Gold Technical Report: The gold prices continue the downfall in the last 2 weeks and also crossed below 1680 support. If prices do not quickly come off the main level of $1680, the medium-term trend may turn negative. The upside resistance is at 50 DMA near 1708 on daily charts. The Short term Stochastics Oscillator is at 21 and the Relative Strength Index is at 40.
Silver Technical Report: The silver prices witnessed selling pressure last week and also looked weak after crossing the 50 DMA which is at 19.30. However, if the prices break this level, the next major support is only at 18.00, crossing below which will change the medium-term trend into negative. On upside, crossing of 200 DMA at 21.80 will change the main trend to positive. The Short term Stochastics Oscillator is at 10 and the RSI momentum is near 40.
Fundamental Report: After a few days of consolidation, gold prices took a hit on Thursday and Friday after U.S. economic data cemented the chances of a super-sized rate hike by the Federal Reserve at its November 1-2 monetary policy meeting. Data released by the U.S. Labor Department on Thursday showed consumer prices in the U.S. rose by more than expected in September, raising concerns about the outlook for interest rates. The data showed the Consumer Price Index (CPI) rose by 0.4% in September after inching up by 0.1% in August. Economists had expected consumer prices to edge up by 0.2%. Economic news released on Friday also triggered a steep break in gold prices. A report from the University of Michigan showed a rebound in inflation expectations in October. One-year inflation expectations climbed to 5.1% in October after dropping to a one-year low of 4.7% in September, while five-year inflation expectations increased to 2.9% in October after falling to 2.7% in September.
As of Friday’s close, the market had priced in nearly a 100% chance of another 75-basis point rate hike in November. On Thursday, the market had also priced in an 11.3% probability that the Fed would raise rates by a supersized 100 basis points when policymakers announce their rate hike decision on November 2. However, those odds fell to 0% by Friday’s close. The most bearish indicator for gold prices is the jump in the Fed’s terminal rate or the level at which the market expects rates to the peak. As of the Fed’s last meeting in late September, the terminal rate was sitting at about 3%-3.25% from near zero in March. As of Friday’s close, money markets now see the Fed Funds rate at 4.95% in March 2023. That’s enough to keep a cap on gold prices and send it sharply lower over the near term.