Silver (XAG/USD) and Gold (XAU/USD) both experienced notable declines on Tuesday, driven by heightened geopolitical tensions in the Middle East and rising US inflation expectations. Silver tumbled nearly 3%, trading at $60.26 after peaking at $62.16, following reports of Iranian attacks on two vessels in the Strait of Hormuz [1]. Gold retreated by 0.44%, trading at $4,146 after reaching a high of $4,180, as the yellow metal failed to clear the $4,200 resistance level [2].
Technical analysis for Silver indicates a bearish outlook, with the formation of an 'evening star' pattern suggesting further downside risk. Key resistance levels for Silver are identified at $64.00-$65.00 and $70.00, with the 200-day Simple Moving Average at $70.13. If Silver falls below the July 2 daily low of $59.00, it could challenge the June 30 low of $56.61 and the $55.00 psychological level [1]. For Gold, the failure to break above the $4,200-$4,225 resistance range and the formation of a 'death-cross' on the daily chart point to continued bearish momentum, with sellers eyeing the $4,000 level [2].
Market reactions were significant, with oil prices (WTI) rising over 2.70% to $70.48 per barrel and the US Dollar Index (DXY) climbing 0.12% to 199.97, reflecting increased demand for safe-haven assets and a stronger dollar [2]. US Treasury yields also rose, with the 10-year yield up by 5.5 basis points to 4.525% [2]. The NY Fed Survey of Consumer Expectations showed one-year inflation expectations rising from 3.5% in May to 3.7% in June, the highest since September 2023 [2]. The US Goods and Services Trade Balance deficit widened from $-54.6 billion in April to $-77.6 billion in May [2].
Forward-looking statements from the sources highlight that money markets remain skeptical of a rate hike at the July 29 FOMC meeting, but the probability for a September hike is near 60%, according to Prime Market Terminal [2]. The World Gold Council reported that the People’s Bank of China increased its gold reserves for the 20th consecutive month, reaching 75.44 million fine troy ounces at the end of June [2]. Investors are awaiting the release of the latest FOMC meeting minutes and US jobless claims data later in the week [2].
CONCLUSION
Both Silver and Gold are under pressure from geopolitical risks and rising US inflation expectations, with technical indicators pointing to further downside. Market sentiment is bearish, as reflected in declining precious metal prices, rising oil and dollar values, and higher Treasury yields. Investors are closely watching upcoming US economic data and central bank communications for further direction.