Gold Technical Report: Gold prices retraced yesterday after a red DOJI, a day before. After crossing above the 200 DMA at 1786 and the crucial 1800 mark early this week, the rally was looking promising but fizzled out on profit booking. The Medium term support stands at 50 DMA @1719 below which the trend may turn bearish. The short-term Stochastics Oscillator is at 25 and the Relative Strength Index is at 54.
Silver Technical Report: The silver prices, parallel to gold prices witnessed a big correction yesterday. The prices continue to trade above 200 DMA @21.18. On the downside, major support is only at 50 DMA @20.88, crossing below which may change the medium-term trend into negative. The Short term Stochastics Oscillator is at 39 and the RSI momentum is near 58.
Fundamental Report: Data released on Thursday showed a larger-than-expected decline in retail sales during November. The sales in categories more reliant on credit started to turn and holiday sales categories flopped. While they expect spending to contract in 2023, it’s too soon to call this the start of a sustained decline in goods spending. Retail Sales in the United States declined by 0.6% every month to $689.4 billion in November. This reading followed October’s 1.3% increase and came in worse than the market expectation for a contraction of 0.1%. “Total sales for September 2022 through November 2022 period were up 7.7% from the same period a year ago,” the publication read. “Retail trade sales were down 0.8% from October 2022, but up 5.4% above last year.”
Chairman Jerome Powell did not mince words this week delivering an exceedingly tough and hawkish written statement as well as responses to reporter’s questions. The reaction to all of the hawkish information provided by the Federal Reserve was tepid at best. The Fed announced its decision to raise its benchmark rate by 50 bps. This takes the central bank’s “Fed funds” rate to between 425 – 450 bps (4 ¼% – 4 ½%). When you combine the exceedingly hawkish demeanor of the Federal Reserve’s monetary policy with the recent reports indicating strong economic contractions it raises the probability of a hard-hitting recession next year or at the beginning of 2023. Investors who participate in gold are reacting to elevated and sustained higher rates next year which creates bearish market sentiment, if the Federal Reserve’s actions lead to a recession that market sentiment will pivot because gold typically moves higher in a recession.