Powell throws Gold and Silver Bulls a Bone

The yellow metal is making some big moves. Yesterday, saw a much higher than expected inflation print, however, this lead to more tightening of monetary policy expectations and helped the dollar push higher keeping gold subdued. Today, however, Jerome Powell’s prepared remarks were released ahead of his testimony before the House Financial Services Committee and the gold bulls/doves were licking their lips. In essence, he said that the U.S. economic recovery hasn’t progressed enough to begin reducing their asset purchases. This sent yields and the dollar lower, which provides rocket fuel for assets like gold and its high beta cousin silver.

The technicals are looking solid. Gold has breached the upper trend line of the descending channel. Price is now hovering right on the 200-day SMA, which will be key for the yellow metal’s next price direction. The 50-day SMA is also just above that so there is lots of resistance gold will have to negotiate. The RSI is ever so slightly above the 55 level which marked previous price rallies. The negative divergence we saw in in June with price and the RSI helped slow the selling momentum for gold. A first initial upside price target would be around $1840 (50-day SMA) and then $1850 the round number. On the downside, I’d watch the $1800 level around the 21-day EMA and horizontal support.

Silver is trying to break out of its range that it finds itself trapped in currently between the 21-day EMA and the 200-day SMA. For bulls it’s important that price still remains above the longer-term moving average. Above the 21-day EMA the next target would be the 50-day SMA around $27. The RSI is moving up in the right direction with plenty of room to go before it can be classified as overbought. If price pulls back and slices through the 200-day SMA then $25 becomes the downside price target.