Gold Technical Report: Gold prices declined further yesterday to close below 10 DMA @ 2021. The selloff started last week when the new highs around 2080 attracted profit booking. Both 10 DMA and 50 DMA @ 1976 are trading above 200 DMA @ 1820 hence, the medium term trend looks upwards. The major support stands at 200 DMA below which the trend may turn bearish. The short term Stochastics Oscillator is at 34 (it is considered overbought when above 80 and oversold when below 20) and Relative Strength Index (RSI) is at 51 (it is considered overbought when above 70 and oversold when below 30) .
Silver Technical Report: The silver prices witnessed heavy profit booking yesterday, as short term mood has turned bearish after Friday’s selloff. It has a strong support near the common region around 23.84/23.36 of 50 DMA and 100 DMA respectively. The medium term trend looks bullish as both of these averages above 200 DMA @ 21.79. The Short term Stochastics Oscillator is at 25 and Relative Strength Index near 38.
Fundamental Report: The Producer Price Index (PPI) for final demand in the US rose 2.3% on a yearly basis in April, down from the 2.7% increase recorded in March, the data published by the US Bureau of Labor Statistics revealed on Thursday. This reading came in lower than the market expectation of 2.4%. The annual Core PPI increased 3.2% in the same period, compared to the market expectation of 3.3%. On a monthly basis, the PPI and the Core PPI both came in at +0.2%. On Wednesday, CPI data was out. Headline inflation came out at 4.9% y/y, while core inflation printed at 5.5% y/y. On a monthly basis, both headline and core inflation were at 0.4%. Markets are not sure whether inflation is weak enough to push the Fed into cutting interest rates. They are waiting for more clarity on the U.S. Federal Reserve’s monetary policy before taking any major positions.
There’s a possibility that the Federal Reserve will put the interest rate hike on hold next month, as markets indicate a high chance of rates remaining unchanged. New York Fed President John Williams mentioned the potential for further rate increases if inflationary pressures persist. Also, another major catalysts for higher Gold prices this month is unquestionably the looming risks of a U.S debt default. Right now, the U.S is $31.4 trillion in debt. This staggering amount is in the spotlight because the U.S government will not be able to pay its bills if Congress cannot agree to raise the debt ceiling by June 1. According to U.S Treasury secretary Janet Yellen “the impact of a U.S debt default on the global economy could rival the 2008 financial crash”. U.S. President Joe Biden emphasized the urgency of addressing the debt ceiling, as failure to do so could result in a recession. The debt ceiling issue has provided stability to gold prices, but the response to a potential ceiling increase while the Federal Reserve is on pause and weak U.S. economic data is sought remains uncertain.