Daily Report – 08 June 2022

08 June 2022
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Daily Gold Report


Technical Report: Gold prices are trading near the 10-day moving average of 1850. It rebounded from immediate support near the 200-day moving average at 1,841. Resistance is seen at 50-day moving average 1886. Short-term momentum turns positive as the Fast Stochastic generates a crossover buy 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 S2 S1 CMP R1 R2 R3 1789 1805 1826 1848 1867 1886 1907 Fundamental Report: The Gold futures are edging higher early Tuesday as U.S. Treasury yields softened overnight and the U.S. Dollar pulled back from a two-year high. Nonetheless, expectations of interest rate hikes in the United States, Europe, Australia, and New Zealand are dampening demand for bullion. At 09:21 GMT, August Comex gold futures are trading $1850.40, up $6.70 or +0.36%. SPDR Gold Shares ETF (GLD) settled at $171.80, down $0.78 or -0.45%. Gold bulls fear higher interest rates because they lower demand for the non-interest-bearing, non-yielding precious asset. Overnight, the Reserve Bank of Australia (RBA) raised its benchmark interest rate. The Reserve Bank of New Zealand is also expected to hike its Official Cash Rate later in the Month. Furthermore, the Federal Reserve is expected to raise its benchmark next week. On Thursday, the European Central Bank (ECB) is widely anticipated to lay out its plans for higher rates on Thursday. In May, ECB President Christine Lagarde opened the door to a 50 basis point hike next month. Gold prices rebounded slightly on Tuesday as the dollar edged lower and yields reversed course. A weaker greenback will buoy gold prices since gold is quoted in U.S. dollars. The dollar moved higher as yields increased, pushing the interest rate differential in favor of the greenback. The U.S. Commerce reported that the trade gap in goods and services fell to 19.1% in April from the prior month to $87.1 billion, retreating from March’s record $107.7 billion deficit. Imports fell 3.4% to $339.7 billion, the first month-on-month decline since July last year, driven by a drop in clothing, household goods, toys, pharmaceutical products, and finished metals. Exports continued their upward trend in recent months, rising 3.5% to $252.6 billion. 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 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
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