In the Asian trading session on Monday, May 18, spot gold traded at $4,539.43 per ounce, up a marginal 0.02%, while spot silver was at $75.28 per ounce, down 0.61%. The precious metals sector is under overall pressure. Gold is weighed down by profit-taking and a high-interest-rate environment, maintaining a weak and volatile pattern in the short term. Support is seen at $4,500, with resistance at $4,580. Silver has experienced a steeper decline, compounded by expectations of weak industrial demand. Short-term focus is on the support level at $74, with limited potential for a rebound.
【Key Updates】 Former US President Trump issued a military threat to Iran, and the US and Israel are discussing the possibility of restarting military action against Iran. Meanwhile, UK Prime Minister Keir Starmer has expressed an intention to resign, and China successfully launched the ninth batch of satellites for its Qianfan constellation. Last Friday, a sharp sell-off swept through the global bond market. US inflation data surged, with multiple key indicators hitting multi-year highs. Traders are now almost certain the Federal Reserve will not cut interest rates this year, and expectations for a rate hike are rising. Driven by the prospect of a tighter Fed policy, the US Dollar Index rose for four consecutive days, decisively breaking through the key psychological barrier of 99 to close higher.
The sharp rise in the dollar has dealt a heavy blow to the precious metals market. Spot gold fell over $110 in a single day, losing the $4,540 level and closing lower. It opened today continuing its decline, with bearish momentum strong. Investors are advised against attempting to catch a falling knife.
The core pressure on gold currently stems from multiple macro-level headwinds. Regarding inflation data and rate hike expectations, US CPI rose 3.8% year-over-year in April, while PPI surged 6.0% year-over-year. These inflation figures, far exceeding expectations, have completely reversed the market's previous expectations for rate cuts. The market is now pricing in a scenario where the Fed maintains high rates for an extended period, or even resumes hiking. The probability of a rate hike by December has approached 40%. The simultaneous strengthening of the US dollar and Treasury yields has increased the opportunity cost of holding non-yielding gold significantly. The US Dollar Index is approaching the 100 mark, and the 10-year Treasury yield remains elevated, prompting institutional funds to continue exiting the gold market. Physical demand is also weak. India has raised import duties on gold, and global jewelry consumption has entered its traditional off-season in the second quarter, substantially weakening physical demand support for gold prices. Although geopolitical tensions in the Middle East persist, under the dominance of the "US dollar interest rate cycle," gold's safe-haven function has temporarily diminished, and bearish sentiment pervades the market.
Given persistent inflation, the Federal Reserve may maintain a tight policy stance for longer. This could dampen rate cut expectations and increase pressure on industrial metals. In this context, silver is expected to decline more sharply than gold, as it is more sensitive to influences from manufacturing, solar energy, electric vehicles, semiconductors, and other industrial demand sectors.
The Fed also faces a challenging policy environment. Inflation remains too high for the Fed to cut rates easily, yet the root causes are demand-driven. Energy supply pressures, tariff pressures, and potential disruptions in the Strait of Hormuz are pushing costs higher. Raising interest rates will not reopen shipping routes or increase energy supply, potentially limiting the Fed's ability to address the problem without harming economic growth. This policy dilemma is crucial for silver. The Fed's expected maintenance of tight policy will introduce more volatility to silver's industrial demand side. Economic growth may slow in the future, but if inflation does not ease, investors will likely resume buying silver as a hedge against currency depreciation and financial uncertainty. The medium-term macro environment remains favorable for silver. Last week's sharp decline appears more like a violent market reaction to interest rates rather than a trend reversal. Silver's next upward move may be delayed by a strong dollar and rising yields. However, considering persistent inflation, energy pressures, and policy uncertainty, the long-term outlook for silver remains bullish.
【Latest Spot Gold Market Analysis】 Spot Gold: From a technical perspective, on the daily chart, the K-line shows consecutive bearish closes with the MACD indicator forming a bearish divergence, indicating continued release of bearish momentum. On the 4-hour chart, the Bollinger Bands are opening downward, with the price hugging the lower band. Although the RSI indicator has entered oversold territory, suggesting a potential minor technical rebound, the overall weak pattern is difficult to reverse.
Spot Silver: The decline to around $61 per ounce is not sufficient; the current price remains weak near the buying zone. A pullback to this zone could provide investors with a strong buying opportunity. Price bars over the past few weeks show high volatility, suggesting a more robust move when the price breaks above $120. This increased price volatility may be due to the current energy crisis. The weekly price structure for spot silver has formed a bearish hanging man pattern below the $100 area, indicating potential for further decline this week. The descending channel pattern from the high near $120 to the low near $60 suggests that if silver closes below $72, it could trigger a strong decline towards the $50-$60 area in the coming days. However, if the price recovers above the $90 area, it could negate this bearish price action and open the door for further gains towards $100.
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