Chart of the day - SILVER (11.06.2024)

Precious metals are taking a hit today - gold drops 0.3%, silver and palladium plunge 2% and platinum declines 1.2%. The move is somewhat puzzling - there was no news that could trigger pick-up in risk appetite, no notable strengthening in US dollar and US Treasury yields tick lower. This means that usual reasons that trigger pullbacks on precious metals are absent today. However, the drop may be driven by positioning ahead of tomorrow's FOMC policy announcement.

FOMC is unlikely to change the level of rates tomorrow, and such an outcome is fully priced-in by the markets. However, it will be a quarterly meeting, so a new set of economic projections will be released. Attention will be mostly on the rate forecast, the so-called dot-plot. Dot-plot released at March meeting showed a median expectation of 3 rates cuts this year. It is almost certain that those expectations will change, but the question is how much? Economists' expectations are split between one or two rate cuts. In any case, rate forecasts will get more hawkish and today's drop in precious metals could be a reflection of investors positioning their portfolios for this change.

Taking a look at SILVER chart at H4 interval, we can see that the price is moving lower today, and has even briefly traded below recent local lows ($29.10 per ounce). Price has also dropped below 200-period moving average (purple line), but it remains to be seen whether it remains below it by the end of the day as SILVER began to trim losses. A key near-term support level to watch should we see further declines can be found in the $28.75 per ounce area, where previous price reactions and the lower limit of the Overbalance structure can be found.

Source: xStation5