Gold Technical Report: Gold medium term trend is looking flat to bullish. Any slippage down the nearest main bottom at $1786 will reaffirm the downtrend. On the upside, the immediate resistance is the 200 DMA at 1842 and then 50 DMA zone at $1856. A trade through $1856 will change the main trend to up. Short term Stochastics Oscillator is oversold at 14 and RSI momentum is flat but poised just below midline at 43.
Silver Technical Report: Silver medium term trend is flat. Further slippage down the main bottom at $ 20.00 will reaffirm the downtrend. On the upside, the immediate resistance is the 20 DMA zone at $21.50. A trade through 50 DMA $22.00 will change the main trend to up. Short term Stochastics Oscillator is flat at 31.3.
Fundamental Report: The Gold prices are trading steady on Tuesday after giving back most of its earlier gains. Putting a lid on prices are rising U.S. Treasury yields, while a sideways-to-lower U.S. Dollar is helping to underpin prices. The price action suggests some traders are still weighing the possibility of an aggressive Federal Reserve against the odds of a recession. Others are focusing on the ECB central bankers’ forum in Portugal that could influence the Euro and consequently the strength of the U.S. Dollar Index. At 12:03 GMT, August Comex gold futures are trading $1826.20, up $1.40 or +0.08%. On Monday, the SPDR Gold Shares ETF (GLD) settled at $169.90, down $0.19 or -0.11%. Treasury yields are looking up as market players assessed the prospect of central banks implementing more interest rate hikes to curb soaring inflation. Additionally, investors are watching for any signs of future policy moves as central bank heads, including ECB President Christine Lagarde and Fed Chair Jerome Powell, attend the annual forum in Sintra. In other news, traders downplayed the news that Britain, the United States, Japan and Canada were planning to ban imports of Russian gold.
Expectations of aggressive interest rate hikes, especially by the U.S. Federal Reserve, are helping to cap demand for gold. Rising yields increase the opportunity cost of holding non-yielding gold, making bullion a less-attractive investment.On Wednesday the Bureau of Economic Analysis (BEA) will release its latest numbers on real GDP which will be followed on Thursday by the PCE for May 2022. Concerns over a potential recession which will either be confirmed or negated by Wednesday’s GDP report. According to a report by Dr. David Kelly, Chief Global Strategist at J.P. Morgan asset management, “1Q22 Real GDP showed the economy contracted at a 1.5% annual rate in 1Q22, a deceleration from the boomy 4Q21. Weakness was primarily led by volatile trade and inventory data. Trade subtracted 3.2% from overall GDP growth as exports fell sharply and imports soared.” The report also said that first-quarter 2022 earnings have held up better than expected. However, inflation continues to far exceed the FOMC’s 2% target with the May CPI report indicating hotter than expected inflation despite hopes by the Federal Reserve that it would moderate. He concluded the following; first, the Federal Reserve could push the economy into a recession if it over-tightens in response to supply-driven inflation. Secondly, heightened geopolitical tensions with Russia could result in continued energy shortages, low consumer confidence, and dampening growth. Lastly, he concluded that markets may remain depressed and volatile until investors receive clarity on inflation and the Fed. The other key report which will be released on Thursday is the PCE price index for May. The PCE for April revealed a slight uptick in core inflation increasing by 0.2% month over month. However. This was a decrease from the increase in March which came in at a 0.9% increase in MoM. Although we will have to wait until Thursday for the official PCE price index from the BEA, last week they reported that “The U.S. current-account deficit widened by $66.6 billion, or 29.6 percent, to $291.4 billion in the first quarter of 2022, according to statistics released today by the U.S. Bureau of Economic Analysis. The revised fourth-quarter deficit was $224.8 billion. The first-quarter deficit was 4.8 percent of current-dollar gross domestic product, up from 3.7 percent in the fourth quarter.”
ECB President Christine Lagarde spoke and the Euro fell, boosting the dollar index, and capping gold prices. The Euro fell below $1.06 as Lagarde offered no fresh insight on the central bank’s policy outlook. With the market already pricing in rate hikes in July and September, Lagarde said the central bank would move gradually but with the option to act decisively on any deterioration in medium-term inflation, especially if there were signs of a de-anchoring of inflation expectations. More importantly, Lagarde played down recession risks, which is probably the statement putting the most pressure on gold’s advancement. “We have markedly revised down our forecasts for growth in the next two years. But we are still expecting positive growth rates due to the domestic buffers against the loss of growth momentum,” Lagarde said Tuesday at the Sintra Forum.