Gold Technical Report: The gold witnessed some profit booking to end the last week on a weaker note and continued to remain volatile in the current week. However, it showed some strength yesterday. If prices do break above the main level of $1679, the medium-term trend will turn positive. Also at the same level is resistance as the current 50 DMA on Daily charts. The short-term Stochastics Oscillator is at 30 and the Relative Strength Index is at 46.
Silver Technical Report: The silver prices recorded a solid upmove yesterday bouncing back. But more or less it’s managing to bounce back above 50 DMA at 19.07. On the downside, major support is only at 18.00, crossing below which will change the medium-term trend into negative. On the upside, a crossing of 200 DMA at 21.52 will change the main trend to positive. The Short term Stochastics Oscillator is at 57 and the RSI momentum is near 55.
Fundamental Report: As the November FOMC meeting concludes today many analysts and news sources are reporting the possibility that the Federal Reserve will announce or at least give subtle hints that they might begin to scale down their aggressive stance on interest rate hikes. If the Fed announces or suggests that they will begin to slow down the magnitude and pace at which they implement further rate hikes they are doing so when the latest data suggests that the core PCE inflation index continues to rise. The most recent inflation report revealed that the core PCE index jumped 5.1% in September year-over-year which is the fourth-highest reading in this cycle behind January, February, and March. The Federal Reserve is still quite a way away from reaching its benchmark level of inflation at 2%. To put it bluntly, inflation shows no signs of slowing down as measured by their preferred index; the core PCE. Over the last five FOMC meetings, the Fed has implemented five consecutive rate hikes beginning with a ¼% rate hike in March, and a ½% rate hike in May which was followed by three consecutive ¾% rate hikes in June, July, and September. It is widely anticipated that the Fed will raise rates by ¾% for a fourth consecutive time after tomorrow’s FOMC meeting. The net outcome of all these hikes is the benchmark rate going from between 0 and ¼% in March to between 3% and 3 ¼% in September.
The net result of the Federal Reserve’s aggressive monetary policy has brought about an extremely strong demise in the price of gold. Since the first rate hike by the Federal Reserve in March gold has fallen from its yearly high of $2078 to a double bottom that occurred at the end of September and last month in which gold futures traded to an intraday low of $1621. Gold has declined in value by approximately 22% from the yearly high to the yearly low. One possibility as to why the Federal Reserve is choosing to pivot its pace of rate hikes is the fact that the Federal Reserve is now losing billions of dollars based on the current benchmark interest rate of 3% to 3 ¼%. On October 25 Bloomberg news published an article titled, “Fed Is Losing Billions, Wiping Out Profits That Funded Spending”. In this article penned by Enda Curran, Jana Randow, and Jonnelle Marte they distinctly discuss the implications of the hawkish monetary policy by the Federal Reserve saying, “The bond market is enduring its worst selloff in a generation, triggered by high inflation and the aggressive interest-rate hikes that central banks are implementing. Falling bond prices, in turn, mean paper losses on the massive holdings that the Fed and others accumulated during their rescue efforts in recent years.”