Gold Technical Report: Gold medium term trend is looking upwards in the beginning of new week. However slippage down the nearest main bottom at $1786 will reaffirm the downtrend. On the upside, the immediate resistance is the 50 DMA zone at $1872. A trade through $1872 will change the main trend to up. Short term Stochastics Oscillator is pointing up at 62 and RSI momentum is poised just below midline at 48.
Silver Technical Report: Silver medium term trend is looking flat. However slippage down the main bottom at $ 21.43 will reaffirm the downtrend. On the upside, the immediate resistance is the 50 DMA zone at $22.57. A trade through $22.72 will change the main trend to up. Short term Stochastics Oscillator is overbought at 80 signalling possible small profit booking.
Fundamental Report: The Gold witnessed a Tug-of-war on Friday. Gold traders experienced extreme price volatility beginning with a $70 drop on Monday and Tuesday, higher prices on Wednesday and Thursday, and a final price decline on Friday. This tug-of-war shifted market sentiment causing market participants to concentrate on either spiraling inflation or higher interest rates. The shift between these two opposing forces resulted in dramatic price increases and declines. Last week’s CPI report which revealed that the current level of inflation is at 8.6% created bullish undertones moving the market higher during the middle of the week. However, the focus shifted to the Federal Reserve’s revision of its forward guidance announcing a rate hike of 75 -basis points (3/4%) on Wednesday taking fed funds rates to 1.5% – 1.75%. This was the largest single rate hike since 2009.
Last week’s conclusion of the June FOMC meeting was followed by a statement as well as a press conference by Chairman Powell. The overall message was that they acknowledge the pain that working Americans are experiencing as a direct result of inflation of over 8%. Secondly, they wanted to send a message that they are actively addressing that issue. However, the message by the Federal Reserve and the reality that they face to effectively lessen the current rate of inflation is dramatically different. FOMC statement and information gleaned from Chairman Powell’s press conference acknowledge that the Federal Reserve needed a transformational change in its monetary policy and forward guidance. They also acknowledged facts that were obvious to economists and analysts but were omitted from former statements by the Federal Reserve. The first acknowledgment was that the current level of inflation is persistent and not in any way transitory. Also, they acknowledged that the root cause of inflation; supply chain issues, cannot be impacted by rising interest rates. Most importantly, they acknowledge that it was not possible to gain any traction fighting inflation without taking the United States and the world into a recession. The Federal Reserve has long maintained a dual mandate of maximum employment and an inflation rate of 2%. Chairman Powell alluded to a strong possibility that there would be more 75 basis point rate hikes at the next FOMC meeting in July. During his press conference Chairman Powell said that further rate hikes of either 50 or 100 basis points would “most likely” be the appropriate outcome of the central bank’s next meeting in July. Yesterday’s FOMC statement revealed the Federal Reserve’s current economic Outlook. The Outlook contains some dire predictions. It anticipates an economic contraction taking the GDP growth rate to 1.7% this year, and unemployment rising from 3.7% to 4.1% in 2024.