Gold Technical Report: The gold witnessed a strong rally last week. The prices have picked up pace after crossing 50 DMA @ 1677 on Daily charts. The next Major resistance is 200 DMA @1803, above which the main trend will turn positive. The short-term Stochastics Oscillator is at 95 and the Relative Strength Index is at 68.
Silver Technical Report: The silver prices also parallel with Gold witnessed a sharp up move last week. Positive for silver unlike gold is that prices were already above 50 DMA and now have also crossed 200 DMA @ 21.44. On the downside, major support is only at 50 DMA @ 19.52, crossing below which will change the medium-term trend into negative. The Short term Stochastics Oscillator is at 79 and the RSI momentum is near 64.
Fundamental Report: Dollar weakness was the driving force behind gold’s recent rally and accounted for approximately 4/5 of gains realized in gold futures last week. The U.S. dollar just had its largest weekly drop in 2022 tumbling from 111 to 106. In a single week, the U.S. dollar index lost 4.824 points, a percentage decline of – 4.286%. This means that dollar weakness during the week accounted for 78.15% of gains seen in gold, and the remaining 21.285% is directly attributable to market participants bidding the precious metal higher. In other words, dollar weakness was the driving force behind gold’s recent rally and accounted for approximately 4/5 of the gains realized in gold the previous week. One component that drives value changes in the U.S. dollar is the yield from purchasing United States Treasuries. The U.S. dollar is very sensitive to the yields of U.S. debt instruments such as Treasuries like the 30-year bond or 10-year note. As the yield climbs on U.S. bonds and notes it attracts foreign investments into those fixed assets that have favorable yields, which require dollars to purchase thereby raising the value of the dollar index. Reciprocally when yields on U.S. bonds and notes fall it causes the reverse as the dollar loses value as foreign investors reallocate investments in U.S. debt instruments to other fixed assets offering favorable yields.
BLS reported that the CPI index for October increased by only 7.7% year-over-year. This was the lowest value of the consumer price index since January of this year when the CPI came in at 7.5%. The average annual inflation rate for 2022 is currently at 8.38% year-over-year. In January 2022 inflation was at 7.5 year-over-year. Inflation would rise to 8.5% year-over-year in March when the Federal Reserve stepped in and began its first interest rate hike since 2018 of 25 basis points. However, inflation continued to spiral higher and peaked in June at 9.1% year-over-year. From July through August inflation as measured through the consumer price index slowly declined. During the last week of September, the dollar index hit its highest value this year at approximately 114.793. Since then, the dollar has lost tremendous value as market sentiment began to shift under the assumption that the Federal Reserve would slow its aggressive rate hikes as they were now having an impact on taking inflation lower.