Gold Technical Report: The gold prices are showing some signs of recovery this week from the bottom after 6 days af continuous fall last week. The medium term trend looks still bearish. Any slippage down the nearest main bottom at $1676 will turn the Main trend negative. On the upside, the immediate resistance are 50 DMA @ 1768 , last week’s high at 1808 and then 200 DMA @1836. The Short term Stochastics Oscillator is at 68 and RSI momentum is near 46.
Silver Technical Report: Silver is experiencing pullback this week from the bottom after last week’s continuous fall. It still looks further bearish as it is trading below both 50 DMA and 20 DMA. However, since the 20 DMA has crossed 50 DMA upwards, we can expect some technical buying. The next major resistence will be faced around 50 DMA around 19.76. The Short term Stochastics Oscillator is at 52 and RSI momentum near 42.
Fundamental Report: Gold prices are edging higher on Thursday, bolstered by a pullback in the U.S. Dollar against a basket of major currencies. Gains are being capped, however, by steady U.S. Treasury yields. While most of the major players have taken to the sidelines ahead of a much anticipated speech by Federal Reserve Chairman Jerome Powell at the Jackson Hole Symposium on Friday, there is U.S. economic data today that could sway the direction of interest rate expectations. At 10:31 GMT, December Comex gold futures are trading $1758. Tthe SPDR Gold Shares ETF (GLD) settled at $163.27, up $0.50 or +0.31%. Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole central bankers’ meeting on Friday will be the key factor in the short-term driving the price action in the gold market. If Powell signals the need for aggressive rate hikes then sellers should return to the gold market because rising rates increase the opportunity cost of holding non-yielding bullion. Additionally, higher rates should make the U.S. Dollar a more attractive investment. A stronger dollar is also a negative for gold demand because it makes the metal more expensive to foreign buyers. Powell is also expected to address the possibility of a U.S. recession. This is where his words could get a little dicey. By addressing the possibility of a recession, Powell keeps the door open for a possible pivot by the central bank if the next consumer inflation, Jobs and business activity reports signal a weakening economy. All of these reports will be released before the Fed begins its next two-day meeting on September 20-21.
Whichever direction Powell chooses in his speech, gold investors will want to see it delivered with clarity and conviction. Powell has to be definitive in his call of the direction of rates and the risks of recession. If he wavers in his convictions, he risks the Fed’s credibility after trying to build it back after losing it last summer when the Fed called rising inflation “transitory”. The lack of clarity and conviction from Powell is likely to cause heightened volatility in the markets because it will mean he is leaving it up to market participants to decide the direction of interest rates and the odds of a recession. The most negative thing Powell can do for gold prices is call for the need of aggressive rate hikes to combat inflation, while emphasizing any recession will be mild and the Fed can make sure there will be a soft-landing. The current reading from the FedWatch Tool indicates the same assessment with the chances of a 50-basis-point rate hike coming in at 49.5% and the odds of a 75-basis-point rate hike sitting at 50.5%. Traders just don’t know what the Fed will do on September 21, but they do have 28 days to figure it out before the Fed makes its determination of where interest rates should be. Before that, however, policymakers will have a chance to take a look at another U.S. Non-Farm Payrolls report and fresh U.S. consumer inflation data. As Powell will address a crowd of central bankers in Jackson Hole Symposium, a highly anticipated speech that could signal how high U.S. borrowing costs may go. The biggest concern for gold traders is that Powell not only delivers a hawkish message but also issues a recession warning. This would give investors two reasons to buy the U.S. Dollar. Some will buy the greenback because they are chasing the yields. Some will be attracted to its safe-haven appeal.Not only are higher Treasury yields making the dollar a more attractive investment, but increasing bets for a global recession are also driving up its safe-haven appeal. Global investors are seeking protection in the greenback for a number of reasons including Russia’s planned shutdown of a key pipeline that supplies natural gas to Germany, and China’s decision to slash its benchmark interest rate in order to stimulate a weakening economy.