Gold Technical Report: Gold prices played rangebound with an upward bias after recording an intraday high of the last 6 months this earlier this week. The yellow metal is still respecting the support at 200 DMA at 1780. The rally may continue as it strides the important psychological 1800 mark and this weekly close will be important on charts, for being the final trading week of the year amidst the thin trading due to the festive season. The Medium-term support stands at 50 DMA @1745 below which the trend may turn bearish. The short-term Stochastics Oscillator is at 54 and the Relative Strength Index is at 59.
Silver Technical Report: The silver prices, parallel with gold prices played rangebound with an upward bias yesterday. The medium-term trend looks up as the prices continue to trade above 200 DMA @21.10. As 50 DMA @21.78 has crossed above 200 DMA on daily charts, further fire-up in the rally is expected. However, some technical selloff can be expected on yearend profit booking. The Short term Stochastics Oscillator is at 46 and the RSI momentum is near 60.
Fundamental Report: Gold prices are set to finish at approximately similar levels for the year as prices remained under pressure in the second half of 2022 due to aggressive interest rate hikes and monetary tightening by central banks around the world, putting a lid on price gains. Gold prices after recording a matching all-time high of $2,070 an ounce in March 2022 ( with earlier August 2020), on the back of a geopolitical crisis, have steadily declined amid rallies in the haven US Dollar and bond yields due to hawkish monetary policy from US Fed. Rising interest rates are typically an obstacle for gold investors as it is considered a non-yielding asset. Also, the speculators and ETFs remained net sellers for the year which weighed on the yellow metal. The demand-side improvement in the last quarter of 2022 supports gold prices recovery from the loss of a healthy demand seen in Asian Countries, and stronger consumer and central bank buying helped year-to-date demand recover to pre-COVID level.
Gold prices posted a positive return in the first quarter of 2022 as prices rose on the back of tensions culminating in Russia’s invasion of Ukraine and geopolitics taking center stage. In a situation like a geopolitical crisis, investors move to safe-haven assets like gold. However, gold prices gradually declined after the first quarter as eased geopolitical tension and a rally in the US dollar and Bond yields dampen the sentiments. The US dollar index hit a 20-year-high amid hawkish US Fed bets and is set to close up by 8% YTD. The US Federal Reserve’s most aggressive rate hikes in 40 years to curb inflation growing at a similar pace has enabled US Treasury yields to rally with little stop since the start of the year. The US 10-Year bond yield hit a high of 4.33% in October 2022 and is set to close up by 128% YTD. Global gold ETF registered a seventh consecutive monthly outflow this year and year-to-date, global gold ETFs have now seen 83 tonnes of net outflow.
The global economy is at an inflexion point after being hit by various shocks over the past year. The biggest was induced by central banks as they stepped up their aggressive fight against inflation and it will likely continue for the first half of next year but at a slower pace which is supporting gold prices. After strengthening for nearly two years straight, the US dollar has recently seen a steep drop, which is favourable to gold prices. Technically, Dollar and US bond yield is topped out and the correction trend will continue in both.