Gold Technical Report: The gold prices resumed the downtrend as the prices shy away from 50 DMA and broke below 1700 levels on selling pressure. Any further slippage down the nearest main bottom at $1676 will turn the main trend negative. On the upside, the next resistance will be at 50 DMA @ 1740. The Short term Stochastics Oscillator is at 12 and RSI momentum is near 36.
Silver Technical Report: Silver witnessed a good upmove last week with reversal signs as it crossed above 20 DMA. Prices have given a small correction earlier after a strong green candle on 50 DMA crossover. Short term trend looks still positive as long as prices are holding 50 DMA levels. The next major resistence will be faced around 20.20 wich is a triple support in mid-August. The Short term Stochastics Oscillator is at 68 and RSI momentum near 52.
Fundamental Report: Gold prices fell solidly lower in as the impact of surprisingly hotter-than-expected inflation report that reinforces notions the Federal Reserve will keep its aggressive monetary policy tightening stance. Tuesday’s inflation data may have surprised, but the reaction by gold traders was by the book. The Labor Department reported U.S. consumer prices unexpectedly rose in August and underlying inflation accelerated amid rising costs for rents and healthcare, giving the Fed ammunition to deliver a third 75 basis points interest rate hike next Wednesday. Although gold is viewed as a hedge against inflation, higher interest rates increase the opportunity cost of holding the bullion while boosting demand for the U.S. Dollar, which in turn hurts demand for dollar-denominated gold. The August consumer price index was reported up 8.3%, year-on-year, compared to forecasts for up 8.0%. On a monthly basis, the August CPI rose 0.1% from July. The July CPI report showed an 8.5% rise, annually. The food and energy component of the CPI report was up 0.6% in August, which is double the expectations for a rise of 0.3%. There had been some signs in the economy that inflation in the U.S. is cooling off a bit, but today’s data suggests inflation is still running hot and may get hotter. The CPI data pretty much assures the Federal Reserve’s FOMC next week will raise the main U.S. interest rate, the Fed funds rate, by at least 0.75%. Fed funds rate futures are suggesting a 20% chance the FOMC could rase the Fed funds rate by 1.0% at next week’s FOMC meeting. General market believed that the Fed won’t be swayed by softer inflation data and that it will raise rates by 75-basis-points at its September 20-21 policy meeting. However, gold traders are likely to react to what policymakers are likely to do at the November and December policy meetings. Gold could rally if soft CPI data signals the need for only 50-basis-point rate hikes on November 2 or December 14. The Federal Open Market Committee, the Federal Reserve’s policy-setting committee, is likely to raise its short-term interest rate target by a full percentage point at its policy meeting next week, because of the emergence of upside inflation risks, Nomura analysts said on Tuesday. Traders have been ramping up their 100 basis point bets all day, since the U.S. Labor Department early Tuesday released a hotter-than-expected U.S. August Consumer Price Index report that looked destined to cement an aggressive stance by the Fed. Any doubt that the Federal Reserve will raise its its benchmark interest rate anything less than by 0.75 percentage point next week is gone, economists said, following the hot U.S. consumer price inflation data for August released Tuesday. Investors who trade in federal funds futures markets are pricing in a 20% chance of a 100 basis point move next week, according to the CME Group’s Fed Watch tool.