Gold Technical Report: The gold continued correction for the last 4 days after a strong rally for more than a week. The prices had picked up pace after crossing 50 DMA @1682 on Daily charts and slightly overbought. The next Major resistance is 200 DMA @1801, above which the main trend will turn positive. The short-term Stochastics Oscillator is at 26 and the Relative Strength Index is at 58.
Silver Technical Report: The silver prices also parallel with Gold faced selling pressure and closed below the support of 200 DMA @21.38. The prices posted a red Doji yesterday on the daily charts. On the downside, major support is only at 50 DMA @19.80, crossing below which will change the medium-term trend into negative. The Short-term Stochastics Oscillator is at 20 and the RSI momentum is near 56.
Fundamental Report: Most policymakers delivered the hawkish message – inflation has not meaningfully softened and interest rates will stay higher for longer. Bullion is being pressured by firm Treasury yields and a surge in the U.S. Dollar against a basket of major currencies. Essentially, it’s the hawkish tone of several Fed officials that is moving all three markets. Last week was a busy one for Fed speakers with over a dozen Fed policymakers offering their latest views on the economy, jobs, inflation and current policy settings. Most policymakers delivered the hawkish message – inflation has not meaningfully softened, more work is needed, and interest rates will stay higher for longer.
Gold prices are up nearly $100 in November with the rally starting after the U.S. government reported an unexpected increase in the unemployment rate. This news was bullish for gold because it served as a sign of a weakening labor market, one of the Fed’s key goals. Prices continued to soar a few days later following the release of another government report that showed consumer inflation was cooling. The news led to a shift in sentiment with investors betting the Federal Reserve will end its series of 75 basis point rate hikes and downshift to a 50 basis point rate hike at its December meeting. But the Fed speakers collectively said, “Not so fast”. They emphasized throughout last week that the Fed is going to continue to raise rates until they get inflation back to their mandated 2% level. St. Louis Fed President James Bullard was particularly hawkish with his commentary saying, even under a “generous” analysis of monetary policy, the Federal Reserve needs to keep raising interest rates given that it’s tightening so far “had only limited effects on observed inflation.” But it was his estimate of where rates should climb that rally set the selling in motion by spooking weak longs out of the market. 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.