Short One-Day Pullback

A one-day pullback was reversed yesterday leading to trend continuation signal. It was further confirmed with today’s advance to a high of 2.30. Resistance was seen off that high and was followed by a pullback to below the 2.27 pivot. At the time of this writing natural gas is poised to end Thursday’s trading session below the 2.27 level as it is trading within the lower half of the day’s range. Yet, a new higher daily higher and higher low should complete today.

Potential Support Begins at 2.13

Given the quick recovery of the bull trend following a one-day decline, it looks likely that natural gas may continue higher before a deeper pullback. Nonetheless, there are a couple potential support zones to be aware of. First, there is the pullback low of 2.13 from Tuesday. It is quickly followed by the 20-Day MA at 2.10. There is also the 50% retracement level at 2.07.

On the Upside

On the upside, natural gas has been rising following a -40.2% drop from the June 11 swing high of 3.16. That peak was a failed bullish breakout attempt above a prior trend line (blue dots). It remains on the chart only as an additional guide. The current advance has the potential to again attempt a breakout of the top trendline, which has been redrawn to account for the June 11 lower swing high. Therefore, the outlook for natural gas remains bullish.

Initial upside targets start with the 31.8% Fibonacci retracement at 2.37. Given the potential upside momentum it seems likely that this price level would be exceeded. The 50-Day MA is then at 2.40. Since the 20-Day MA was exceeded, the 50-Day line at 2.52 becomes the next moving average target, along with a previous pullback low at 2.475.

For a look at all of today’s economic events, check out our economic calendar.

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CPI Report and Fed Expectations

Investors are closely monitoring the CPI figures for insights into future Federal Reserve policy. The Core CPI, which excludes volatile food and energy prices, is projected to rise by 0.2% month-over-month and 3.2% year-over-year. Concerns about the U.S. economy’s health have grown recently, with some market participants questioning whether the Fed should have already initiated rate cuts. As of Wednesday, traders were fully pricing in a rate cut in September, though opinions varied on its size.

The Federal Reserve, after its July meeting, left rates unchanged but hinted that a cut could be on the table depending on incoming economic data. The market’s current pricing reflects a 52.5% chance of a 50 basis point cut in September, according to the CME FedWatch Tool. U.S. Treasury yields, which tend to move inversely with gold prices, fell slightly on Wednesday as investors digested the implications of the upcoming CPI release.

Geopolitical Risks Boost Safe-Haven Demand

Gold’s appeal as a safe-haven asset has been bolstered by ongoing tensions in the Middle East. Iran’s threat of retaliation following the death of a Hamas leader has heightened fears of a broader conflict, driving demand for gold. Any escalation in the region could push prices higher, with the potential for gold to reach new records if combined with dovish signals from the Federal Reserve.

Market Forecast: Bullish Outlook for Gold

Given the current market environment—characterized by expectations of a rate cut, moderating U.S. inflation, and persistent geopolitical risks—gold prices are likely to continue their upward trend. Traders should watch for a possible all-time high in the near term, particularly if the CPI data supports the case for a significant reduction in U.S. interest rates.

Technical Analysis

• Silver price faces immediate resistance around the 14-day EMA at $28.00 level.
• The daily chart analysis indicates a breakout above a descending triangle, suggesting a potential bullish trend reversal.
• The upper boundary of the descending triangle around the $27.75 level acts as immediate support.

Silver price (XAG/USD) price retraces its recent gains, trading around $27.90 per troy ounce during the European session on Wednesday. The analysis of the daily chart shows a breakout above a descending triangle pattern, which is considered a positive signal. This breakout suggests that the market may be shifting from a bearish to a bullish bias.

Additionally, the 14-day Relative Strength Index (RSI) is consolidating below 50 level, suggesting a downward trend. A break above the 50 level would indicate the emergence of an upward trend.

Additionally, the Moving Average Convergence Divergence (MACD) line has crossed above the signal line, suggesting a potential bullish signal. However, since both lines remain below the centerline (zero line), this indicates that the overall trend is still bearish. It might be wise to wait for further confirmation before making any significant trading decisions.

In terms of support, the Silver price is testing the upper boundary of the descending triangle around the $27.75 level. A return to the descending triangle would reinforce the bearish bias and push the metal asset to navigate the region around the $26.60 level, followed by May’s low at the $26.02 level.

On the upside, the Silver price tests an immediate resistance around the 14-day Exponential Moving Average (EMA) at the $28.00 level, followed by the “throwback support turned resistance” at the $28.60 level. A breakthrough above the latter could lead the XAG/USD pair to explore the region around the two-month high at the $31.75 level.

XAG/USD: Daily Chart

• Gold price defends $2,450, as buyers stay hopeful ahead of key US CPI data.
• The US Dollar and Treasury bond yields lick soft PPI data-inflicted wounds.
• Gold price teases upside break from a symmetrical triangle amid a daily bullish RSI.    

Gold price is defending the $2,450 psychological level, looking to the one-week high of $2,477 on the US Consumer Price Index (CPI) inflation day.

All eyes remain on the key US CPI inflation data

Gold buyers remain expectant of a softer US CPI report, following a bigger-than-expected cool-off in the Producer Price Index (PPI) inflation data published a day ago.

The US will hog attention later on Tuesday while the US Consumer Price Index (CPI) inflation release will stand out on Wednesday. The US Labor Department’s Bureau of Labor Statistics reported Tuesday that the headline PPI increased 2.2%, a sharp drop from the 2.7% reading in June, coming in below the expected 2.3% rise.

The data triggered a risk rally on Wall Street, as it reinforced dovish US Federal Reserve (Fed) expectations, smashing the US Dollar across the board in tandem with the US Treasury bond yields. Increased dovish Fed bets cushioned the corrective downside in the non-interest-bearing Gold price, as markets resorted to profit-taking after the bright metal reverted toward all-time highs in the lead-up to the US CPI showdown.

Markets are currently pricing in a 54% chance of a 50 basis points (bps) interest-rate cut by the Fed in September, according to the CME Group’s FedWatch Tool.

Meanwhile, the US annual CPI is seen rising 2.9% in July, compared to the 3% figure recorded in June. The annual core CPI inflation is set to ease to 3.2% in the same period vs. June’s 3.3%. Over the month, the CPI is expected to rebound 0.2% in July while the core CPI will likely inch a tad higher to 0.2%.

A softer-than-expected headline annual CPI print could confirm bets of aggressive and big Fed rate cuts, providing extra legs to the US Dollar downtrend. Gold price, in turn, could clinch fresh record highs.  

Besides, Gold price will continue to find support from the rife Middle East geopolitical tensions, with markets bracing for an imminent Iranian attack on Israel. Additionally, speeches from Fed policymakers will also help influence the Gold price action.

Gold price technical analysis: Daily chart

As observed on the daily chart, Gold price is challenging the upper boundary of a symmetrical triangle formation, now at $2,471.

Gold buyers look to the US CPI data to secure a daily candlestick closing above that level, which could then trigger a fresh advance to the $2,500 mark.

However, Gold price needs to take out the all-time high of $2,484, at first.

The key leading indicator, the 14-day Relative Strength Index (RSI) points lower but stays above the 50 level, suggesting that Gold price will continue to see dip demand.

On the other hand, an upside surprise in the US CPI data could revive the selling interest, dragging Gold price back toward the  21-day Simple Moving Average (SMA) support at $2,420 holds.

Ahead of that, the August 9 high of $2,437 could lend some support to Gold buyers.

Should the selling momentum intensify, with the 21-day SMA giving way, the next relevant support is seen at $2,380, where the lower boundary of the triangle and the 50-day SMA converge.

• Gold price posts modest gains around $2,465 in Wednesday’s early Asian session. 
• The escalating tensions in the Middle East increase safe-haven demand, benefiting Gold. 
• The US July Consumer Price Index report will be the highlight on Wednesday. 

Gold price (XAU/USD) trades with mild gains near $2,465 during the early Asian session on Wednesday. The upside of the yellow metal might be underpinned by the safe-haven flows amid ongoing tensions in the Middle East. Traders will closely watch the release of the US July Consumer Price Index (CPI), which is due later on Wednesday. 

Safe-haven demand from heightened tensions in the Middle East might lift the precious metal in the near term. The BBC reported on Tuesday that the United States sent a guided missile submarine to the Middle East as tensions rise in the region. The action comes in response to fears of a wider regional conflict after the recent assassination of senior Hezbollah and Hamas leaders. Analysts from Saxo Bank A/S noted that gold remains “supported by geopolitical risks and anticipated Federal Reserve rate cuts amid heightened tensions” involving Iran and Israel as well as Ukraine. 

On Tuesday, Atlanta Fed President Raphael Bostic said that recent economic data made him “more confident” that the Fed can get inflation back to its 2% target. Still, more evidence is needed before he’s ready to support lowering interest rates. 

The US CPI inflation report on Wednesday could offer some hints about the Federal Reserve’s (Fed) interest rate cut path. The CPI is expected to increase 0.2% MoM in July, compared to the previous month of a 0.1% decline. On an annual basis, the CPI inflation is estimated to ease to 2.9% in July from 3.0% in June. 

The softer reading could fuel the chance of a Fed rate cut in September. On the other hand, a hotter inflation outcome might diminish the odds of a Fed easing policy, which is likely to exert some selling pressure on the non-yielding Gold. 

Drop to 20-Day MA at 2.09 Next in Line

A decline below today’s low of 2.14 will trigger a bearish continuation of today’s pullback. The 20-Day MA at 2.09 looks to be the first area to watch for support. If it fails to hold, there is a price zone to watch from around 2.03 to 2.02, and it includes the 61.8% Fibonacci retracement at 2.025. One of the reasons that natural gas is anticipated to continue higher following a pullback is that it triggered a bullish weekly reversal signal last week on a rally above the three-week high at 2.15.

Weekly Reversal Just Getting Started

A reversal week completed last week, and the week ended strong, in the top quarter of the week’s trading range. Also, the week ended above 2.15 at 2.16. Moreover, Monday’s rally triggered a bullish continuation of the weekly chart. This was the first time in eight weeks that natural gas exceeded the high of a prior week. These signs of strength should lead to further upside.

Since the 20-Day MA was cleared last week with a rally above 2.10, natural gas is showing strength that may result in a continuation of the current advance up to the 50-Day MA, now at 2.42. Prior to that price level there is the 38.2% Fibonacci retracement at 2.37, while the 50% retracement is at 2.42.

Watching for Clues During Pullback

Characteristics of the current pullback should assist in determining short-term underlying strength in natural gas. A bullish reversal following a test of support at the 20-Day line would be a stronger sign than a drop to test support around the 61.8% Fibonacci level at 2.025, for example.

For a look at all of today’s economic events, check out our economic calendar.

• Silver price remains on backfoot even though the US PPI turned out softer-than-expected in July.
• Soft US producer inflation has increased investors’ confidence that price pressures remain on path that leads to banks’ target of 2%.
• Middle East conflicts limit Silver price’s downside.

Silver price (XAG/USD) faces pressure in Tuesday’s American session even though the United States (US) producer inflation remained soft in July. The US Bureau of Labor Statistics (BLS) showed that the core Producer Price Inflation (PPI), which strips off volatile food and energy prices, remains flat month-on-month. Annually, the underlying PPI decelerated at a faster-than-expected pace to 2.4% from expectations of 2.7% and the former release of 2.4%.

Soft US producer inflation has affirmed confidence among investors that price pressures continue to moderate. This has weighed on the US Dollar (USD) and bond yields by boosting expectations of a big interest-rate cut announcement by the Federal Reserve (Fed) in September.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, skids below the crucial support of 103.00. 10-year US Treasury Yields tumble to near 3.87%. Historically, lower yields on interest-bearing assets reduce the opportunity cost of holding investment in non-yielding assets, such as Silver. However, the Silver price declines too as investors await for more evidence to confirm that inflation is on track to return to the desired rate of 2%.

For more evidence, investors will focus on the US Consumer Price Index (CPI) data for July, which will be published on Wednesday. The CPI report is expected to show that monthly headline and core inflation rose by 0.2%. Annual headline and core CPI are estimated to have decelerated by one-tenth to 2.9% and 3.2%, respectively.

Meanwhile, geopolitical risks continue to limit the downside in the Silver price. Investors expect an all-out war in the Middle East between Iran and Israel after the killing of Hamas leader in Tehran.

Silver technical forecast

Silver price finds an interim support near the 200-day Exponential Moving Average (EMA) near $26.90, suggesting that the overall trend is uncertain. The major cushion for the Silver price will be the horizontal support plotted from May 5 high at $26.14.

The 14-day Relative Strength Index (RSI) hovers near 40.00. A decisive break below the same will trigger a bearish momentum.

Silver daily chart

XAU/USD Current price: $2,470.00

• The United States will publish the July Consumer Price Index on Wednesday.
• Financial markets adopted a cautious stance ahead of first-tier figures from the US and the UK.
• XAU/USD consolidates near record highs, bulls hold the grip.

Gold price moved one step closer to its record high on Tuesday, hitting $2,476.81 during Asian trading hours. XAU/USD, however, spent most of the day stuck to its daily opening level at around $2,470 as market players turned cautious ahead of first-tier headlines. Following a relatively quiet week in terms of macroeconomic releases, the focus returns to inflation.

The United Kingdom (UK) and the United States (US) will publish fresh Consumer Price Index (CPI) figures on Wednesday. The numbers will affect the respective central banks’ decisions and, hence, affect both currencies in the near term. Clearly, US figures will have a larger impact on the bright metal, as the Federal Reserve (Fed) has yet to decide on an interest rate cut.

Financial markets have had erratic sentiments about what and when the Fed may act. The central bank, however, has just recently shifted into a more dovish stance, paving the way for a September rate cut. Just recently, tepid growth related data boosted speculation the Fed has no choice but to trim interest rates next month.

Indeed, inflation figures will have a saying, as softer-than-anticipated CPI numbers will further pave the way towards lower rates. Ahead of the event, the US published the July Producer Price Index (PPI), which rose 0.1% MoM in July as expected, while the annual increase resulted at 2.2%, below the 2.3% anticipated and the previous 2.7%. The core annual inflation at wholesale levels eased from 3% in June to 2.4%.

XAU/USD short-term technical outlook  

From a technical point of view, the daily chart for XAU/USD shows bulls retain control. The pair holds well above all its moving averages, with the 20 Simple Moving Average (SMA) partially losing its bullish strength but still providing dynamic support at around 2,420.00. At the same time, the Momentum indicator keeps grinding higher well above its midline, while the Relative Strength (RSI) indicator consolidates at around 61, skewing the risk to the upside.

XAU/USD is poised to retest its record high at $2,483.68. The pair trades well above all its moving averages, with a bullish 20 SMA accelerating north above the 100 and 200 SMA, which slowly gain upward traction. Finally, technical indicators maintain modest upward slopes well above their midlines, reflecting the ongoing consolidation yet maintaining the risk skewed to the upside.

Support levels: 2,458.30 2,442.90 2,438.80

Resistance levels: 2,483.70 2,495.10 2,510.00