The silver price had a hard time breaking above $28 during the pandemic. Unlike other commodities, which rallied sharply, gold and silver underperformed. A break below $24 suggests a triple top reversal pattern is in place.
Precious metals had a hard time during the pandemic. While rising inflation should have supported gold and silver prices, the opposite happened.
Silver now trades close to the $25 level, threatening to break even lower. Because gold dipped below $1,800, the chances are that the move lower in the yellow metal will trigger further weakness in the price of silver.
Crude oil remains well bid above $70. The more it consolidates above the level, the bigger the pressure on prices, and the more inflation will rise. In other words, central banks that view inflation as transitory, as the Fed or the ECB do, need to see a drop in the price of oil first. Until that happens, inflation is here to stay.
Equities remain close to their highs, although the Dow Jones index failed to break and hold above 35,000, and the other indices traded similarly. Market participants await the Fed’s decision and press conference, and ranging conditions are likely to dominate until the event.
The European equity markets opened lower by about 1% today. The decline in the US futures weighed on European markets.
The currency market is pretty much unchanged on the week. For instance, the EUR/USD closed last Friday around 1.1770 and, at the time of writing this article, it trades at 1.17775. Once again, everyone is waiting for the FOMC statement and press conference.
Consumer confidence is expected at 123.9 in the United States. A miss here, coupled with yesterday’s miss in the new home sales number, might move the markets. No important economic data is expected in the London session.
Markets to Watch
The Silver, AUD/USD, and GBP/USD markets are in focus today.
A possible triple top formation will put further pressure on the price of silver, should the market drop below $24. Such a move breaks the higher lows series and indicates further weakness. Gold may be the driver of such a move, as it recently dropped below $1,800.
Higher commodity prices in 2021 failed to support the AUD/USD pair. It is not the Australian dollar to blame, but the strength of the US dollar. Investors bought the greenback after the Fed turned hawkish in June, and every bounce has presented an opportunity to go short since then.
A similar weakness is seen on the GBP/USD pair. Here, the downtrend is obvious and the pair recently reacted from dynamic resistance. If the Fed keeps its hawkish message unchanged, we may see a sharp reversal of the recent move higher in the GBP/USD. In any case, the series of lower highs remains intact, suggesting that the bearish conditions continue.
Winners and Losers
The US dollar remains bid ahead of the Fed meeting; precious metals are weak.