Gold Technical Report: Gold prices slipped but managed to trade above support near the 200-day moving average at 1,842. Resistance is seen near the 50-day moving average at 1,885. Medium-term momentum is flat. The MACD histogram has a decelerating trajectory pointing to consolidation.
Silver Technical Report: Silver prices moved lower, slipping through support which is now resistance near the 10-day moving average of 21.89. Support is seen near the June lows at 21.43. The 50-day recent crossed below the 200-day moving average, which 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. The trajectory of the MACD histogram is in negative which reflects consolidation.
Fundamental Report: The Gold futures are trading lower on Thursday as firm U.S. Treasury yields weighed on bullion’s appeal as an investment. The market is also posting an inside move on below average volume. This suggests investor indecision and impending volatility, while they awaited clarity on interest rate hike plans from the European Central Bank (ECB) later today. At 10:58 GMT, August Comex gold futures are trading $1851.20, down $5.30 or -0.29%. The SPDR Gold Shares ETF (GLD) settled at $172.73, down $0.21 or -0.12%. Gold prices slipped on Thursday. A Strong greenback and higher yields capped gold price gains. Since gold is quoted in dollars, a stronger dollar generates headwinds for the yellow metal. CPI is expected to come in hot but how hot will determine the direction of gold prices. Jobless claims for the week ended June 4 totaled 229,000, an increase of 27,000 from the upwardly revised level, more than the 210,000 expected. The last time initial claims were that high was in January. 15. Continuing claims, which run a week behind the headline number, were unchanged at just over 1.3 million, below estimates of 1.35 million. The four-week trend for continuing claims declined slightly to 1.32 million, the lowest level since January 10, 1970.
Trading volume is also being subdued by general concerns ahead of Friday’s U.S. consumer inflation report and next week’s Federal Reserve monetary policy and interest rate decisions. The ECB is all but certain to flag an end to its long-running asset purchase program at the end of this month, and promise a rate hike for July, but the size and pace of its tightening are uncertain. 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.
Generally speaking, rate hikes tend to weigh on gold prices, but in this case, the news has been telegraphed for weeks so we could see a counter-intuitive move in gold. Furthermore, worries over a global recession could underpin gold prices and limit losses. Nonetheless, the direction of gold is still being controlled by Treasury yields. 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. Food costs have also not subsided over the last month and will most certainly keep 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.