Market update: gold and silver dip ahead of US CPI and Powell's speech

Gold volatility, as measured by the Gold Volatility Index (GVZ), surged ahead of last weekend but has since eased at the start of this week. It can be argued that the market priced in some caution due to the Israel Defence Force's advance into Rafah, leading to a late bid in precious metals.

While 30-day implied volatility showed an increase and remains relatively high, current levels are notably below the panic levels seen when US regional banks encountered issues in March 2023.

Gold volatility (GVZ) chart

Gold starts the week on the back foot with US CPI the main focus

Gold has witnessed a noticeable drop on the first trading day of the week – which isn’t all that surprising seeing that US CPI is due on Wednesday and Jerome Powell speaks on Tuesday. The precious metal appears to have tagged trendline resistance before pulling lower at the end of last week and continuing in that vein on Monday.

Since hitting its recent all-time high, gold has largely retreated as traders and investors reassess their positions. US economic data has softened, especially in the jobs market, with Non-Farm Payrolls missing estimates and last week’s initial jobless claims coming in noticeably higher than previous figures. This suggests a more dovish outlook for the dollar, limiting its upside potential if inflation eases in April. Typically, a weaker dollar supports gold prices, but recently gold has both risen and fallen in tandem with the dollar, deviating from their usual inverse relationship.

Should bears bring down gold prices from here, $2,319.50 presents the immediate level of support, followed by the swing low at $2,277. Upside targets appear at the resistance zone around $2,360 and trendline resistance.

Gold (XAU/USD) daily chart

Silver respects zone of resistance ahead of US CPI

Silver, like gold, has experienced a longer-term bullish trend but has also failed to retest its recent high. The $28.40 level proved challenging for the latest bullish advance, as price action approached this zone late last week only to fall back below it. This resistance zone emerged during 2020 to 2021, where higher prices were consistently rejected in the broader area.

The next level of significance to the downside emerges at the 78.6% Fibonacci retracement ($27.41), followed by the swing low at $26.00. The RSI also appears to have rounded, heading lower for now. Upside targets would require a new catalyst and US inflation may help it get there but early estimates assume cost pressures will show further signs of easing in April, which may weigh on the precious metal. Resistance remains at $28.40 with the all-time high of $29.80 requiring a substantial influence to tag the significant level.

Silver (XAG/USD) daily chart

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