GOLD AND SILVER OUTLOOK
Gold and silver prices end the week with a bang, boosted by rising geopolitical tensions in the Middle East following Hamas terrorist attacks in Israel.
News of a possible ground invasion of Gaza by Israeli troops has unnerved investors and boosted appetite for defensive assets.
Gold (XAU/USD) and silver (XAG/USD) were wounded after September US inflation beat consensus estimates and sparked a surge in US Treasury yields, but managed to stage a remarkable turnaround on Friday, rallying around 3.2% and 4.0% respectively on risk-off sentiment triggered by escalating geopolitical tensions in the Middle East.
The financial world has been on edge since the Hamas terror attacks in Israel, but we haven’t seen a full-blown flight to safety yet. However, sentiment has begun to deteriorate after Israeli Prime Minister Benjamin Netanyahu warned civilians in Gaza to begin evacuating the northern part of the enclave ahead of an invasion.
While the situation is fluid and subject to change, some traders believe that a possible Israeli incursion into Gaza, designed to secure the coastal territory and disrupt Hamas’ operational facilities, could backfire. Such a move could inadvertently trigger more violence by potentially drawing other nations into the conflict, ultimately prolonging instability in the region.
Gold, and to a lesser extent silver, tend to perform well in times of market uncertainty and widespread fear. With tensions in the Middle East on the rise, both metals are likely to remain well supported in the coming days and weeks, especially if Israel launches a ground operation in response to last weekend’s events.
While the interest rate environment remains a challenge for precious metals, it wouldn’t be surprising if investors temporarily ignore this dynamic in favour of a heightened focus on the geopolitical landscape, which at times reinforces the safe-haven premium. With this in mind, any escalation in the ongoing conflict should be positive for gold and silver.
GOLD PRICE TECHNICAL ANALYSIS
Gold rallied on Friday, approaching channel resistance and the 200-day simple moving average around $1,930. It is not yet certain that XAU/USD will be able to sustainably overcome this technical barrier, but if it does so decisively, we could see a push towards $1,950. Further strength will put the crosshairs on $1,967, the 61.8% Fibonacci retracement of the May/October decline.
If, on the other hand, sellers return and trigger a bearish reversal from current levels, initial support is around the 50-day simple moving average. Looking further down, the next area of interest is around $1,890. While XAU/USD could find support in this area on a pullback, a breakdown could pave the way for a decline towards $1,860.
SILVER PRICE TECHNICAL ANALYSIS
Silver continued to rally strongly on Friday on the back of geopolitical tensions in the Middle East, rising towards trendline resistance at $22.75 but failing to clear this technical ceiling. It will be important to watch how prices react in this area next week, but there are two possible scenarios to consider: a breakout or a bearish rejection.
If XAG/USD breaks higher, buyers may be emboldened to challenge the 50- and 200-day moving averages. Further strength could see a move towards $23.75, the swing high of 22 September. Conversely, if sellers regain the upper hand and trigger a pullback, the first area of support to consider is $22.30. Below that, the focus shifts to $20.70.
