Gold Technical Report: Gold continued the trend of profit booking after having a nice rally on Tuesday but took intra-day support at 200 DMA at 1781. The rally may continue after it strides the important psychological 1800 mark and today’s weekly close will be important on charts, especially due to the thin trading due to the festive season. The Medium term support stands at 50 DMA @1732 below which the trend may turn bearish. The short-term Stochastics Oscillator is at 50 and the Relative Strength Index is at 55.
Silver Technical Report: The silver prices, parallel with gold prices cooled off further after they performed a good show of strength on Tuesday. The medium-term trend looks up as the prices continue to trade above 200 DMA @21.12. As 50 DMA @21.35 has crossed above 200 DMA on daily charts, further fire-up in the rally is expected. However, some technical profit booking can be expected here if the crossover fails. The Short term Stochastics Oscillator is at 65 and the RSI momentum is near 60.
Fundamental Report: Gold prices moved lower on Thursday after stronger-than-expected GDP economic data showed the economy bounced back from a contraction faster than previously expected. Additionally, the Unemployment report pointed to a buoyant labor market. Treasury yields firmed on the news, pushing up the U.S. Dollar and likely greenlighting the Federal Reserve to continue its aggressive rate hike path. Demand for non-yielding, dollar-denominated gold tends to weaken when interest rates rise and the Dollar strengthens. The SPDR Gold Shares ETF (GLD) is at $166.37, down $2.43 or -1.44%. Gross domestic product increased at a 3.2% annualized rate last quarter, the government said in its third estimate of GDP. That was revised up from the 2.9% pace reported that month. The economy contracted at a 0.6% rate in the second quarter. Initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 216,000 for the week ended December 17, leaving the bulk of the prior week’s decline intact, Labor Department data showed on Thursday. Economists polled by Reuters had forecast 221,000 claims for the latest week.
Despite the knee-jerk reaction to the BOJ’s move away from its ultra-dovish monetary policy, gold could remain capped because the Federal Reserve has promised to deliver more interest rate hikes next year even as the economy slips towards a possible recession. Last week, Fed Chair Powell argued that a higher cost would be paid if the U.S. central bank does not get a firmer grip on inflation. This was essential “Fedspeak” for “higher rates are coming”. Bullion has shed more than $260 an ounce since its March peak as central banks stepped up efforts to fight soaring inflation. However, with some investors seeing the Fed moving close to a target, gold is enjoying its best quarter since early 2020, up 9.4% so far. Furthermore, if the Bank of Japan is moving toward a more hawkish policy, it means it will join all the other major central banks in tightening to stop the rise in inflation. This is potentially bearish for gold. Gold bulls would like to see lower yields and a weaker U.S. Dollar. However, higher rates and a weaker dollar are likely to keep the market in a range over the near term.