Gold and Silver Bid Higher, Government Bond Yields Fall on Recession Fears

Gold Price (XAU/USD), Silver Price (XAG/USD) Charts, and Analysis

• Heightened recession fears drive investors into gold and silver.
• US Treasury yields slump, US regional bank fears grow.

Gold, and silver, prices are pushing higher as US recession fears continue to grow. The closely-watched US 2yr-10yr yield spread remains heavily inverted, while US Treasury yields fell heavily yesterday as traders continue to price in US rate cuts later this year. The Federal Reserve is expected to hike rates by 25 basis points at next week’s FOMC meeting, before pausing before starting to cut rates in Q3. The latest CME Fed Fund rate probabilities point to US rates ending this year at 425-450, compared to a current rate of 475-500. Further out, US Fed Funds are seen at 300-325 in September 2024.

US Treasury 2-year yields have fallen by 36 basis points over the last week with a series of higher lows broken decisively by yesterday’s move lower.

US Treasury 2-Year Yields – Daily Chart

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This lower interest rate backdrop in the US is supporting the move higher in gold and silver, while fears that the US regional banking crisis is not over is also giving gold’s safe-haven status a boost. Monday’s news from First Republic Bank that it had lost over $100 billion of deposits this year pushed gold briefly back above $2,000/oz. on safe-haven flows before the precious metal settled slightly lower. Initial resistance is seen at $2,009/oz. while a cluster of prior lows between $1,970/oz. and $1,980/oz. should provide support.

Gold Price Daily Chart – April 26, 2023

Chart via TradingView

Retail Traders Remain Net-Long

Retail trader data show 54.74% of traders are net-long with the ratio of traders long to short at 1.21 to 1.The number of traders net-long is 4.49% lower than yesterday and 6.20% lower from last week, while the number of traders net-short is 6.72% higher than yesterday and 5.00% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Gold price trend may soon reverse higher despite the fact traders remain net-long.

Silver is trading just over one dollar away from its recent multi-month high and has a technical set-up similar to gold. Support is seen at around $24.50 while resistance is pegged at the April high of $26.08 before last April’s high of $26.22 comes into focus.

Silver Price Daily Chart – April 26, 2023

Retail trader data shows 55.18% of traders are net-long with the ratio of traders long to short at 1.23 to 1. The combination of current sentiment and recent changes gives us a further mixed Silver trading bias.

What is your view on Gold and Silver – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.