The Fed and the ECB could do silver a disservice

30 January 2023 174
The Fed and the ECB could do silver a disservice

Soon it will be already 2 months since silver has been keeping its sideways movement. The correction trend in gold reduces the chances for silver to move up out of the rectangle.

 

There will be two significant events for the market this week. On Wednesday the U.S. Federal Reserve will publish new interest rates and on Thursday the ECB will announce its decision about further monetary policy. Analysts continue to forecast a rise in precious metals prices on the back of easing monetary policy tightening.

Analysts say the Fed's monetary policy will continue to weigh on gold. A weaker U.S. dollar, due to a less hawkish policy, is likely to support gold prices. James Knightley suggests that the Fed's rate hikes will stop after the February meeting.

Fears of recession will also have a positive effect on the precious metal, and the prolonged weakening of the U.S. currency will stimulate its growth.


However, it is also important to mention that the pace of rate hikes over the past few weeks has weakened by the market, so the market reaction will be subdued. The comments of the Fed and the ECB will be put at the heart of the current week. Officials may say there is no need to hurry with the rate cut yet.

Regulators probably will keep rates at current levels in order to accurately "anchor" the inflation rate in the world. During the last weeks, this sort of comments is striking from many other resources, despite positive inflation data. This scenario would be negative for both gold and silver.


In terms of the technical analysis, silver remains stuck in a sideways position. There was a strong momentum down the other day, which was redeemed the same day. Looking at the gold dynamics, it is hard to predict the growth of silver so far. Most likely, there will be an exit to the lower border of the rectangle, with an attempt to break through it. It is possible to set the downside target at the level of 0.236 Fibonacci of the entire growth wave. A couple of days ago, this level was tested, it corresponds to the silver price of $22.90. A stop-loss is traditionally set at the upper boundary of the trend, near the level of $24.56.

 

Silver price decline:

Take profit – 22.90

Stop-loss – 24,56

 

This content is for informational purposes only and is not intended to be investing advice.

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