Daily Report – 02 June 2023

02 June 2023
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Gold Technical Report: Gold had moved up from the day lows after finding a support near 100 DMA @1938 on Tuesday. In the last two days, it continued the positive momentum and closed above 10 DMA @1964 yesterday. If the rally sustains, the next target can be 50 DMA @1992. The fact that prices and all these averages are trading above major support at 200 DMA @1834 (below which the trend may turn bearish ) makes the medium term trend bullish. Gold has been facing selling pressure on continuous profit booking after it made a new high around 2080 last month. The short term Stochastics Oscillator is at 66 (it is considered overbought when above 80 and oversold  when below 20) and Relative Strength Index (RSI) is at 50 (it is considered overbought when above 70 and oversold when below 30).

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Silver Technical Report: The silver prices also moved up following the suit and successfully closed above the resistance at 100 DMA @23.35 for a second consecutive day, albeit after a struggle of earlier 3 trading sessions. After clearing this level, the next target stands at 50 DMA @24.43. The medium term trend looks intact as both of these averages above 200 DMA @22.05. The Short term Stochastics Oscillator is at 81 and Relative Strength Index near 49.

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Fundamental Report: The data published by Automatic Data Processing (ADP) showed on Thursday that private sector employment in the US rose by 278,000 in May. This reading surpassed the market expectation of 170,000 by a wide margin. The 296,000 increase recorded in April got revised lower to 291,000. Regarding wage developments, “last month brought a broad-based slowdown in pay increases. Job changers saw a gain of 12.1%, down a full percentage point from April,” the ADP noted. “For job stayers, the increase was 6.5 percent in May, down from 6.7%.” Commenting on the report’s findings, “this is the second month we’ve seen a full percentage point decline in pay growth for job changers,” said Nela Richardson, chief economist, ADP. “Pay growth is slowing substantially, and wage-driven inflation may be less of a concern for the economy despite robust hiring.” With the initial reaction, the US Dollar Index edged slightly higher and was last seen trading flat on the day near 104.20.

In other news, the U.S. Senate successfully passed a bipartisan bill, supported by President Joe Biden, to raise the government’s debt ceiling, avoiding a historic default that could have occurred for the first time ever. Philadelphia Federal Reserve President Patrick Harker voiced his opinion against raising interest rates at the upcoming rate-setting meeting in June. Despite acknowledging the persistently slow decline in high inflation, Harker advocated for a pause to evaluate the situation. He highlighted the cooling effect of the Fed’s previous rate hikes, particularly on housing prices, and expressed concern over uncertainties surrounding inflation dynamics and the pace of credit tightening. Harker suggested that the Fed should stay in restrictive territory for the time being without rushing into further rate increases. Market expectations align with Harker’s stance, as there is a 73.7% probability of rates remaining unchanged in June. Gold, which lacks its own interest yield, tends to lose appeal when interest rates rise. Additionally, the U.S. dollar index is currently trading close to a one-week low, making gold more affordable for buyers holding other currencies.

Investors are also closely monitoring the U.S. Labor Department’s non-farm payrolls (NFP) report, scheduled for release at 12:30 GMT. It is expected to reveal a slowdown in U.S. job growth for May, potentially allowing the Federal Reserve to forgo an interest rate hike this month, which would be the first break in their aggressive policy tightening campaign in over a year. Despite the expected deceleration, the labor market is anticipated to remain tight, with the unemployment rate projected to increase to 3.5%. While the economy is not heading towards a recession, some areas of weakness are starting to emergeAccording to economists surveyed by Reuters, the report is likely to show an increase of 190,000 jobs in non-farm payrolls, a decline from the monthly average of 285,000 seen in the first four months of the year but still well above the level needed to sustain working-age population growth. Revisions to the March and April data will be closely scrutinized, considering the government’s downward adjustments of 149,000 in the previous month. The outcome of the non-farm payrolls report could significantly impact market sentiment and influence the Federal Open Market Committee’s (FOMC) decision-making next week.

Key US Economic Reports & Events
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