Gold Technical Report: Gold prices had a volatile session yesterday after two days of consecutive decline but closed the day with a DOJI (open and close prices at similar levels) suggesting indecision. Prices continued to trade below 10 days EMA @ 1919. After crossing this, next target will be around the conjunction point of 50 days EMA and 100 days EMA near 1930. Major support is near 200 days EMA @ 1900 and major resistance lies near 1951 Horizontal TrendLine touchpoint. The short term Stochastics Oscillator is at 27 (it is considered overbought when above 80 and oversold when below 20) and Relative Strength Index (RSI) is at 46 (it is considered overbought when above 70 and oversold when below 30).
Silver Technical Report: Silver prices also moved down for second successive day but rebounded from the intra day low which was also the last month low. It also touched briefly the 200 days EMA @ 23.00 but could not sustain. Last week alone, prices have crossed below 50 days EMA and 100 days EMA which are at conjuction point 23.50 and then 10 days EMA @ 22. The Short term Stochastics Oscillator is at 6 and Relative Strength Index near 41.
Fundamental Report: Gold prices reacted forcefully for last two days on the combined set of inflation data of CPI and PPI numbers. The CPI (Consumer Price Index) suggested that not only the headline inflation had risen by 0.6% last month forecasted by economists but also inflation had its largest month-over-month gain this year. And then, yesterday’s PPI (Producer Price Index) also rose 0.7% last month. Because wholesale prices are passed down to the retailer and then to the consumer this index acts as a precursor, or forecast of what retailers and then consumers will pay months later. The key takeaways from PPI report are that wholesale pricing of partially completed goods jumped by 2.1% last month breaking the consecutive price declines over the prior six months. Also, the cost of raw materials increased by 1.3%. The only silver lining in today’s report was in the cost of services which rose by only 0.2% in August. Service prices slowed to 2.2% in August a dramatic decline from the peak of 9.4% which occurred in March 2022. Both these reports did not lessen the probability of a pause by the Federal Reserve at their September FOMC meeting next week. According to the CME’s FedWatch tool, there is currently a 97% probability that the Fed will continue the pause of rate hikes that began at the last FOMC meeting in July. The Federal Reserve has raised rates at every FOMC meeting since its March 2022 meeting when it first raised the benchmark interest rate or Fed funds rate. However, the probability of another pause in rate hikes in November had the largest percentage gain. Currently, there is a 66.6% probability that the Federal Reserve will maintain the current benchmark rate of between 5 ¼% and 5 ½% up from 57.4% yesterday.