Gold and silver prices under pressure – fear of recession remains dominant
While the price of gold is now well below the psychological $1,800 mark, the price of silver has dropped the 20 mark for the first time since July 2020. Concerns about inflation and the associated fears of recession remain decisive. As expected, late Wednesday evening investors checked the Fed minutes for clues about future monetary policy. On Thursday, both values initially recorded a slight plus.
Fed transcripts provide clues – Federal Reserve remains determined in fight against inflation
Investors on both sides of the Atlantic have obviously taken temporary courage from the minutes of the most recent central bank meeting. Investors see a silver lining in an otherwise cloudy stock market sky. The Federal Reserve’s determination to fight inflation is obviously to the liking of investors. This gives investors hope that the currency watchdog may not assess the risk of a recession as high as feared in advance. In addition, the minutes of the meeting fuel the fantasy that the Fed could soon take a break from its strict rate-hiking cycle.
However, an interest rate hike of 50 or 75 basis points can be expected at the forthcoming central bank meeting of the Fed, which is about three weeks away.
Risks remain smoldering – gold and silver prices could tend to remain under pressure
However, stock market traders should not rub their hands too early. In view of the threatening monetary policy headwind in the euro zone and the escalating gas problem, the prospects remain gloomy.
On July 21, 2022, the European Central Bank (ECB) plans to raise interest rates by 0.25 percentage points for the first time in more than a decade. The currency watchdog has also announced an interest rate hike of the same magnitude for September. It is quite possible that central bankers are still discussing the speed of the current rate hike cycle. At 8.6 percent, inflation in the euro zone in June was higher than ever. The currency guardian has his back to the wall to get inflation under control without stalling the economic engine and causing serious difficulties, especially for countries on the southern flank, such as Italy or Greece.
From a technical point of view, the mixture of gold and silver prices continues to be fragile. The recent abandonment of said psychological level could result in fresh downward pressure in the short-term. While in the case of gold the historical low of $1,720 from September 2021 should come to the fore, silver investors could target the $18 mark.