Gold Technical Report: The gold prices seem to be coming out of bearish grip, after 5 weeks of underperformance. We may witness some fresh value buying supported by 1700 mark taking it towards 1800.However, since the 50 DMA trading below 200 DMA on daily charts keeps medium term still bearish. Any slippage down the nearest main bottom at $1676 will turn the Main trend negative. On the upside, the immediate resistance for main trend is the Psychological mark of 1800 which is also near 50 DMA. The Short term Stochastics Oscillator is overbought at 95 and RSI momentum is near 53.
Silver Technical Report: Silver prices bounced back strongly breaching 19.00 mark which was also a resistance as 20 DMA. We may expect fresh buying support emerging against profit booking here, heralding volatility in prices. Next major resistence will be faced only around 20.53 which is 50 DMA. The Short term Stochastics Oscillator is overbought at 98 and RSI momentum near 57.
Fundamental Report: Gold prices are edging higher on Thursday, but the buying is a little tentative as traders continue to digest yesterday’s comments from Federal Reserve Chairman Jerome Powell after the central bank lifted its benchmark interest rate 75-basis points as widely expected. Powell’s comments have been described as “dovish”, and the subsequent rally wasn’t actually fueled by new buying, but rather short-covering by traders who had bet on a bigger rate hike and a more hawkish tone from Powell. The lack of volatility and strong follow-through rally is also the result of a mixed-to-weaker U.S. Dollar and an overnight rise in U.S. Treasury yields.
The U.S. Federal Open Market Committee (FOMC) on Wednesday voted to raise the Fed’s overnight interest rate by 75-basis points for a second straight meeting to combat red-hot inflation. After the rate hike announcement, Fed Chairman Powell said in his press conference that another “unusually large” increase in interest rates may be appropriate at the September 21 meeting, but the decision will be determined by the incoming economic data and it would not give forward guidance. Powell also added, “I do not think the U.S. is currently in a recession and the reason is there are too many areas of the economy that are performing too well.” Although gold prices are likely to be manipulated mostly by the movement in Treasury yields and the U.S. Dollar until the Fed’s next rate decision on September 21, these two markets will be controlled mostly by expectations of the next rate hike. As of Wednesday’s close, the CMEGroup’s FedWatch Tool predicts a 66% chance of a 50% rate hike and a 34% chance of a 75% rate hike. Like Powell said in his press conference, the next move by the Fed will be data dependent. We can also say that about gold prices. We’re likely to see a few outlier moves in gold over the near-term, but the overall direction will be primarily driven by the expectations of the size of the next Fed rate hike. Today’s GDP report could move the market if it misses on either side of 0.4%. A strong number will give the Fed more room to hike rates, which would be bearish for gold. A weaker ready could extend the short-covering rally.