Gold: Hawkish Powell Testimony Sends Gold Lower

Gold prices continued lower this week, extending losses from the prior week as the market reacted to the first testimony from new Fed Chair Powell. Powell caused a wave of USD buying as he stated that the economic outlook in the US had improved since the December FOMC and said that the fiscal stimulus enacted recently hadn't been accounted for in either the December SEP forecasts or the January discussions as the tax reform bill hadn't been passed in December and the budget agreement plan had only been passed following the January meeting.

Furthermore, Powell indicated that the Fed is prepared for four rate increases over the year ahead which has traders ready for an upward revision to the dot plot forecasts in March along with a rate increase at this meeting. If the dot plot is indeed revised higher, gold is likely to continue to remain pressured in line with Powell's comments.

Gold prices continue to remain trapped in the larger contracting triangle pattern which has framed price over the last two and half years. Despite recently testing the top of the triangle twice, price has now turned lower again and focus will be on a test of the rising triangle support to see if this can hold. A break of these trend lines (short term and longer term) will bring deeper structural support into play.

Silver: Strong US Dollar Weighs

Silver prices were equally soft this week as the stronger US Dollar weighed on silver markets. While the rebound in equity markets has helped buffer the sell-off in silver, a resurgent US Dollar is likely to pull silver prices down heading into Q2.

Silver prices are now sitting right on the rising trend line support of the contracting triangle pattern running from last year. If prices break this trend line support focus will be on a test of the next key structural support at the 15.65 – 15.80 level which has been a key longer-term level in silver.