Precious metals meltdown continues: Is it safe to buy the dip


The past few trading sessions have been a tough time for gold and silver buyers. But the metals have pulled back a bit during the early trading session on Friday, as we continue to see a lot of noisy behavior ahead of next week’s FED meeting. As of this writing, gold price rebounded back to above $1915, and silver recovered sharply and moved back above $23.

A look at the daily chart of the dollar strength index reveals that the ongoing meltdown in gold and silver prices is fueled by broad-based strength in the dollar. The soaring bond yields and rising U.S. real interest rates also remained a major headwind for non-yielding assets.

This week the metals extended its slide after the latest batch of US economic data including US ISM services PMI, CPI, PPI, and retail sales pointed to a robust US economy, giving the FED some space to keep monetary settings restrictive or even raise interest rates further.

The biggest catalyst for the precious metals is next week's FOMC meeting outcome. The traders are seeing a hawkish pause from the Federal Reserve, where it could signal one more rate increase in the November or December meetings. Investors should also closely monitor the movement of the US dollar because the strength of the US dollar negatively affects precious metals.

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