Gold Technical Report: Gold posted a DOJI yesterday on daily charts indicating indecisiveness after a narrow-range movement throughout the day. But the market seems to be factoring little nervousness from the last couple of days it has shed almost 50 Dollars. It’s also clear from the fact that the 10 DMA @1854 has crossed below the 50 DMA @1860. But since 50 DMA 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 15 and Relative Strength Index is at 34.
Silver Technical Report: The silver prices also yielded further selling pressure and closed below the 100 DMA @21.86. The medium-term trend can be considered up only if the prices move above 100 DMA. As 50 DMA @23.30 trades above 200 DMA @20.94 on daily charts, gives an indication of Buy on Dip. The Short term Stochastics Oscillator is at 22 and the RSI momentum is near 31.
Fundamental Report: Gold continues to trade under pressure moving to lower prices after Tuesday’s CPI report for January indicated that inflation declined to 6.4% year-over-year. January’s CPI report came in lower by 6.4% year-over-year, than the prior month of December. However, analysts were expecting a larger decline with expectations that yesterday’s report would come in between 6.2% and 6.3%. It 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. All this economic data, When combined with last week’s unexpected jobs report the collective information will allow the Federal Reserve to maintain its aggressive stance which means more interest rate hikes, and that rates will remain elevated longer. Chairman Powell has been resolute in his commitment to keeping higher rates elevated throughout the entire calendar year.
The dollar has been gaining strength when compared to other currencies, but for Americans, the dollar’s purchasing power continues to be diminished, a byproduct of higher levels of inflation. The national debt continues to grow and the United States has reached its debt limit which means that the government will have to raise the debt ceiling which means that the United States will grow its national debt to a higher level. Another factor pressuring gold lower is that recent data has suggested that the Federal Reserve could modify its current rate target of 5.1% to closer to 6% to accelerate the process of reducing inflation. Gold intrinsically benefits from higher levels of inflation and higher interest rates are detrimental. This is because gold does not generate a yield which makes US treasuries and other interest-bearing assets more favorable.
Although this is a headline-driven market and current headlines have had a hard impact that took gold prices lower technical indicators will come into play at the point in which investors believe that gold is becoming oversold and more valuable than current pricing.