As tensions rise in the Middle East following the deadly drone strikes on a US base in Jordan, gold and silver are experiencing upward momentum in the commodity market. Simultaneously, traders are gearing up for key events this week, including the Federal Open Market Committee (FOMC) policy decision, Bank of England (BoE) policy decision, and the release of the US Non-Farm Payrolls (NFP) report.
Escalating Middle East Tensions: The United States has attributed the drone attacks to Iran-backed militia, prompting President Joe Biden to pledge retaliation. Iran, however, has denied any involvement in the attacks. Concerns are mounting over the potential for further escalation if the US responds, further destabilizing an already volatile Middle East region.
FOMC and US NFPs Awaited: This week is crucial for commodity traders, with the FOMC and BoE policy decisions on the horizon. Additionally, market participants eagerly anticipate the release of the US NFP report. Currently, financial markets have priced in a 50/50 chance of a 25 basis point interest rate cut at the upcoming FOMC meeting, with expectations of further cuts throughout the year.
Gold's Consolidation and Future Outlook: Gold has remained range-bound, with a narrow $38/oz. range over the past 12 days. Neither buyers nor sellers have taken control of price action. This stalemate is expected to persist until the FOMC decision, unless Middle East tensions escalate further. Market participants will closely watch the post-decision press conference for hints on future rate cuts. In the meantime, gold is likely to continue its sideways pattern.
Silver's Recovery and Resistance Levels: While gold has faced challenges recently, silver has displayed a more positive performance, recovering some of its earlier losses. The daily chart for silver still appears negative, but if it can break above the 20-day simple moving average, further downside could be limited. However, a cluster of prior highs and the presence of the 50-day and 200-day moving averages around $23.50 may act as resistance levels for any potential rally.
