Silver (XAG/USD) could still be creating a big top, according to some analysts. According to Credit Suisse analysts, a breach below $22.63 might constitute confirmation of this. Despite near-term stability above important price and “neckline” support, a significant potential peak appears to loom over silver’s near-term performance. Closing below $22.63 would, however, be required to show that the fundamental trend has shifted downward, with resistance then be found at $21.68 and then $19.65, respectively.
XAG/USD CHART. Source: Tradingview.com
Gold Price Assessment
Following lower than expected consumer inflation data in the United States, gold saw an intraday reversal from nearly three-week lows reached previously on Tuesday and climbed back over the $1,800 level. The consumer price index (CPI) increased by 0.3 percent in August, recording the smallest increase in seven months. This is the first time that the pace of inflation over the last year has slowed since last October, with the rate of inflation falling to 5.3 percent for the month under review. More crucially, the core CPI slowed to a rate of 0.1 percent month on month and 4 percent year on year, indicating that the significant increase in inflation this year could have reached its apex. The report alleviated fears about the Federal Reserve beginning its trimming sooner than planned and prompted a precipitous fall in the rates on US Treasury bonds, which in turn benefited the non-yielding precious metal.
Gold (XAU/USD) has remained firmly embedded in its band but has been capped around the highs of July and August, which are $1832/34. Credit Suisse strategists predict that a breach below $1775 will result in additional declines in the stock market. Only a break below $1671 would signal a large top and a significant shift in trend downward, with resistance initially anticipated at $1620/15 and then $1565/60, before a substantial shift in trend upward. It would appear that just a breach over $1834 would be required to establish an in-range basis and pave the way for a more significant rebound to 1863, then $1917.
XAU/USD CHART. Source: Tradingview.com
The $1,800-1,795 Range Appears to Buffer the Downside
Market players are now looking forward to the publication of the Empire State Manufacturing Ranking, Industrial Production statistics, and Capacity Utilization Rate, which will all be released by the United States government. This, together with the rates on US Treasury bonds, might have an impact on the Dollar and give the XAU/USD a little more traction.
Bullish traders benefit from strength/acceptance levels over the $1,800 mark. Purchasing further than the $1,808-10 zone (200-day moving average) will confirm the positive view and pave the way for more increases in the near term. The XAU/USD pair may regain momentum and return to the $1,832-34 support area. In the latter case, the metal has reached various barriers, which if broken should propel the metal to $1,853.
The zone between $1,800 and $1,795 currently appears to be protecting the imminent fall ahead of the solid support level of $1,780. Investors who are pessimistic on the currency would see any convincing breach below the $1,750 level as a new trigger, setting the scene for a rapid decline below the $1,750 level.