Gold Technical Report: The gold, after a correction for the earlier 4 days has started showing some green shoots on daily charts in the latter part of this week. The prices had picked up pace after crossing 50 DMA which is at 1686 on the Daily charts currently. The next Major resistance is 200 DMA @1798, above which the main trend may turn positive. The short-term Stochastics Oscillator is at 45 and the Relative Strength Index is at 61.
Silver Technical Report: The silver prices traded flat yesterday after crossing forcefully 200 DMA @21.34, a day before. On the downside, major support is only at 50 DMA @19.93, crossing below which may change the medium-term trend into negative. The Short term Stochastics Oscillator is at 83 and the RSI momentum is near 59.
Fundamental Report: Gold markets were a little positive during the trading session on Thursday, even though it was very thin and limited Thanksgiving trading. As the market guessed earlier, FOMC Meeting Minutes reveal that interest rate hikes will continue in smaller portions. The majority of Fed officials agreed that it is better to raise interest rates in smaller increments than the last four rate hikes. There are two primary techniques or tools they use to achieve their goal of reducing inflation to its target rate of 2%. One technique is by adjusting the money supply by buying or selling assets from their balance sheet. Their asset balance sheet includes U.S. debt instruments and mortgage-backed securities (MBS). However, the primary technique they use along with another powerful option i.e. adjusting their benchmark “Fed funds” interest rate. The Federal Reserve has completed seven of the eight yearly meetings and except for January has raised its Fed funds rates at each consecutive meeting. The Fed has raised rates by 75 basis points at each of the last four consecutive meetings (June, July, September, and November), taking their benchmark rate from between 0 and 25 basis points in March to its current rate which is between 375 and 400 basis points.
Gold markets gapped higher to kick off the Thursday session, and then rose slightly even though it was Thanksgiving in the United States, therefore trading hours were limited and volume of course was thin. The minutes revealed what market participants have been already anticipating which is that the Federal Reserve will begin to reduce the amount of each rate hike beginning in December. According to the CME’s FedWatch tool, there is an 80.5% probability that the Federal Reserve will raise its Fed funds rates by 50 basis points in December. The pace at which the Federal Reserve has been raising rates can be best described as extremely hawkish and aggressive with consecutive large rate hikes for the last four meetings. Market participants and economists have been voicing concern that the Federal Reserve has been overly aggressive risking a hard landing. As reported by Reuters News service, Tai Wong, a senior trader at Heraeus Precious Metals in New York said, “Gold traded higher in a relief rally after the Fed minutes contained no hawkish surprises, and just about confirmed the pace of hikes would drop to 50 bps in December. Furthermore, he added, “The financial markets are convinced the Fed is overtightening so it is dovish interpreting the minutes which contains no real surprises given Fed commentary the past two weeks.”