Gold languishes below $4,500, silver rebounds above $75

Gold consolidates losses at nearly seven-week lows below $4,500 on Wednesday, trading at $4,478, as the DXY Dollar Index tests six-week highs at the 99.45 area. Safe-haven flows on concerns about further escalation of the US-Iran conflict and rising bets of Federal Reserve rate hikes are boosting the dollar and hammering gold. Hopes of a negotiated end to the war are fading as the US and Iran exchange threats, while in the US, the focus will be on the minutes of April’s Fed meeting, which is expected to show a hawkish tweak. The Fed left rates unchanged last month, but three policymakers called for removing the “easing bias” line from the bank’s statement. Markets have ramped up expectations of a rate hike in the next 12 months, ever since, which has propelled US Treasury yields and weighed on the yieldless gold. XAUUSD maintains a bearish near-term tone after losing more than 2.5% from Monday’s highs. The Relative Strength Index (RSI) is holding near oversold territory on the 4-hour chart, which hints at some consolidation, while the Moving Average Convergence Divergence (MACD) histogram stays in negative territory, suggesting that upside attempts are likely to find sellers. The pair found some support at $4,450 on Wednesday, with the next bearish targets at the March 30 low, near $4,420, and the March 26 low, near $4,350. On the upside, bulls would need to breach the previous support area in the $4,480-4,500 area (May 4, 15, and 18 lows) to ease negative pressure and shift the focus towards Monday’s high, at $4,590. Silver trades 2% higher to near $75.20 during the European trading session on Wednesday. The white metal recovers from its almost two-week low of $73.10 posted the previous day. However, the outlook for silver remains bearish as US Treasury yields remain firm due to expectations that the Fed will hike benchmark lending rates this year. 10-Year US bond yields have posted a fresh over-a-year high at 4.69% during the day, while yields on 30-year US Treasuries jumped to 5.2%, the highest level seen beyond the sub-prime crisis. Theoretically, higher yields on interest-bearing assets diminish demand for non-yielding assets, such as silver. The CME FedWatch tool shows that the odds of the Fed delivering at least one interest rate hike this year are 56.3%, a sharp turnaround from two rate cuts anticipated before the war started in the Middle East. Dovish Fed bets have squeezed as US inflationary pressures have accelerated due to elevated crude oil prices. The US Consumer Price Index (CPI) data showed last week that the headline inflation accelerated to 3.8% year-on-year, the highest level seen in almost three years. Higher US Treasury yields have also strengthened the dollar. Theoretically, a higher US dollar makes the silver price an unfavourable risk-reward bet for investors. (Source: OANDA) The post Gold languishes below $4,500, silver rebounds above $75 appeared first on Financial Mirror.