The gold and silver bulls are out of the gate strong early this week. As of this writing, gold has tacked on $150 so far this week. Silver prices have added over $1. Precious metals bulls have gained momentum following recent big price setbacks that saw June gold futures (GCM25) hit a low of $2,970.40 on April 7 and May silver futures (SIK25) score a low of $27.545 on the same date. Since then, both metals have reestablished price uptrends on the daily bar charts.

Importantly, trending markets often see a price pattern develop. Prices burst and then pause, only to burst again and then pause again. The cycle continues until the trend peters out. These bursts and pauses in price action can create bull/bear flag and pennant patterns on the charts.

The U.S. Data Point of the Week Lies Just Ahead. Gold and Silver Traders May Take Profits. 

The big fundamental event for this week is the Federal Open Market Committee meeting (FOMC) of the Federal Reserve. The meeting began Tuesday morning and ends on Wednesday afternoon. The marketplace consensus is that the FOMC will not lower U.S. interest rates. As always, the FOMC statement and press conference from Fed Chair Jerome Powell will be very closely scrutinized for clues on the trajectory of Fed monetary policy in the weeks and months ahead. Wording on inflationary pressures will also be very important to the marketplace, as will the central bank’s latest take on tariffs and the global trade war.

I would not be surprised to see the shorter-term gold and silver futures traders, but especially gold traders, ring the cash register and take some profits just after the FOMC statement is released Wednesday afternoon. We’ve seen the price bursts in gold and, to a lesser degree, in silver this week. Now it may be time for pauses or corrective pullbacks in the existing price uptrends in both metals. 

Crude Oil Price Action May Offer Clues for All Commodity Market Watchers

Veteran commodity market watchers, including metals traders, will be closely watching how the crude oil (CLM25) market reacts in the immediate aftermath of the FOMC results. 

Crude oil is the leader of the raw commodity sector. Its daily price movements can have a significant influence on many other commodity markets’ daily price action. A surprisingly hawkish lean by the Fed would likely further pressure oil prices and may be bearish for gold and silver. A surprisingly dovish lean on U.S. monetary policy would likely rally crude oil and precious metals prices. 

Key price levels to watch in June crude oil futures after the FOMC meeting are the April low of $54.67. There are likely a good number of pre-placed sell-stop orders just below that level, which if triggered, would likely push oil prices to test $50 a barrel. A close in crude oil prices below the April low would be an ominously bearish development for commodity futures markets, including possibly, but not for certain, the precious metals, which may see safe-haven demand in such a scenario. 

Conversely, a close in June crude above $62.50 would suggest a market bottom is in place in oil and that trader and investor risk appetite in the general marketplace has improved. That’s an important element for the speculative traders to become more active on the long side of commodity futures markets. But again, such a scenario may be a mixed bag for gold and silver. 

Better risk appetite in the general marketplace is generally bearish for the safe-haven metals. However, gold and silver traders can be fickle. They may decide that any improved trader and investor attitudes could make for better consumer and commercial demand for precious metals, including for jewelry — especially from China and India.

Tell me what you think. Email me at jim@jimwyckoff.com.