Daily Report – 07 June 2022

07 June 2022
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Gold Report

Gold prices eased. Prices hovering around the 200-day moving average at 1,840. Resistance is seen near the 50-day moving average of 1889. Short-term momentum turns negative as the Fast Stochastic generates a crossover sell signal. Medium-term momentum turns positive as the MACD generates a crossover buy signal. This occurs as the 12-day moving average minus the 26-day moving average crosses below the 9-day moving average of the MACD line. The MACD (moving average convergence divergence) histogram has a positive trajectory pointing to higher prices. Daily Support/Resistance : S3:1800, S2:1810, S1:1828, CMP:1844, R1:1870, R2:1888, R3:1900 The Gold prices are down late in the session on Monday, pressured by a sharp rise in U.S. Treasury yields, which made the U.S. Dollar a more attractive investment. Yields were boosted as traders placed bearish bets on U.S. Treasury bonds ahead of key U.S. inflation data later in the week that could strengthen the case for more aggressive rate hikes by the U.S. Federal Reserve. At 18:54 GMT, August Comex gold futures are trading $1844.40, down $5.80 or -0.31%. The SPDR Gold Shares ETF (GLD) is at $171.72, down $0.86 or -0.50%. The benchmark 10-year U.S. Treasury yield moved higher on Monday ahead of a big week for U.S. economic releases. The yield rose more than 7 basis points to 3.03%, while the yield on the 30-year Treasury bond traded about 7 basis points higher at 3.183%. prices eased on Monday as the dollar rose. Since gold is quoted in U.S. dollars, a strong greenback will weigh gold prices. The dollar moved higher as yields increased, pushing the interest rate differential in favor of the greenback. Benchmark yields rose following the stronger than expected jobs report. The ten-year yield is higher, pushing back through the 3.0% market up to the 3.03% level. The quiet period for Fed members has started ahead of their June 14/15 monetary policy meeting. Last week yields continued to rise in the wake of a strong jobs report. The end of year Fed Funds futures contract is now pricing in rates of 2.70%, which implies another 100-basis points of tightening over the next 2-meetings. The price action the last two sessions suggests investors are pricing in an aggressive path of interest rate hikes from the Fed. This latest round of selling pressure began on Friday after a U.S. payrolls report showed the U.S. economy added a better-than-expected 390,000 jobs in May, despite fears of an economic slowdown and inflation running at a multi-decade high. Traders are now looking forward to a key inflation reading due on Friday. May’s consumer price index (CPI) is expected to be a little cooler than last month’s reading. If the CPI report meets expectations then this would indicate the inflation has peaked. Even if the CPI report indicates that consumer prices have peaked, the Fed is not likely to let up on the gas. Release in early May, the latest Fed policy statement and comments from several Fed policymakers indicate that 50-basis-point rate increases are likely in June and July. The major sticking point is the September interest rate decision. If the economy starts to weaken too much, too soon, suggesting a recession is imminent, the Fed is likely to slow down the pace of rate hikes. If the economy, especially the jobs data, continues to show strength then look for the Fed to be more aggressive. This assessment would keep the pressure on gold prices. The forward guidance of the Federal Reserve are the inflation report (PCE core inflation index) and the monthly jobs report. The Fed will most likely continue to implement both rate hikes and quantitative tightening (a reduction of their balance sheet) as long as inflationary pressures continue at the current elevated levels and the monthly job report does not indicate a strong reduction in new jobs added which would indicate that no major economic contraction occurred increasing the likelihood of a soft landing. The decline today in both gold and silver as well as the gains in dollar value was the direct result of today’s U.S. nonfarm payroll report coming in above expectations. The better-than-expected report paves the way for the Federal Reserve to continue its current forward guidance which includes additional interest rate hikes and continued attempts to reduce its balance sheet which has swelled to nearly $9 trillion to be initiated over the next two FOMC meetings, the next FOMC meeting will begin on the 14th of this month, followed by the July meeting which will begin on the 26th.

Key US Economic Reports & Events
Treasury Sec Yellen Speaks
6:00 PM