Gold And Silver Prices Retrace After 10% Rallies, Bulls Still Favored

Precious metals continue the retracement initiated on Monday as the financial markets try to settle down from the vast stress over the last few days. Gold price (XAU/USD) has pulled back to trading below $1,970 at the time of writing, from a peak above $2,000 early Monday. Silver price action (XAG/USD) has been a bit quieter, with a relative monthly high below $23 achieved on Monday and a 1% retracement since.

UBS’s agreement to buy Credit Suisse and coordinated central bank action to inject liquidity into the system are the actions that have somewhat relieved the extreme risk-off mood seen since the collapse of Silicon Valley Bank.

Gold Price Rally Can Keep Going On Any Federal Reserve Dovish Hint

Tensions are far from over, though, as the Federal Reserve interest rate decision on Wednesday is crucial, to understanding how the biggest central bank in the world understands the dilemma, between combating relentless inflation and alleviating the international banking system’s stress suffering.

Institutional market strategists believe that precious metals, mainly Gold, have more room to continue rallying. Any dovish hints in the FOMC statement and projections (the dot plot) will provide a bullish impetus for the bright metal. ANZ Bank analysts write: “Despite banking regulators rushing to shore up market confidence, the uncertain macro backdrop continues to entice buying. All eyes now shift to the Fed’s two-day meeting. Any dovish commentary should help support the precious metals sector.”

Gold Trading Volume On The Rise

The vast rally (around 10% in a week) seen in Gold prices has been highlighted by surging open interest and volume in the futures markets. According to data from the CME Group, negotiated contracts rose from around 13K in the first week of March to an average above 40K in the past seven trading days.

Silver Price Technical Outlook Is Also Bullish

The silver price has not made the same headlines as its brightest counterpart in Gold, but the second-highest traded metal has also profited from the banking crisis. The technical scenario in XAG/USD remains with bullish potential intact despite the recent retracement. Haresh Menghani, Market Analyst at FXStreet, writes:

“The recent breakout through the $21.65-$21.70 confluence resistance was a new trigger for bullish traders. Furthermore, a subsequent move and acceptance above the 50% Fibonacci retracement level of the recent sharp pullback from a multi-month peak add credence to the constructive outlook. This, along with bullish oscillators on 4-hour and daily charts, suggests that the path of least resistance for the XAG/USD is to the upside.

Hence, 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.”

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