Gold Technical Report: Gold prices witnessed a rangebound movement yesterday. After a strong rally last week the gold is going through some consolidation this week. The prices continue to trade below the crucial 1800 mark. The medium-term trend will turn bullish if it reclaims 200 DMA @1795 on the Daily charts currently. The Major support stands at 50 DMA @1703. The short-term Stochastics Oscillator is at 34 and the Relative Strength Index is at 56.
Silver Technical Report: The silver prices, parallel with gold prices marched up smartly last week but yielded to selling pressure this week. The prices continue to trade above 200 DMA @21.25. On the downside, major support is only at 50 DMA @20.42, crossing below which may change the medium-term trend into negative. The Short term Stochastics Oscillator is at 41 and the RSI momentum is near 61.
Fundamental Report: The market awaits next week’s 2-day FOMC meeting which begins on Tuesday, December 13. After the conclusion of the last FOMC meeting of the year, the Federal Reserve will release a statement which Chairman Powell’s press conference will follow. Powell’s speech last week, caused extreme volatility leading to a dynamic price spike in both precious metals. Market participants immediately reacted to Powell’s speech by focusing on the fact the Federal Reserve was planning to slow the pace of interest-rate hikes. However, today they seemed to disregard Powell’s remarks about how the Federal Reserve would slow the pace of rate hikes. They changed their focus to the fact that the Federal Reserve is maintaining an extremely hawkish demeanor with more rate hikes at a slower pace. In other words, market participants focused on the time it would take the Federal Reserve to lower inflation to its target rate rather than the fact that the Fed intends to slow down the size of individual rate hikes. But the jobs report raised doubts over whether the Fed can afford to change its aggressive monetary policy tightening, encouraging investors to book profits and driving prices lower into the close.
Gold traders fear the Fed could raise rates higher over the long run. This notion was supported by Chicago Fed President Charles Evans who stated that there could be “a slightly higher peak rate of the fund’s rate, even as we likely will step down: the pace of rate hikes from 75 BPD.” It is highly anticipated that the Federal Reserve will raise its benchmark Fed funds rate as it has at every consecutive FOMC meeting since March. Traders and investors have largely priced in the high likelihood that the Fed will raise rates by 50 basis points, or a ½ %. This will take the current target rate of 375 – 400 basis points to 425 – 450 basis points by the end of the year. According to the CME’s FedWatch tool, there is a 77% probability of a 50-basis point rate hike and a 23% probability of a 75-basis point rate hike. It is the possibility, although remote, of a fifth consecutive rate hike of 75 basis points that have given market participants angst about the upcoming meeting.