Gold Technical Report: The gold prices continued the last week’s trend downwards and crossed below 1680 support. If prices do not quickly come off the main level of $1680, the medium-term trend may turn negative. The upside resistance is at 50 DMA near 1717 on daily charts. The Short term Stochastics Oscillator is at 21 and the Relative Strength Index is at 42.
Silver Technical Report: The silver prices witnessed selling pressure last week. The prices are currently hovering around 50 DMA which is at 19.33. However, if the prices break this level, the next major support is only at 17.60, which will change the medium-term trend into negative. On the upside, crossing of 200 DMA at 21.88 will change the main trend to positive. The Short term Stochastics Oscillator is at 46 and the RSI momentum is near 49.
Fundamental Report: The jobs report for September showed a decrease in monthly gains, with 263,000 new jobs added last month, a decline from the prior month in which 315,000 new jobs were added. The deep impact it had on almost every asset class in the financial markets was not because of the tepid numbers but rather hopes by the Federal Reserve that these numbers would be even lower. The Federal Reserve had hoped that today’s report would reveal even slower growth because that would indicate progress by the Federal Reserve in reducing inflation. Inflation is still greatly elevated at a 40-year high even after the Federal Reserve has raised interest rates at every FOMC meeting since March. The Fed raised rates by 25 basis points in March, 50 basis points in May, and 75 basis points in June, July, and September. The Fed took their benchmark Fed funds rate from between 0 and 25 basis points in February to between 300 and 325 basis points in September. Although today’s report indicated slowing job growth it is believed that this contraction is not enough for Federal Reserve to slow down its current pace of interest-rate hikes. According to CME’s FedWatch tool, last week there was a 56.5%% probability, yesterday there was a 75.2% probability which today swelled to an 82.3% probability that the Federal Reserve will raise rates by 75 basis points for the fourth consecutive time at the November FOMC meeting. This probability indicator forecasts the probability of FOMC rate moves using the 30-day Fed Funds futures pricing data. Also, in terms of the long-term effect of the Federal Reserve on gold pricing, it is highly likely that if the Fed continues to raise rates and inflation remains persistent at some point market participants will have to focus on the high level of inflation rather than being laser-focused on rising rates. If that assumption is correct, it could take gold dramatically higher.