Gold Technical Report: The gold prices came down on selling pressure yesterday but recovered a bit thereafter and today morning session. The medium term trend looks further bearish as prices continue to trade below 50 DMA which itself is trading below 200 DMA. Any slippage down the nearest main bottom at $1676 will turn the Main trend negative. On the upside, the major resistance will be at 50 DMA @ 1757 . The Short term Stochastics Oscillator is at 12 and RSI momentum is near 33.
Silver Technical Report: Silver witnessed continued selling pressure after the attempted pullback last week. It still looks further bearish as 20 DMA is about to cross below 200 DMA on weekly charts. The next major resistence will be faced around 50 DMA around 19.50. The Short term Stochastics Oscillator is at 13 and RSI momentum near 30.
Fundamental Report: Gold prices slid lower on Thursday while continuing to edge closer toward the psychological support at $1700.00. The selling pressure continues to be driven by expectations of aggressive rate hikes by global central bankers as they try to harness heightened inflation. At 7:00 GMT, gold is trading $1703.70. The SPDR Gold Shares ETF settled at $159.28, up $0.01 or +0.01%. Gold has been under pressure since March when the Federal Reserve brought an end to the easy money cycle with a 25-basis point rate hike. Since then the market has dropped more than $350 since edging above the $2000.00 level. According to Reuters, this is the longest streak of monthly losses since 2018. Once again it’s rising Treasury yields and a stronger U.S. Dollar driving the price action. However, volume is on the light side with many of the major players on the sidelines ahead of Friday’s U.S. Non-Farm Payrolls report. Although we could see periodic short-covering rallies, it seems the heavy lifting is just getting started with Fed Chair Jerome Powell last Friday vowing to get inflation under control even if it means pain for businesses and consumers. The 2-year U.S. Treasury yield hit a nearly 15-year high on Thursday after ADP data the day before showed a significant slowdown in private payroll growth. The yield on the short-term note hit a high of 3.516%, the highest level since November 2007, at one point Thursday. It was last trading about 3 basis points higher at 3.487%. Meanwhile, 10-year Treasury yields are up 6 basis points at 3.20% and the yield on the 30-year Treasury bond gained 6 basis points to reach 3.318%.
Although gold has been pressured for months, this particular leg down is being fueled by Federal Reserve Chairman Jerome Powell’s hawkish tone last Friday that highlighted his determination to bring down inflation through tighter monetary policy. His policy is expected to result in higher U.S. real rates and a stronger U.S. Dollar. Powell also warned that businesses and consumers are going to have endure “pain” during the process that could result in an economic slowdown or recession. In essence, the primary message that Chairman Powell delivered on Friday was that the Federal Reserve will continue to raise rates to reduce inflation “until the job is done”. This idea still lingers in the forefront of market participants’ minds. Yesterday gold futures traded to a low of $1731.80 but quickly recovered as market participants bought the dip. According to the CME’s FedWatch tool, there is a 68.5% probability that the Federal Reserve will raise rates by 75 basis points during the September FOMC meeting. Although it is a slight decline from yesterday’s probability assessment which predicted a 75% probability of a 75-basis point rate hike in September, one week ago the FedWatch tool was predicting a 47.4% probability. In economic news, today’s ADP Private Sector Employment report showed an increase of 132,000 jobs in August and annual pay at 7.6%. This may have missed the forecast, but gold fell to a new low for the session on the news.