Gold Technical Report: The gold prices marked a DOJI candle on the charts yesterday to balance last week’s selloff. If prices do break above the main level of $1680, the medium-term trend will turn positive. The upside resistance is at 50 DMA near 1704 on daily charts. The Short term Stochastics Oscillator is at 21 and the Relative Strength Index is at 40.
Silver Technical Report: The silver prices trying to rebound for the last 2 days, almost after 6 continuous selling days earlier. As they move near the 50 DMA which is at 19.19. The next major support is only at 18.00, crossing below which will change the medium-term trend into negative. On the upside, a crossing of 200 DMA at 21.76 will change the main trend to positive. The Short term Stochastics Oscillator is at 42 and the RSI momentum is near 44.
Fundamental Report: Gold prices are trading flat but consolidating for a second session as traders react to a weakening U.S. Dollar and a dip in U.S. Treasury yields. The stable price action suggests the market may be getting ready for a major move to the upside. If one takes place then it will likely be tied to a possible intervention against the greenback. At 06:00 GMT, gold is at trading $1648, whereas, the SPDR Gold Shares ETF (GLD) settled at $153.45, up $0.47 or +0.31%. U.S. Treasury yields are edging lower early Tuesday after falling the previous session. The weakness is attributed to the start of earnings season when investors get the opportunity to look at results to assess the impact of persistent inflation. Investors are also being influenced by improving financial conditions in the U.K. that had been weighing on global bond markets. Gold prices are also being underpinned by a weaker U.S. Dollar. The greenback is being pressured by several factors including the fear of an intervention by Japanese authorities, or even worse by a concerted intervention by several major central banks. A shift in risk sentiment is also encouraging investors, who bought the dollar for safe-haven protection, to liquidate those long positions. A weaker dollar will also be good news for gold prices because it tends to drive up demand from holders of foreign currencies.
The U.S. has made it clear that it won’t approve of coordinated intervention. U.S. Treasury Secretary Janet Yellen has said several times that Washington had no appetite for concerted action. This is the very reason gold traders should be on their toes. The element of surprise puts downside risk in the hands of long U.S. Dollar investors and upside potential in the hands of speculative gold buyers. We haven’t seen any signs of intervention yet, other than a tentative trade in the Japanese Yen. But we do know gold prices haven’t fallen below the low hit on September 28, a few days after Japan intervened the first time. Furthermore, the low at $1622.20 remained untouched last week after the U.S. red-hot inflation report and after the odds of a 75-basis point rate hike by the Fed jumped to nearly 100%.