Gold, silver and S&P 500 price trends

Multi-Asset Analysis (Gold, Silver, S&P 500)

Gold overheated, let some steam at the beginning of the week

This week began in a similar fashion to how we closed last week, with an increase in risk appetite as the tit-for-tat exchanges between Israel and Iran appear to have come to an end.

Many markets breathe a sigh of relief, such as: gold, silver, AUD and US stocks. The Aussie dollar often moves in line with risk assets and has shown a partial recovery since Friday afternoon, extending into today. For a more in-depth analysis, read the full AUD report.

Through Friday, gold rode the bullish momentum higher, spurred by additional safe-haven appeal. That same pull appears to have subsided at the start of this week, with the precious metal on course for its biggest single-day drop since March 9, 2022.

Implied gold volatility has also turned significantly lower as markets discount the likelihood of a broader conflict in the Middle East.

30-day implied gold volatility (GVZ)

Source: TradingView, prepared by Richard Snow

Gold market trading involves a thorough understanding of the fundamental factors that determine prices such as supply and demand, as well as the effect of geopolitical tensions and war. Find out what lies ahead by reading our comprehensive Gold Q2 forecast:

Gold struggled to approach the new all-time high around $2341 apart from Friday’s push and traded sharply lower on Monday. The next level of support for the yellow metal appears at $2319.50 ($2320), which could signal a deeper pullback to $2222.

Gold has been trading in overbought territory for an extended period of time and has finally recovered into a more ‘normal’ range. Gold has proven impervious to a stronger US dollar as well as US Treasury yields, but now that risk appetite appears to have lifted, the non-yielding metal will begin to feel the effects. Additionally, robust US data has led the market to push for rate cuts later in the year, something that is likely to keep the dollar supported, weighing on gold.

Gold (XAU/USD) Daily chart

Source: TradingView, prepared by Richard Snow

Similarly, silver saw a noticeable decline on Monday. As a result, the move can be seen even on the weekly chart and this is only the first day of the week. Silver prices found resistance around the resistance zone at $28.40, which is now trading below the 78.6% Fibonacci retracement of the 2021-2022 big dip. Further bearish momentum will highlight the $26.10 level which previously acted as a robust level of resistance, followed by the 61.8% Fibonacci retracement at $25.30.

Silver (XAG/USD) Weekly Chart

Source: TradingView, prepared by Richard Snow

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S&P 500 gaps higher, but looks to technical earnings for a bullish catalyst

The volatility index (VIX), in the larger scheme of things, has barely lifted from basement levels when viewed on a major time frame (monthly chart below). The VIX is widely considered a fear index, rising when stock markets sell off. The VIX is already heading lower despite the S&P 500 registering its deepest retreat since the beginning of late October last year.

Earnings season is hitting its stride in the US, with major tech stocks buoyed by post-earnings updates this week. Some of those big names include Tesla, Meta, Alphabet and Microsoft.

Volatility Index (VIX): 30-day implied volatility derived from the S&P 500

Source: TradingView, prepared by Richard Snow

The S&P 500 retreated more than 5% from its peak, but edged higher at the open on Monday to just shy of the psychological 5000 mark. A hawkish admission from the Fed’s John Williams and still robust US data delayed Fed rate cuts. In fact, Williams put a potential hike on the list of probabilities when addressing the recent rise in inflation since the start of the year.

Much of the bull run was fueled by the broad anticipation of multiple rate cuts in 2024, but the landscape now looks very different with markets not pricing in even two full rate cuts from the Fed. The Fed also prefers to emphasize its independence from politics and avoids rate adjustments during presidential elections – meaning that realistic opportunities to lower rates are becoming fewer and fewer. AI-focused stocks like Microsoft will be under scrutiny this earnings season, as the AI ​​story has been an integral part of the bullish run. Positive earnings reports combined with optimistic outlook may be needed to lift US stocks back to the 50-day SMA, while a further decline brings the previous high of 4818 into focus.

S&P 500 Daily Chart

Source: TradingView, prepared by Richard Snow

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— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX