Gold Technical Report: Gold registered a correction yesterday after a continuous rally of 5 days. It has strong support at 10 DMA in 1882. The rally continues strongly after it has overcome the important psychological 1900 mark. The golden crossover of 50DMA @1798 over 200 DMA @1778 last week has boosted the rally so far. The Medium term support stands at 200 DMA below which the trend may turn bearish. The short-term Stochastics Oscillator is at 81 and Relative Strength Index is at 70.
Silver Technical Report: The silver prices, registered a DOJI on daily charts yesterday, after a robust performance the day before. The medium-term trend looks up as the prices continue to trade above 50 DMA @22.72. As 50 DMA has crossed above 200 DMA @21.07 on daily charts, gives an indication of Buy on Dip. The Short term Stochastics Oscillator is at 82 and the RSI momentum is near 58.
Fundamental Report: Gold witnessing a profit booking yesterday appears to be in response to a rebound in Treasury yields and a technical bounce by the U.S. Dollar. Relatively low volume could be another factor contributing to the intraday move with the U.S. on a bank holiday. An important factor influencing gold prices is expectations of slower interest rate hikes from the U.S. Federal Reserve. The Fed raised rates by 75 basis points (bps) four times last year, before slowing to a 50 bps increase in December. Most traders expect a 25 bps hike at the U.S. central bank’s next policy meeting on Jan. 31-Feb. 1. There is no question that the Fed is the focus for gold traders. Currently, these traders are of the view that the Fed’s rate hike cycle is slowing and may come to an end soon. However, it all depends on how one interprets recent comments from Fed officials. Although members of the Fed were quick to highlight that while the CPI numbers were moving in the right direction, they stood by their stance to bring levels back to 2%. They see rates rising “slower but longer and potentially higher.” In his first public appearance of 2023, US Federal Reserve Chair Jerome Powell participated in a panel discussion (Central bank independence and the mandate – evolving views) last week and reiterated the central bank’s commitment to contain inflation. Powell added that ‘restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy’. However, comments on upcoming policies were minimal. The main highlight for the week, though, was US inflation. As of now, investors are pricing in a roughly 90% chance for a 25 basis point hike to a range of 4.50% to 4.75% at the next meeting. This level is likely to hold steady which will support gold prices unless U.S. retail sales data, due on Wednesday, come in well above expectations.