Gold Technical Report: Gold prices traded in a zigzag style for most of the part of yesterday as market felt nervous before the FOMC event. Sliding from the intra day high of 1960, it closed above the support of 100 days Exponential Moving Average @ 1938. Upside resistances stand around 10 days EMA @ 1951 and 50 days EMA@ 1966. Long term trend is still intact as the prices and all these averages are above 200 days EMA @ 1868. The short term Stochastics Oscillator is at 22 (it is considered overbought when above 80 and oversold when below 20) and Relative Strength Index (RSI) is at 42 (it is considered overbought when above 70 and oversold when below 30).
Silver Technical Report: The silver prices moved up yesterday honouring the support near 100 days EMA @ 23.50. It also crossed above the resistances also 10 days EMA @ 23.80 and 50 days EMA @ 23.90. The medium term trend looks intact as all of these averages are above 200 days EMA @ 22.42. Some upside movement can be expected if 10 days EMA crosses above 50 days EMA. The Short term Stochastics Oscillator is at 30 and Relative Strength Index near 60.
Fundamental Report: The Federal Reserve announced that the “committee decided to maintain the target range for the federal funds rate at 5 to 5 ¼%”. However, the core message as expressed in today’s statement and press conference by Chairman Powell was that its monetary policy will remain restrictive, hawkish, and most likely include two more rate hikes before the end of the year. The recent economic data, it would not be difficult for the Fed to justify a rate hike. Inflation continues to run well above its 2% target. Consumer Price Inflation data for May showed headline inflation slowing to 4% year-over-year, down from a peak of 9.1% last June. However, core CPI has risen by 0.4% month-over-month for the last six months – a reminder that the underlying inflation trend is still too strong. Demand for goods, especially autos, has been rising this year, keeping prices higher than many Fed policymakers expected. Meanwhile, service prices continue to surge higher, as strong demand meets tight capacity on the supply side.
Outside of the U.S economy, OPEC’s recent decision to cut global supply in an effort to increase Oil prices – has only added to concerns and made the Fed’s job of lowering inflation a lot more challenging. Meanwhile, China’s newly announced plans to unleash multi-billions of dollars in stimulus spending over the next few months to reinvigorate the world’s second-biggest economy, does not help make the Fed’s job any easier. In fact, it just adds to the complexity – stoking fears that an era of stagflation could be on the horizon.