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. Both Stochaistic and the MACD histogram have upward bias.
Silver Technical Report: Silver prices hover aound 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 trajectory of the MACD histogram is in negative which reflects consolidation.
Fundamental Report: The Gold futures are trading lower early Monday after an attempt to follow-through to the upside following Friday’s dramatic bullish reversal failed to draw enough buyers to extend the move. Fundamentally speaking, buyers may have been spooked by a new high for the year in U.S. Treasury yields and a gap higher opening in the U.S. Dollar Index. At 02:53 GMT, August Comex gold futures are trading $1866.70, down $8.80 or -0.47%. Bullion is often seen as an inflation hedge, but the opportunity cost of holding it is higher when the Fed raises short-term interest rates, since gold is a non-yielding investment. Furthermore, a stronger U.S. Dollar tends to dampen foreign demand for gold. Fear of aggressive rate hikes by the Fed could also be weighing on gold prices. The Fed is expected to deliver its second straight half-point rate hike to bring inflation under control, and could be equally aggressive in July and September.
Gold prices moved lower in early trade in the North American trading session. A Strong greenback and higher yields weighed on the yellow metal. Since gold is quoted in dollars, a stronger dollar generates headwinds for the yellow metal. The headline and core CPI came in stronger than expected pushing the 2-year yields to a 13-year high. The Labor Department reported on Friday that CPI rose 8.6% yearly, hotter than the 8.3% expected. This report shows that consumer inflation has been the strongest since 1981. While headline inflation remains strong due to energy and food prices, shelter and services are starting to slow. Excluding volatile food and energy prices, core CPI was up 6%, slightly higher than the 5.9% estimate. Monthly, headline CPI was up 1% while core rose 0.6. US CPI for May was a nightmare for risk markets as the headline came in well above the consensus. Inflation is back on the highs; critically, it is across the board. Just education services were negative at -0.1%. The Fed’s policy is influencing financial conditions- the housing market is slowing in terms of mortgages written and sales volume dropping, but that is not yet hitting inflation data where the housing component was still up 0.8%. The Fed needs to see the non-energy sectors of the economy slowing – i.e., those segments it “should” be able to influence. There is not much sign of that in the data, and t is the second-round effects that are coming through loud and clear. A 50bp rate hike from the Fed this Wednesday was a done deal in any case, so this data is not an immediate policy influence. Instead, what it does is cement the September 50bp hike. The sizable CPI beat and hawkish ECB are reminders that elevated inflation will continue to compete with the slowing growth narrative.