Gold Technical Report: Gold prices, declined heavily yesterday, marking a second consecutive red candle in this week on daily charts. It is trading just near the trendline support which acted as a resistance before this rally. Below these levels, we may see some buying support at the10 Day Moving Average (DMA) @1919 and 50 DMA @1878. Since both 10 DMA and 50 DMA are trading over 200 DMA @1778, 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 70 (it is considered overbought when above 80 and oversold when below 20) and Relative Strength Index (RSI) is at 62 (it is considered overbought when above 70 and oversold when below 30).
Silver Technical Report: The silver prices also following the suit retraced back for the second consecutive day but managed to close above both 100 DMA @22.32 and 50 DMA @22.20. The medium-term trend looks bullish as both of these averages are above 200 DMA @20.90. The Short term Stochastics Oscillator is at 83 and Relative Strength Index is near 59.
Fundamental Report: Yesterday Gold prices came down crashing. Even the SPDR Gold Shares ETF (GLD) settled at $180.38, down $3.46 or -1.88%. The markets are trading with little nervousness as big investors adopted a wait-and-see approach ahead of the U.S. Federal Reserve’s interest rate decision and policy outlook. Gold had recently rallied by as much as 10%, or about $180, to a one-year high on safe-haven demand following the collapse of U.S.-based Silicon Valley Bank and a crisis at lender Credit Suisse. However, prices retreated after the rescue of Credit Suisse whetted risk appetite, although financial system uncertainties remained. Treasury Secretary Janet Yellen cautioned that if smaller institutions experience deposit runs that could lead to contagion, further measures may be necessary, despite the stabilization of the U.S. banking system.
As the focus shifts to the Fed’s decision, the market is currently fixated on how the Fed communicates its forward guidance. A still-hawkish Fed, determined to fight inflation, could undermine gold prices with higher dot plots as bullion is considered a hedge against inflation but loses appeal due to increased opportunity cost when interest rates rise. There is a consensus amongst analysts that the precious yellow metal will continue to track higher, but there is also a consensus that there is an extreme amount of uncertainty as to the short-term direction or price changes over the next couple of weeks. This uncertainty is based upon the upcoming FOMC decision on its next rate hike; whether it will pause, or raise rates by ¼%. Secondly, and of equal importance is the current banking crisis that has now spread globally to include Credit Suisse of Switzerland. On Sunday Credit Suisse had new ownership by rival UBS AG in an all-stock purchase priced at 3 billion francs ($3.25 billion) took ownership of Credit Suisse. Guarantees were made by the Swiss National Bank to either bank allowing them to borrow up to 100 billion francs, which is backed by a federal default guarantee. This agreement was the result of work between the Swiss National Bank and the U.S. Federal Reserve. Last week’s banking crisis in the United States and Switzerland intensified potential uncertainty and concern of contagion spreading.