Gold Technical Report: Gold dropped yesterday on selling pressure after a much volatile movement on both sides. It also gave a convincing close below 50 DMA for the first time in almost 3 months. Till the 50DMA @1856 is trading over 200 DMA @1773, the medium-term trend looks upwards. The major support stands at 200 DMA below which the trend may turn bearish. The short-term Stochastics Oscillator is at 16 and Relative Strength Index is at 36.
Silver Technical Report: The silver prices also yielded to selling pressure and closed below the 100 DMA @21.83. The medium-term trend can be considered up only if the prices move above 100 DMA. As 50 DMA @23.32 trades above 200 DMA @20.95 on daily charts, gives an indication of Buy on Dip. The Short term Stochastics Oscillator is at 24 and the RSI momentum is near 33.
Fundamental Report: Gold fell to a multi-week low on Wednesday, as markets reacted to the latest retail sales data in the United States. Figures from the Commerce Department showed that sales rose by 3.0% in January, with spending coming in at $697 billion. This number was higher than December’s drop of 1.1% and better than market estimates of a 1.8% increase last month. The increase in spending comes as inflation marginally fell in January, in addition to a stronger jobs market. As a result of these figures, many expect a soft landing for the U.S. economy, despite fears of a global recession from Q2 onwards. Strong U.S. retail sales send Gold to a 6-week low. Retail Sales, not adjusted for inflation it must be said, were boosted by departmental store sales particularly strong suggesting some post-season sales shopping was at play. It is worth noting December retail sales fell 1.1%. Other data was a little more mixed. The New York Fed Empire Manufacturing Index remained in contraction, as it has for nine of the past twelve months. US Home Builder Sentiment rose on the month but overall continues to languish near Covid lows.
The big concern was that Industrial Output in the US was flat at 0, and has been flat or declining for four months in a row now. While the flashy Retail Sales number looks good and is, it may well have been a Department Stores sales flash in the pan. Then, we have continued evidence of deep structural barriers to growth still existing in the economy via Industrial Output and the Empire reading. It was certainly a nice moment for the bulls at the close in New York, but during the day we again saw significant institutional selling that sold rallies and kept the market heavy overall. Nevertheless, that typical flat afternoon buying did take the market higher for a reasonable close. With much of the big-ticket data releases now out of the way for the moment, we are likely to get a clearer picture of the true underlying fundamental trend within a few days. At the moment, a pure price action approach suggests this is a consolidation phase capable of setting new highs. When we look at the overall fundamental picture, Retail Sales are not reflective, on one month’s data, of the state of the US economy. Especially, as other data remains at suppressed activity levels. Bring in the early signs of surprise inflation re-acceleration, and the one thing we can be certain of is further possibly sustained rate hikes by the Fed. Is the economy really in a position to withstand further hikes? Very probably not. A good look on the day, but maintaining a posture of caution would seem appropriate.