Gold Technical Report: Gold prices are trading near the 10-day moving average of 1850. Its struggling hard to maintain 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 at 43.46. Medium-term momentum looks positive as the MACD poised for upwards direction, although below zero line. The MACD (moving average convergence divergence) histogram has a positive trajectory pointing to higher prices.
Silver Technical Report: Silver prices whipsawed and moved lower. Support is seen near the 20-day moving average of 21.80. Resistance is seen near the 50-day moving average at 23.The 50-day moving average remains crossed under the 200-day moving average, which is a headwind for XAG/USD and indicates downward momentum. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal.
The medium-term momentum turns positive as the histogram prints positively with the MACD (moving average convergence divergence). The trajectory of the MACD histogram is in negative territory, which reflects a downward trend in price movement.
Fundamental Report: The Gold futures are trading slightly higher after spending most of the session inside yesterday’s trading range. The price action suggests investor indecision and impending volatility. Traders are taking their direction from the U.S. Dollar and U.S. Treasury yields. Both are delivering mixed signals which is leading to today’s passive trade. At 12:44 GMT, August Comex gold futures are trading $1853.80, up $1.70 or +0.09%. The SPDR Gold Shares ETF (GLD) settled at $172.93, up $1.11 or +0.65%. Earlier this week, 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.
This week’s choppy trade also suggests that many of the major players are on the sidelines ahead of Friday’s U.S. Consumer Price Index (CPI) report and perhaps even next week’s major policy decision from the U.S. Federal Reserve. The news isn’t helping sentiment either. On the bearish side, we have rising Treasury yields and a firming U.S. Dollar. That’s pretty clear. However, on Wednesday, these factors are being offset somewhat by the World Bank’s slashing of its global growth forecast. U.S. Treasury yields are up early Wednesday as investors await a key inflation indicator and assess signs of slowing economic growth. The U.S. consumer price report (CPI), due Friday, is expected to provide more clues on the Fed’s rate-hiking path, ahead of next week’s policy decision, where a half-point increase is widely expected. Economists polled by Reuters are expecting the CPI to have gained 5.9% on the year, after an annual rise of 6.2% in April. Rising yields tend to weigh on gold prices because bullion doesn’t pay a dividend or interest to own it.The World Bank cut its 2022 global growth forecast on Tuesday by nearly a third to 2.9%. This news may be providing support for gold prices on Wednesday. In its report, the World Bank said it isn’t expecting a major turnaround in the global economy anytime soon. It further warned that global growth should “hover around” the 2.9% level for both next year and 2024, describing the next few years as “a protracted period of feeble growth and elevated inflation.” Gold could remain rangebound until the release of Friday’s U.S. CPI report. The World Bank’s proclamation is a new key issue because it gives credibility to the possibility of a global recession. A slowdown in the global economy would cause the major central banks to stand up and take notice. This would put pressure on them to slow down the pace of rate hikes. This is potentially bullish for gold prices.
Unlike the PCE inflation index, the CPI index includes current inflationary pressures stemming from both energy and food costs. Given that crude oil futures are currently trading for $122.41 per barrel, last month crude oil was still exceedingly high at approximately $105 per barrel. This will most certainly continue to highly impact the CPI numbers that will be released on Friday. Food costs have also not subsided over the last month and will most certainly influence the CPI inflation index keeping current inflationary pressures hot. The expectations that inflationary pressures will remain exceedingly high were expressed yesterday by the U.S. Treasury Secretary Janet Yellen in her testimony to the Senate Finance Committee. As reported by Reuters news service, “Yellen said that the United States was dealing with “unacceptable levels of inflation,” but that she hoped price hikes would soon begin to subside.” The Treasury Secretary also reinforced her views that “inflation was being fueled by high energy and food prices caused by Russia’s war in Ukraine, a shift to goods purchases during the pandemic, and by new COVID-19 variants and persistent supply chain disruption.” Friday’s CPI Report Will Guide the FOMC Meeting Next Week. It is highly anticipated that the Federal Reserve will announce another interest rate hike of ½ a percent, or 50 basis points after next week’s FOMC meeting on Wednesday, June 15. According to the CME’s FedWatch tool, there is a 94.8% probability that the Federal Reserve will announce and enact another 50 basis point rate hike next week.