Precious Metals Set for FOMC Test
Gold breaks multi-year resistance as Fed meeting looms amid record central bank buying
Executive Summary
Precious metals enter a pivotal week with gold trading near $2,190/oz following its decisive breakout above the $2,075-2,080 resistance zone that held for over three years. The Federal Reserve's two-day meeting concluding Wednesday will set the tone for metals through Q2 2024, with markets expecting the Fed to maintain its hawkish pause while keeping three rate cuts on the table for 2024. Silver consolidates around $24.75, coiling for a potential breakout above $25.00 as technical indicators suggest the metal may follow gold's lead. Record central bank gold purchases of 290 tonnes in Q1 2024 and escalating geopolitical tensions in Ukraine and Gaza provide fundamental support, while the banking sector marks the one-year anniversary of SVB's collapse with underlying vulnerabilities persisting.
Current Market Position
Prices as of Monday, March 18, 2024 at 9:00 AM ET
| Metal | Monday AM (3/18) | Friday Close (3/15) | Weekly Change | YTD 2024 |
|---|---|---|---|---|
| Gold | $2,188.50 | $2,175.20 | +0.61% | +6.2% |
| Silver | $24.73 | $24.55 | +0.73% | +3.8% |
| Platinum | $915.00 | $908.50 | +0.72% | +2.1% |
| Palladium | $1,025.00 | $1,018.00 | +0.69% | -1.2% |
Gold's technical breakout in early March represents the most significant development in precious metals since 2020. The metal's ability to hold above the critical $2,075-2,080 zone confirms a major shift in market structure after 3.5 years of consolidation. Silver's constructive price action near the $24.50 support level, combined with its 21-day EMA crossing above the 200-day MA, signals potential for a similar breakout pattern.
Technical Analysis
Gold: Momentum Indicators Flash Mixed Signals
Gold's momentum indicators flash mixed signals despite the bullish breakout, suggesting consolidation may precede the next leg higher. The metal trades comfortably above its 21-day EMA at $2,145 and 50-day MA at $2,088, with the 200-day MA providing major support at $2,015. RSI sits near 58, indicating room for upside without immediate overbought concerns. However, the rapid advance from $2,075 to current levels warrants caution for late chasers.
The decisive break above $2,075-2,080 transformed former resistance into support, creating a new trading range between this level and the psychological $2,200 target. Volume patterns during the breakout showed institutional accumulation, contrasting with continued ETF outflows from retail investors. The next resistance cluster sits at $2,195-2,205, marking the 161.8% Fibonacci extension of the recent correction. A weekly close above $2,200 would target $2,250 based on the measured move from the consolidation pattern.
Silver: Coiled Energy Awaiting Catalyst
Silver's technical setup suggests coiled energy awaiting a catalyst, likely from gold's continued strength or dovish Fed surprises. The metal respects support at $24.50 while resistance at $25.00 caps upside attempts. The recent 21-day/200-day EMA golden cross at $24.93 provides the first bullish signal since 2020. However, momentum oscillators remain mixed, with MACD showing early positive divergence while RSI struggles to break above 50.
Silver's gold ratio trades near 88:1, historically elevated and suggesting relative value opportunity. A decisive break above $25.00 would target $25.35 initially, then December's $25.92 high. The measured move from the current consolidation pattern projects to $27.50, though silver typically requires gold to lead before mounting its own advance. Support levels to watch include $24.50 (must hold), $24.15 (38.2% Fibonacci), and critical support at $23.50.
Key Technical Levels This Week
Gold Resistance
- $2,195-$2,205 (Immediate)
- $2,200 (Psychological)
- $2,250 (Measured move)
- $2,300 (Long-term target)
Gold Support
- $2,150 (Near-term)
- $2,075-$2,080 (Critical)
- $2,088 (50-day MA)
- $2,015 (200-day MA)
Silver Resistance
- $25.00 (Key breakout)
- $25.35 (First target)
- $25.92 (Dec high)
- $27.50 (Measured move)
Silver Support
- $24.50 (Must hold)
- $24.15 (38.2% Fib)
- $23.50 (Critical)
Week Ahead Calendar
Monday, March 18 Light Data
Markets have a quiet start with no major U.S. economic releases, allowing traders to position ahead of the FOMC meeting. Treasury markets will see regular weekly bill auctions while traders assess the latest Commitment of Traders data showing commercials maintaining typical net short positions as prices rise.
Tuesday, March 19 FOMC Begins
The two-day Federal Open Market Committee meeting begins, the fifth consecutive gathering where rates are expected to remain unchanged at 5.25%-5.50%. Pre-meeting positioning typically sees increased options activity in precious metals as traders hedge against potential volatility.
Wednesday, March 20 2:00 PM ET - HIGH IMPACT
FOMC DECISION DAY - The week's main event arrives with the FOMC rate decision at 2:00 PM ET followed by Chair Powell's press conference at 2:30 PM ET. Markets will scrutinize the updated Summary of Economic Projections and dot plot for any shifts in the committee's rate cut expectations. The Fed faces a delicate balance between acknowledging improving inflation trends while maintaining credibility on its 2% target. Any deviation from the expected three rate cuts in 2024 could trigger significant precious metals volatility.
Thursday, March 21 12:00 PM ET
Fed Vice Chair for Supervision Michael Barr speaks at noon in Ann Arbor, offering the first post-FOMC policy clarification. Existing home sales data will provide insight into housing market resilience amid elevated mortgage rates. Congressional testimony from the Fed's Director of Supervision at 10:00 AM ET may address ongoing banking sector concerns one year after the regional banking crisis.
Friday, March 22 12:15 PM ET
Vice Chair Barr discusses international monetary design at 12:15 PM ET, potentially addressing dollar reserve status and global monetary architecture - topics increasingly relevant to gold demand. Weekly banking data will reveal any stress in the system following the Bank Term Funding Program's expiration on March 11.
Key Themes for the Week
Fed's Inflation Credibility Test
The dominant theme emerges as officials balance acknowledging progress against maintaining hawkish credibility. Core PCE at 2.8% shows meaningful deceleration from 2022's peaks, yet remains stubbornly above target. The committee must thread the needle between validating market expectations for summer rate cuts while avoiding premature easing that could reignite inflation. Fed communication will likely emphasize data dependence and the need for "greater confidence" before cutting rates.
Central Bank Gold Demand Accelerates
Q1 2024 purchases reaching a record 290 tonnes fundamentally alter supply-demand dynamics. China's resumption of official purchases after 18 months, combined with continued buying from Turkey, India, and Poland, reflects growing de-dollarization trends. The latest central bank survey shows 29% plan to increase gold reserves over the next year - the highest reading since 2018. This structural demand shift provides a price floor independent of Western investment flows.
Geopolitical Risk Premium Persists
Multiple conflicts show no signs of resolution as Russia maintains control of approximately 17-20% of Ukrainian territory with the war entering its third year. The Gaza conflict continues with humanitarian crisis deepening and regional escalation risks via Iran-backed proxies. These tensions, identified by 31% of precious metals investors as the primary price driver for 2024-2025, reinforce gold's safe-haven appeal.
Banking Sector Shadows Linger
Exactly one year after Silicon Valley Bank's collapse, the system avoided contagion but $477 billion in unrealized losses remain on bank balance sheets as of Q4 2023. The Bank Term Funding Program's March 11 expiration removes a key liquidity backstop just as commercial real estate concerns mount. These vulnerabilities support precious metals as portfolio insurance despite surface-level stability.
Trading Scenarios
Bullish Scenario
60% ProbabilityTriggers: Fed maintains three rate cuts for 2024 while acknowledging inflation progress, validating market expectations without appearing overly dovish.
Targets: Gold breaks decisively above $2,200, targeting $2,250 by month-end. Silver follows with a break above $25.00, accelerating toward $26.00. This scenario gains probability if Powell emphasizes confidence in the disinflationary process while maintaining flexibility. Central bank buying continues providing fundamental support regardless of Fed actions.
Neutral Scenario
25% ProbabilityCatalysts: Fed delivers as expected with minimal market impact, leading to range-bound trading.
Range: Gold consolidates between $2,150-2,200 while silver remains trapped between $24.50-25.00. Markets await Q1 earnings and April inflation data for next directional catalyst. This scenario sees dealers defending option strike prices at round numbers, creating choppy price action.
Bearish Scenario
15% ProbabilityRisks: Fed surprises hawkishly by reducing rate cut projections to two for 2024 or emphasizing upside inflation risks.
Targets: Gold retests $2,075-2,080 support while silver drops toward $24.00. However, central bank demand and geopolitical tensions likely limit downside to brief corrections rather than trend reversals. Even in this scenario, dip buyers emerge quickly given structural supportive factors.
Economic Calendar Impact Analysis
Wednesday's FOMC decision dominates the economic calendar with asymmetric risk for precious metals. A dovish surprise (maintaining three cuts despite recent firm data) could trigger an immediate gold rally toward $2,250, while a hawkish shift might only produce a temporary pullback to $2,150 given underlying support factors. The dot plot matters more than the statement, as markets focus on 2024 rate cut projections and the longer-run neutral rate assessment.
Powell's press conference tone often moves markets more than the written statement. Key phrases to monitor include "greater confidence," "sustainable progress," and any shift from "careful" to more definitive language about policy direction. Questions about banking sector stability or quantitative tightening adjustments could provide additional precious metals catalysts. Historical analysis shows gold typically experiences $30-50 moves during FOMC weeks, suggesting a potential range of $2,140-2,240.
Week Ahead Outlook
Precious metals enter the week with strong technical and fundamental tailwinds facing their first major test at the FOMC meeting. Gold's breakout above multi-year resistance shifts the burden of proof to bears, while record central bank buying provides consistent underlying demand. The Fed likely maintains its patient stance, validating market expectations for mid-year easing without appearing to cave to market pressure.
Silver's consolidation near key technical levels positions the metal for a potentially explosive move once direction becomes clear. A sustained gold break above $2,200 should finally provide the catalyst for silver to challenge $26.00. Traders should prepare for elevated volatility Wednesday afternoon while respecting the dominant uptrend. The combination of technical breakouts, central bank demand, and persistent geopolitical tensions suggests any dips remain buying opportunities in a structurally supportive environment for precious metals.
Three Things to Watch This Week
1. Fed Dot Plot
Updated projections at 2:00 PM Wednesday will reveal if three 2024 rate cuts remain consensus
2. Gold's $2,200 Test
Break above psychological resistance could trigger momentum buying to $2,250
3. Silver $25 Breakout
Decisive move above resistance would confirm bullish continuation pattern
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