Gold Technical Report: The gold continued correction for the last 3 days after a strong rally for more than a week. The prices had picked up pace after crossing 50 DMA @1680 on Daily charts and slightly overbought. The next Major resistance is 200 DMA @1800, above which the main trend will turn positive. The short-term Stochastics Oscillator is at 14 and the Relative Strength Index is at 60.
Silver Technical Report: The silver prices also parallel with Gold faced selling pressure and closed below the support of 200 DMA @21.38. On the downside, major support is only at 50 DMA @19.77, crossing below which will change the medium-term trend into negative. The Short term Stochastics Oscillator is at 25 and the RSI momentum is near 57.
Fundamental Report: The market sentiment is the view or attitude that creates our opinion as to whether an asset class is overvalued or undervalued. It shapes and changes the value of a stock or commodity’s price. Market sentiment is overly sensitive to statements and comments made by Federal Reserve officials because those individuals have the power and influence to change monetary policy. There is a dramatic difference between the perception of upcoming Federal Reserve monetary policy changes and the actions of Federal Reserve officials. The Federal Reserve raised rates at every FOMC meeting this year except in January, from March through November, a total of six rate hikes. Over the last four FOMC meetings (June, July, September, and November) they raised rates by 75 basis points. The aggressive nature of the Federal Reserve’s monetary policy moved gold dramatically lower from March up until the beginning of November. Gold traded to its highest value this year of $2078 in March. By the beginning of November, gold prices had dropped to approximately $1621, resulting in a price decline of 21.99%.
During the first week of November, market sentiment shifted because inflation rates had declined fractionally and investors viewed this fractional drop as a signal that the Federal Reserve would begin to loosen its aggressive monetary policy. This caused gold to rise dramatically from $1621 to an intraday high of $1792 by Tuesday, November 15. Because the CPI index dropped from 8.2% year-over-year in September to 7.7% year-over-year in October investors believed that the Federal Reserve would become more dovish regarding upcoming rate hikes. Also, St. Louis Fed President James Bullard made powerful hawkish remarks last week. Bullard said the Fed’s target policy needs to rise to at least a range between 5.00% and 5.25% from the current level of just below 4.00% to be “sufficiently restrictive” to curb inflation, though he would defer to Fed Chair Jerome Powell regarding how much higher to move rates at upcoming policy meetings.