indicator reverses course ahead of overbought territory.
Will keep a close eye on the RSI as it establishes a negative slope, and the indicator may register levels not seen since March if the oscillator breaks below 50.
The price of gold may continue to pull back from the 2020 high ($1765) as the advance from earlier this month stalls ahead of the 2012 high ($1796), with lack of momentum to hold above the Fibonacci overlap around $1733 (78.6% retracement) to $1743 (23.6% expansion) bringing the $1676 (78.6% expansion) region on the radar, which largely lines up with the May low ($1670).
Next area of interest comes in around $1655 (161.8% expansion) followed by the overlap around $1627 (61.8% expansion) to $1630 (23.6% retracement).

GOLD PRICE TALKING POINTS
The price of gold struggles to retain the advance from earlier this week even though Federal Reserve officials retain a dovish forward guidance, and the precious metal may consolidate over the remainder of the month as the Relative Strength Index (RSI) appears to have flopped ahead of overbought territory.

GOLD PRICE CONSOLIDATION TO LINGER AS RSI FLOPS AHEAD OF OVERBOUGHT ZONE
The price of gold has traded to fresh yearly highs during every single month so far in 2020, and the break above the November 2012 high ($1754) may keep bullion afloat as the Federal Reserve prepares to launch the Municipal Liquidity Facility along with the Main Street Lending Program over the coming days.

It seems as though the Federal Open Market Committee (FOMC) will actively expand its balance sheet over the coming months as Vice-Chairman Richard Clarida warns that the US economy is expected to “contract at an unprecedented pace in the second quarter,” with the official going onto say that “additional support from both monetary and fiscal policies may be called for.”

It remains to be seen if the FOMC will deploy more unconventional tools in 2020 as Clarida insists that the committee “will wind down these lending facilities at such time as we determine the circumstances we confront are no longer unusual or exigent,” and the central bank may carry out a wait-and-see approach over the coming months as US lawmakers try to pass another stimulus program labeled the HEROES Act.

Nevertheless, the FOMC appears to be on track to endorse a dovish forward guidance at the next interest rate decision on June 10 as Chairman Jerome Powell tells Congress that the committee is” committed to using our full range of tools to support the economy in this challenging time,” and the threat of a protracted recovery may push the central bank to deploy more unconventional tools as Vice-Chairman Clarida insists that “the Federal Reserve will continue to act forcefully, proactively, and aggressively.”

At the same time, Fed officials may continue to tame speculation for a negative interest rate policy (NIRP) as Chairman Powell and Co. “expect to maintain interest rates at this level until we are confident that the economy has weathered recent events,” but the low interest rate environment along with the ballooning central bank balance sheets may act as a backstop for goldas marketparticipants look for an alternative to fiat-currencies.

In turn, the price for gold may continue to exhibit a bullish behavior as it trades to fresh yearly highs during every single month so far in 2020.

The opening range for 2020 instilled a constructive outlook for the price of gold as the precious metal cleared the 2019 high ($1557), with the Relative Strength Index (RSI) pushing into overbought territory during the same period.
A similar scenario materialized in February, with the price of gold marking the monthly low ($1548) during the first full week, while the RSI broke out of the bearish formation from earlier this year to push back into overbought territory.
However, the monthly opening range for March as less relevant amid the pickup in volatility, with the decline from the monthly high ($1704) leading to a break of the January low ($1517).
Nevertheless, the reaction to the former-resistance zone around $1450 (38.2% retracement) to $1452 (100% expansion) instilled a constructive outlook for bullion especially as the RSI reversed course ahead of oversold territory and broke out of the bearish formation from February.
In turn, gold cleared the March high ($1704) to tag a new yearly high ($1748) in April, with the behavior also taking shape in May as the precious metal trades to a fresh 2020 high ($1764).
The RSI highlights a similar dynamic as the oscillator breaks out of the downward trend carried over from the previous month, but the bullish momentum may abate over the coming days as the indicator appears to have flopped ahead of overbought territory.
Waiting for a close above the $1754 (261.8% expansion) region, which lines up with the November 2012 high ($1754), to bring the $1786 (38.2% expansion) area on the radar, with the 2012 high ($1796) up next.
However, the string of failed attempts to close above the $1754 (261.8% expansion) region may push the price of gold towards the May low ($1670), which lines up with the $1676 (78.6% expansion) region, with the next downside hurdle coming in around $1655 (161.8% expansion).

GOLD AND CRUDE OIL TALKING POINTS:
Gold prices edged back despite a far from optimistic market background
US-China relations deteriorated further with President Trump overtly blaming his Chinese counterpart
Crude oil prices rose once again as US stockpiles were drawn down
Gold prices failed to hold onto the gains with which they started the session.

The backdrop looks obviously supportive with the prospect of near-term economic weakness across the globe leading to massive stimulus and the sort of monetary largesse which tends to support gold prices.

There were signs that risk aversion had picked up too. US President Donald Trump pointed the finger at his Chinese counterpart Xi Jinping, accusing him via Twitter of direct responsibility for anti-US propaganda. US stock futures slipped a little after this, but the knock-on effect to gold was limited and Asia Pacific equity had a mixed, narrow session.

The remainder of the day offers plenty of interesting economic data points. Purchasing Managers Indexes from Europe and the US will give investors an early snapshot of May activity. Sadly the pictures are unlikely to be reassuring with most expected to be well short of the key 50-point level which separates expansion from contraction.

Oil prices were higher again, with the market responding to another fall in US stockpile levels. Crude oil stocks fell by five million barrels last week, according to the Energy Information Administration, when the market had expected a one million barrel rise.

However, storage facilities remain very well used and, although there are clear signs that production cuts are restraining supply, levels of demand remain under deep question thanks to the various economic shutdowns either still in force or being unwound only gradually.

GOLD PRICES TECHNICAL ANALYSIS
Gold Prices, Daily Chart
Gold prices remain well within their daily-chart uptrend and have just made a new higher high within it. However, a range of resistance from late 2012 still stands between gold’s bulls and the market’s all time highs from earlier that year.

So far the market has only managed a single, quick intraday foray into that range with very little follow through. If prices have not pushed into that range by month end then some correction lower may well be seen, possibly even testing psychological support at $1700/ounce.

However there seems little fundamental reason why gold prices should reverse now and an eventual move into that resistance zone and, quite possibly, above it, looks more likely.

CRUDE OIL PRICES TECHNICAL ANALYSIS

US crude oil prices remain above the steep uptrend line in place since late April and have edged into their own resistance zone formed by trading levels seen on the way down between March 8 and 16. Above this the key $40/barrel level will beckon. That hasn’t been seen for more than two months. However, given the clear question marks hanging over Covid-hit fundamental demand, it may be likely that the market will have to see a period on consolidation before seriously challenging $40.

Gold prices rushed up to another fresh seven-year-high to kick of this week’s trade.
Comments from Jerome Powell on the television show 60 Minutes seemed to give another shot-in-the-arm to the risk trade, as Chair Powell said that there were ‘no limits’ to what the FOMC can do with the lending programs available.
The highlight of this week’s economic calendar are inflation prints out of Europe, the UK and Canada, and out of the US, FOMC Minutes are released on Wednesday afternoon.

GOLD RUSHES UP TO ANOTHER FRESH SEVEN-YEAR-HIGH
The month of March was a major inflection point in global markets, and with a little hindsight, that fact has become even more clear. While stocks spent much of the month in a precipitous decline, the final week of March was marked by strength in the risk-on trade as global governments, the US in particular, rushed to markets with multiple streams of stimulus. What started as an apparent short-cover rally soon turned into a fresh bullish trend; and almost 40% later, US stocks are continuing to climb as the series of stimulus programs and government action have so far helped to arrest that fear.

This theme was on display in Gold prices, in a couple of different ways. As panic was heating up in early-March, Gold prices fell by almost 15% as the US Dollar rallied by as much as 8.8%. Normally, investors might expect risk aversion to help Gold prices but in this case, and in others where deflation is a realistic prospect and investors are rushing for cash – Gold can sell-off, as well. Case in point, during the depths of the Financial Collapse gold prices fell by more than 33% over a six-month-stretch. But in March, the yellow metal put in almost half of that move in a week as panic alarms rang the world-around.

In the latter portion of the month, recovery began to show in both stocks and gold prices; but given the timing and the fact that this drive may have been emanating from end-of-quarter flows, it was difficult to discern whether it was a legitimate bullish trend brought upon by loads of stimulus or a mere pullback in a longer-term, bigger-picture sell-off.

The month of April helped to provide some clarity as both stocks and gold continued to rally, with the latter hitting a fresh seven-year-high on April 14th.

The next month, from the April 14th into the May 14th breakout, Gold prices digested those prior gains in the form of a symmetrical wedge. And when that wedge was combined with the prior bullish trend, that made for a bull pennant formation that began to give way last week as buyers hit the bid to create another fresh seven-year-high. (To learn more about pennant formations, the recently revamped education section of DailyFX touches on the topic.)

GOLD JUMPS AFTER WEEKLY OPEN, POTENTIAL FOR MORE STIMULUS
There’ve been a few noteworthy moments around Central Banks in the past couple of months. Jerome Powell has discussed stimulus options numerous times, but it was perhaps the comments from an appearance on the television show 60 Minutes last night that seemed to have really stirred the pot.

The interviewer, Mr. Scott Pelley, asked the very direct question of ‘Has the Fed done all that it can do?’

Mr. Jerome Powell responded: “Well, there is a lot more we can do. We’re not out of ammunition by a long shot. No, there’s, there’s really no limit to what we can do with these lending programs we have.”

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This may have just been Mr. Powell’s ‘whatever it takes’ moment, harkening back to the promise from Mario Draghi pledged during the depths of the European Financial Collapse that finally helped to restore order to the bloc. It’s also something that can help to build an even stronger fundamental case for Gold forecasts as a busy Fed firing numerous lending programs at the same time may bring about conditions similar to the 2009-2011 backdrop; as Gold prices surged up to an all-time-high of $1920 as global governments were showering the world (and markets) with liquidity.

From a shorter-term perspective, this morning’s pullback appears to be more technical in nature as an already overbought market caught another shot-in-the-arm with those comments from the television program last night. This could keep the search on for support, with potential areas of interest around 1720 and a bit lower around 1692. The former of those levels is the 14.4% Fibonacci retracement, the latter the 23.6% marker of the March-May bullish move.

GOLD PRICE TALKING POINTS
The price of gold trades to a fresh yearly high ($1760) as it extends the series of higher highs and lows from the previous week, and the break above the November 2012 high ($1754) may keep the precious metal afloat as the Relative Strength Index (RSI) approaches overbought territory.

GOLD PRICE FORECAST: BREAKOUT PUSHES RSI TOWARDS OVERBOUGHT TERRITORY
The price of gold has traded to fresh yearly highs during every single month so far in 2020, and the precious metal may continue to exhibit a bullish behavior as Federal Reserve Chairman Jerome Powell warns of a protracted recovery.

In a recent interview on CBS News, Chairman Powell started off by stating that the US economy may “recover steadily through the second half of this year” as states start to rollback the stay-at-home orders, but went onto say that the disruption in economic activity “could stretch through the end of next a year” if a second wave of infections emerge.

Chairman Powell mentioned that “it may take a while” for the US to recover from COVID-19 as “it’s very plausible that the economy will take some time to gather momentum,” with the central bank emphasizing that the Federal Open Market Committee (FOMC) is “not out of ammunition” as the central bank expands its balance sheet.

Nevertheless, Chairman Powell revealed that officials “on the Federal Open Market Committee continue to think that negative interest rates is probably not an appropriate or useful policy for us here in the United States,” and it seems as though Fed officials will continue to tame speculation for a negative interest rate policy (NIRP) as “there’s really no limit to what we can do with these lending programs that we have.”

In turn, the FOMC may become increasingly reliant on its unconventional tools as the benchmark interest rate sits at the effective lower bound (ELB), and it remains to be seen if the unprecedented efforts taken by monetary as well as fiscal authorities will spur a V-shaped recovery as US lawmakers try to pass another stimulus program.

With that said, the low interest rate environment along with the ballooning central bank balance sheets may act as a backstop for goldas marketparticipants look for an alternative to fiat-currencies, and the price for bullion may continue to exhibit a bullish behavior as it extends the series of higher highs and lows from the previous week.

The opening range for 2020 instilled a constructive outlook for the price of gold as the precious metal cleared the 2019 high ($1557), with the Relative Strength Index (RSI) pushing into overbought territory during the same period.
A similar scenario materialized in February, with the price of gold marking the monthly low ($1548) during the first full week, while the RSI broke out of the bearish formation from earlier this year to push back into overbought territory.
However, the monthly opening range for March as less relevant amid the pickup in volatility, with the decline from the monthly high ($1704) leading to a break of the January low ($1517).
Nevertheless, the reaction to the former-resistance zone around $1450 (38.2% retracement) to $1452 (100% expansion) instilled a constructive outlook for bullion especially as the RSI reversed course ahead of oversold territory and broke out of the bearish formation from February.
In turn, gold cleared the March high ($1704) to tag a new yearly high ($1748) in April, with the behavior also taking shape in May as the precious metal trades to a fresh 2020 high ($1764).
The break/close above the $1754 (261.8% expansion) region, which lines up with the November 2012 high ($1754), opens up the $1786 (38.2% expansion) area, with the 2012 high ($1796) next on the radar.
The RSI highlights a similar dynamic as the oscillator breaks out of the downward trend carried over from the previous month, and the bullish momentum may gather pace if the indicator breaks above 70 and pushes into overbought territory.

SILVER PRICES, GOLD PRICE CHART, XAU/USD, XAG/USD – TALKING POINTS
Silver prices may retreat as XAG/USD feels the pressure at key technical cross-section
Gold prices at risk short-term pullback as slope of appreciation shows signs of fragility
Is the appeal of silver and gold as an anti-fiat hedge still present after Fed’s comments?
SILVER PRICE OUTLOOK
Silver prices have risen a little over 32 percent after bottoming out at a multi-year low, though the precious metal’s ascent may soon face a short-term pullback. XAG/USD is approaching a key inflection range between 16.177 and 16.541. As the area between it and the uptrend narrow, capitulation or a push forward could reveal and underlying bearish or bullish bias.

If XAG/USD is unable to clear that zone, a break below the uptrend could precede a larger pullback and lead to a possible retest of the September downtrend that the precious metal only recently recovered from. Conversely, a turn higher would open the door to flirting with the lower tier of a key congestive range between 17.440 and 18.110. Having said that, the path of least resistance suggests a bearish tilt.

GOLD PRICE FORECAST
Much like silver, gold prices too have managed to nurse their losses after incurring a double-digital decline following the selloff in risk-oriented assets in March. This also helped to illustrate that gold is incorrectly mislabeled as a haven-linked asset, for if it was, traders would have seen the precious metal rise.

Amid the selloff, the appeal of gold as an anti-fiat hedge waned since interest rates appeared to have hit the lowest point policymakers were willing to let them go. See my prior piece outlining the Fed’s comments on using negative interest rates here.

Consequently, its utility as an anti-fiat hedge evaporated and its relative illiquidity as compared with the US Dollar made it less attractive to hold in uncertain times and led to heightened liquidation pressure. Digression aside, gold prices have managed to rise a little over 17 percent from the December 2019-lows and was helped by a steep, upward-sloping support channel.

However, recent price action suggests the precious metal may be losing steam as it trades within the range of the slope of appreciation. If it cracks under the weight of increased selling pressure, XAU/USD may encounter some downside friction between 1671.81 and 1671.84 before turning lower. If that area also succumbs to the force of sellers, the next floor to clear may be at 1641.20.

SILVER PRICES, GOLD PRICE CHART, XAU/USD, XAG/USD – TALKING POINTS
Silver prices may retreat as XAG/USD feels the pressure at key technical cross-section
Gold prices at risk short-term pullback as slope of appreciation shows signs of fragility
Is the appeal of silver and gold as an anti-fiat hedge still present after Fed’s comments?
SILVER PRICE OUTLOOK
Silver prices have risen a little over 32 percent after bottoming out at a multi-year low, though the precious metal’s ascent may soon face a short-term pullback. XAG/USD is approaching a key inflection range between 16.177 and 16.541. As the area between it and the uptrend narrow, capitulation or a push forward could reveal and underlying bearish or bullish bias.

If XAG/USD is unable to clear that zone, a break below the uptrend could precede a larger pullback and lead to a possible retest of the September downtrend that the precious metal only recently recovered from. Conversely, a turn higher would open the door to flirting with the lower tier of a key congestive range between 17.440 and 18.110. Having said that, the path of least resistance suggests a bearish tilt.

GOLD PRICE FORECAST
Much like silver, gold prices too have managed to nurse their losses after incurring a double-digital decline following the selloff in risk-oriented assets in March. This also helped to illustrate that gold is incorrectly mislabeled as a haven-linked asset, for if it was, traders would have seen the precious metal rise.

Amid the selloff, the appeal of gold as an anti-fiat hedge waned since interest rates appeared to have hit the lowest point policymakers were willing to let them go. See my prior piece outlining the Fed’s comments on using negative interest rates here.

Consequently, its utility as an anti-fiat hedge evaporated and its relative illiquidity as compared with the US Dollar made it less attractive to hold in uncertain times and led to heightened liquidation pressure. Digression aside, gold prices have managed to rise a little over 17 percent from the December 2019-lows and was helped by a steep, upward-sloping support channel.

However, recent price action suggests the precious metal may be losing steam as it trades within the range of the slope of appreciation. If it cracks under the weight of increased selling pressure, XAU/USD may encounter some downside friction between 1671.81 and 1671.84 before turning lower. If that area also succumbs to the force of sellers, the next floor to clear may be at 1641.20.

The price of gold continues to trade in a narrow range even though US President Donald Trump pushes for a negative interest rate policy (NIRP), and the precious metal may continue to consolidate as plans to gradually restart the advanced economies appear to be restoring investor confidence.

GOLD PRICE HOLDS STEADY EVEN AS TRUMP PUSHES FOR NEGATIVE US RATES
The price of gold is little changed from earlier this week as US President Trump tweets that “as long as other countries are receiving the benefits of Negative Rates, the USA should also accept the GIFT,” and the Federal Open Market Committee (FOMC) may continue to push monetary policy into uncharted territory as Chairman Jerome Powelland Co. pledge to use their powers “forcefully, proactively, and aggressively until we are confident that we are solidly on the road to recovery.”

Image of US President Donald Trump tweet
However, Fed officials may continue to show little interest for an negative interest rate policy (NIRP) as the benchmark interest rate sits at the effective lower bound (ELB), and the central bank appears to be on track to expand its balance sheet throughout the months ahead as Cleveland Fed President Loretta Mester, a 2020-voting member on the FOMC, argues that “accommodative monetary policy will be needed for some time to support the recovery.”

Mester goes onto say that the Fed stands “ready to address the challenges that will arise as the country incrementally re-engages in economic activity as the year progresses,” but insists that “further direct fiscal support will be needed if we are to avoid the longer-lasting damage to the economy.”

It remains to be seen if the unprecedented efforts taken by monetary as well as fiscal authorities will spur a V-shaped recovery as major cities like New York remain on lockdown, and the FOMC may come under pressure to further support the US economy “if an upsurge in virus cases necessitates shutting down activity again or if there is considerably more harm in terms of business and personal bankruptcies or if instabilities in the banking system arise.”

Nevertheless, it seems as though the FOMC will stick to the sidelines at the next interest rate decision on June 10 as the central bank carries out its non-standard measures and provides more detailed information surrounding its unconventional tools like the Term Asset-Backed Securities Loan Facility (TALF), which “initially will make up to $100 billion of loans available.”

In turn, the Fed may carry out a wait-and-see approach over the coming months as the Great Lockdown appears to have passed its peak, but Chairman Powell and Co. may continue to endorse a dovish forward guidance for monetary policy as Minneapolis Fed President Neel Kashkari, another 2020-voting member on the FOMC, warns that “the worst is yet to come” in response to the record decline in US Non-Farm Payrolls (NFP).

With that said, the low interest rate environment along with the ballooning central bank balance sheets may act as a backstop for goldas marketparticipants look for an alternative to fiat-currencies, but the price for bullion may continue to consolidateas plans to gradually restart the advanced economies appear to be restoring investor confidence.

As a result, the price of gold may continue to track the April range following the string of failed attempt to test the November 2012 high ($1754) especially as the Relative Strength Index (RSI) preserves the bearish formation carried over from the previous month.

The opening range for 2020 instilled a constructive outlook for the price of gold as the precious metal cleared the 2019 high ($1557), with the Relative Strength Index (RSI) pushing into overbought territory during the same period.
A similar scenario materialized in February, with the price of gold marking the monthly low ($1548) during the first full week, while the RSI broke out of the bearish formation from earlier this year to push back into overbought territory.
However, the monthly opening range for March as less relevant amid the pickup in volatility, with the decline from the monthly high ($1704) leading to a break of the January low ($1517).
Nevertheless, the reaction to the former-resistance zone around $1450 (38.2% retracement) to $1452 (100% expansion) instilled a constructive outlook for bullion especially as the RSI reversed course ahead of oversold territory and broke out of the bearish formation from February.
In turn, gold cleared the March high ($1704) to tag a fresh yearly high ($1748) in April, and it remains to be seen if bullion will trade to a fresh 2020 high in May as the precious metal appears to be stuck in a narrow range following the of failed attempt to test the November 2012 high ($1754).
At the same time, the RSI continues to track the bearish formation carried over from the previous month, but will keep a close on the indicator as it approaches trendline resistance, with a break of the downward trend likely to be accompanied by higher gold prices as the bearish momentum abates.
Waiting for a break/close above the Fibonacci overlap around $1733 (78.6% retracement) to $1739 (100% expansion) to bring the $1754 (261.8% expansion) region on the radar, which lines up with the November 2012 high ($1754).