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 resumed the uptrend 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 1681 on Daily charts. The short-term Stochastics Oscillator is at 72 and the Relative Strength Index is at 48.
Silver Technical Report: The silver prices also posted a strong green candle last Friday to close the week in the footsteps of Gold. It continued the uptrend this week yesterday and 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 79 and the RSI momentum is near 53.
Fundamental Report: According to Reuters, “Gold prices rose to a two-week high on Wednesday as the dollar and U.S. bond yields slipped on expectations the Federal Reserve will temper its aggressive rate-hike stance starting December.” Once again we can see that while gold’s gains are respectable, they are based entirely upon dollar weakness. Furthermore, 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.
This clearly shows that market participants continue to have their primary focus on the pace and magnitude at which the Federal Reserve continues to raise interest rates. It is widely accepted that the Federal Reserve will raise rates by 75 basis points in November and for the most part, has already been factored into current market pricing. It is also widely believed that the Federal Reserve will continue to raise rates at the December FOMC meeting. According to the FedWatch tool, there is a 55% probability that the Federal Reserve will raise rates to between 425 and 450 basis points and a 37.7% probability that they will raise rates to between 450 and 475 basis points in December.