Gold Technical Report: The gold continued the rally yesterday and posted a strong green candle on the daily charts. The prices have picked up pace after crossing 50 DMA @ 1674 on Daily charts. The next Major resistance is 200 DMA @ 1802, above which the main trend will turn positive. The short-term Stochastics Oscillator is at 93 and the Relative Strength Index is at 70.
Silver Technical Report: The silver prices also parallel with Gold witnessed a sharp up move. Positive for silver unlike gold is that prices were already above 50 DMA and now have also crossed 200 DMA @ 21.42. On the downside, major support is only at 50 DMA @ 19.50, crossing below which will change the medium-term trend into negative. The Short term Stochastics Oscillator is at 88 and the RSI momentum is near 70.
Fundamental Report: Today’s report immediately had a profound impact on market sentiment sending ripples through asset classes across-the-board. The US dollar had a steep selloff giving up 2.45% with the dollar index currently fixed at 107.75. The largest percentage decline today occurred within government debt instruments such as Treasury Bonds and Notes. The dramatic gains seen in equities and precious metals as well as the sharp selloff in the US debt instruments, and the dollar were shaped by the perception that inflation coming in under the estimates suggests we will see a more accommodative Federal Reserve when it meets for the last FOMC meeting this year in December. According to the CME’s FedWatch tool, there is an 80.6% probability that the Fed will raise rates by 50 basis points in December rather than 75 basis points which now has only a 19.4% probability of occurrence. Most noteworthy is the net change in the probability of a 50-basis point rate hike in December which was at 56.8% yesterday and over 80% today. What is most significant about today’s inflation report is that although it came in underestimates inflation is still exceedingly at 7.7%. With market perception and sentiment now assuming a more dovish Fed and inflation still at an extremely high rate it is the perfect environment for gold to gain value. It was the aggressive rate hikes by the Federal Reserve that kept gold from moving higher rather than the sharp decline witnessed in March of this year. Even with inflation spiralling, market participants focused on the effect of rising interest rates rather than rising inflation. This most certainly will reshape market participants’ focus from higher rates to high inflation.