Daily Report – 26 October 2022

26 October 2022
OTC Market Data
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Gold Technical Report: The gold recorded a very strong closing last Friday, to end the week with a strong Green candle. However, it witnessed some profit booking to start the week and posted a DOJI candle yesterday. They have also witnessed the downfall earlier for the last 2 weeks. If prices do break above the main level of $1680, the medium-term trend will turn positive. The upside resistance is at  50 DMA near 1689 on Daily charts. The short-term Stochastics Oscillator is 65 and the Relative Strength Index is 46.

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Silver Technical Report: The silver prices also posted a strong green candle last Friday to close the week in the footsteps of Gold. However, it witnessed some profit booking yesterday but closed above 50 DMA at 19.08. On the downside, major support is only at 18.00, crossing below which will change the medium-term trend into negative. On the upside, a crossing of 200 DMA at 21.62 will change the main trend to positive. The Short term Stochastics Oscillator is at 74 and the RSI momentum is near 52.

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Fundamental Report: On top of today’s weak U.S. dollar which has added significant value to gold, the world is facing an escalating level of geopolitical uncertainty in both North Korea as well as the war in Ukraine. On Tuesday the President of South Korea Yoon Suk-Yeol said that North Korea has completed its initial preparations for its seventh nuclear test. As reported by Bloomberg News the president of South Korea told his Parliament on Tuesday, “We assess that it has already completed preparations for a seventh nuclear test”. The threat of nuclear tests by North Korea is only part of a much more complex geopolitical framework. The article in Bloomberg News articulated the complexities of the current geopolitical environment saying, “The US push to isolate Russia over Vladimir Putin’s war in Ukraine, coupled with increasing animosity toward China, has allowed Kim to strengthen his nuclear deterrent without fear of facing more sanctions at the UN Security Council”.

There are also reports that Russia is planning a false flag attack. On Monday Putin and the Kremlin claimed that Ukraine was planning to use a radioactive “dirty bomb” against Russian forces. Putin has used “false flags” before as a rationale to escalate Russia’s military operations. This has raised concern that the Russian president is creating a narrative in which he will escalate the war in Ukraine to include tactical nuclear weapons or a dirty bomb to preempt Ukraine from using a “dirty bomb”. On Tuesday Air Force Brigadier General Patrick Ryder said, “From a US standpoint, the allegations that Ukraine is building a dirty bomb are false.” Today President Biden said that Russia would be making a “serious mistake” by launching a “false flag” nuclear attack in Ukraine and that it’s unclear if such an operation was underway.

The increased geopolitical uncertainty and recent dollar weakness that gold would have strong gains. However, With today’s backdrop of extreme dollar weakness giving up more than 1%. As well as an extreme escalation of geopolitical uncertainty from North Korea and the fact that gold is only up $3 clearly illustrate that gold is currently not reacting as a safe haven asset. The recent bearish market sentiment in gold has been the direct result of market participants having genuine concern about upcoming rate hikes of 75 basis points at the final two FOMC meetings this year in November and December. Comments made by multiple Federal Reserve officials have underscored their intent and focus on lowering inflation by raising interest rates. In an exclusive interview with Kathleen Hays of Bloomberg News today Federal Reserve Bank of St. Louis President James Bullard reinforced the resolve of the Federal Reserve to continue their aggressive rate hikes to curb high inflation. Amongst Federal Reserve officials James Bullard is considered to be one of the most hawkish officials. He was the first Federal Reserve President to publicly suggest rate hikes of 75 basis points. In the interview, he said that the CPI core rose to 6.6% in September year over year, which continues to be a worrisome pattern. These statements reinforced that the market sentiment yields in government debt will continue to rise.

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