Today’s report offers a comprehensive examination of the gold and silver markets, delving into the fundamental and technical factors shaping current trends. Our goal is to provide investors with the insights necessary to navigate these markets effectively.
Anticipation of a hawkish stance from the U.S. Federal Reserve (Fed) in its upcoming meeting has propelled the U.S. Dollar and Treasury bond yields higher, leading to a corrective decline in gold prices from multi-month highs. Market participants expect the Fed to signal a pause in January following a projected 25 basis points (bps) rate cut during the December 17-18 policy meeting. This expectation is bolstered by stronger-than-expected U.S. Producer Price Index (PPI) data, which showed a 3.0% year-over-year increase in November, surpassing the anticipated 2.6% growth. The core PPI also rose by 3.4%, exceeding the forecasted 3.2%. Monthly figures indicated a 0.4% rise in PPI and a 0.2% increase in core PPI. Currently, markets are fully pricing in a 25 bps rate cut by the Fed next week, as reflected in the CME Group’s FedWatch Tool.
On Thursday, gold prices encountered resistance at higher levels, prompting a decline toward the 50-day Moving Average (MA) at $2,670 early Friday. A daily close below this level could lead sellers to target the 21-day MA at $2,652. The critical support for gold buyers is the psychological $2,600 mark. The 14-day Relative Strength Index (RSI) remains above 50, indicating potential for recovery. Should the upward momentum resume, gold prices may retest $2,726, with subsequent resistance at $2,712. The Stochastics Oscillator stands at 70, and the RSI is at 54.
Silver is experiencing significant pressure as the gold/silver ratio climbs above 86.50. A weekly close below the $31.00 level could drive silver toward $30.06. Conversely, a move above $31.33 would open the path to test the $31.66 – $32.20 support range. The short-term Stochastics Oscillator is at 48, and the RSI is at 44.
In the dynamic and complex bullion markets, staying informed through both technical and fundamental analysis is essential for making well-founded investment decisions. This report aims to provide a balanced perspective to assist investors in navigating the intricacies of gold and silver trading.