Gold and Silver Face Critical Support Levels Ahead of Fed Minutes

Gold (XAU) and silver (XAG) prices are experiencing a downward trend in early Asian trading on Wednesday. Gold is currently hovering around $4,150 per ounce, while silver is consolidating near $60.90. The recent correction in the US dollar provided some support for the metals, but traders remain cautious ahead of the release of the Federal Reserve's September meeting minutes later in the day.

The market is currently pricing in a 20.5% chance of a rate hike in October, though the probability of a December increase remains significantly higher. While the reduced expectations for an October hike have offered some support to the metals, further rate hikes could still limit demand for both gold and silver. Additionally, oil prices have rebounded, with Brent crude surpassing $104 per barrel, which could exacerbate inflation concerns and strengthen the case for further tightening by the Fed.

Traders are closely monitoring the Fed minutes for insights into how officials are balancing these risks. Analysts suggest that gold and silver remain vulnerable if rising oil prices revive expectations for higher interest rates. The daily chart for spot gold shows bearish pressure, with key support at $4,100. A break below this level could lead to a sharp decline towards $4,000, while a recovery above $4,300 would be needed to trigger a rebound towards the 200-day SMA at $4,500.

Similarly, silver is facing a critical test at the $60 level. A breakdown below this point could push prices towards $55, while a recovery above $64 would be required to initiate a rally towards $72. Both metals are under pressure from a strong US dollar and rising Treasury yields, which are contributing to negative price action in the short term.