Today’s analysis delves into the gold and silver markets, highlighting the fundamental and technical factors influencing current trends. Our report is designed to empower investors with the knowledge required to navigate these markets effectively.
Gold prices have partially reversed the gains from the previous day’s rebound. The US Dollar and US Treasury bond yields remain low, leading traders to hold back on new positions while taking profits from recent long positions ahead of the US CPI report, particularly after weaker-than-expected Producer Price Index (PPI) results. Data released on Tuesday showed that the US annual PPI rose by 3.3% in December, falling short of the anticipated 3.4% increase. Additionally, core PPI inflation rose to 3.5% year-on-year, compared to a forecast of 3.8%. Monthly figures were also disappointing.
Despite this softer data, markets have fully factored in a pause in rate cuts at the upcoming Fed policy meeting later this month. Consequently, the stakes are high for the US CPI report, as it could significantly impact market expectations regarding Fed rate cuts for the year. Traders have adjusted their outlook, now anticipating only one rate cut in 2025, down from two predicted last December, according to the CME Group’s FedWatch Tool. This shift follows strong US Nonfarm Payrolls (NFP) data from December. Hawkish sentiments are fueled by expectations that President-elect Donald Trump, beginning his second term next week, may implement protectionist policies that could drive inflation.
Gold prices are experiencing a rebound, with buyers entering a bullish consolidation phase following last week’s breakout from a symmetrical triangle. The 14-day Relative Strength Index (RSI) remains well above the midline, indicating that gold continues to be a ‘buy-the-dips’ opportunity in the coming days. For gold to regain upward momentum, it needs to establish a stable base above the $2,690 level, aiming for the $2,726 barrier. A daily candlestick close above this level is crucial to extending the uptrend toward the December 12 high of $2,726. Conversely, strong support is found at $2,661, and if prices drop below this, sellers would target the $2,630 demand area. The Stochastic Oscillator is currently at 75, while the RSI stands at 56.
Silver prices are trending upward as the gold/silver ratio retreats toward the 89.50 level. The RSI is in moderate territory, indicating potential for further momentum in the near term. If silver rises above the $30.00 mark, it could reach $30.66. Currently, the short-term Stochastic Oscillator stands at 54, while the Relative Strength Index (RSI) is at 48.
In the dynamic and complex world of bullion markets, it’s essential to stay informed through both technical and fundamental analysis to make sound investment decisions. Our report aims to offer a balanced perspective to help investors navigate the nuances of gold and silver trading.