Gold Technical Report: The gold prices continued the last week’s trend downwards and 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 1714 on daily charts. The Short term Stochastics Oscillator is at 14 and the Relative Strength Index is at 46.
Silver Technical Report: The silver prices witnessed selling pressure last week. The prices are currently hovering around 50 DMA which is at 19.34. However, if the prices break this level, the next major support is only at 18.66, it will change the medium-term trend into negative. On the upside, crossing of 200 DMA at 21.80 will change the main trend to positive. The Short term Stochastics Oscillator is at 5 and the RSI momentum is near 45.
Fundamental Report: The primary driver influencing pricing on multiple asset classes including gold is the fact that inflation remains persistent at a 40-year high. The circumstances that brought the global economy to its knees during the beginning of 2020 was a black swan event. It began as a global pandemic that effectively shut down the world’s economy and led to a major global recession. By definition, a black swan event is an unpredictable event that is beyond what is normally expected and has potentially severe consequences. However, the actions following the event specifically by central banks and the Federal Reserve absolutely had a predictable effect and outcome. While the Federal Reserve could not control what happened, its actions and policies exacerbated the problem. They created an environment that let us get to a level of inflation not seen in 40 years. The current level of inflation is so high that 30% of the world’s population (those 40 years are under) have never witnessed a diminished purchasing power of their wages to this extent. Currently, inflation has affected the entire global economy with the Consumer Price Index in the United States at 8.3%, and in the Eurozone at 10%.
Today the Federal Reserve released the minutes from last month’s FOMC meeting revealing the obvious; inflation is not falling as fast as they had expected. The minutes highlighted their concern that the current level of high inflation is unacceptable making their current aggressive monetary policy the best strategy which will contain less risk to the economy than doing too little. “A sizable portion of the economic activity has yet to display much response,” the Fed minutes said. “Inflation had not yet responded appreciably to a policy tightening.” Where were the minds of these economic geniuses running the Federal Reserve when they let interest rates get out of control beginning in the middle of 2020? Inflation was steadily rising for some time hitting 8.5% when the Fed initiated its first interest rate hike in March 2022 of only ¼%. In other words, the black swan event that led the world into a global crisis and recession were unavoidable. However, the high inflation that followed was. Had the Federal Reserve acted sooner with small incremental interest rate hikes in 2021 inflation would certainly not be as high as currently stand. Now the Federal Reserve is in a reactive posture and could easily make the same mistake by raising rates too quickly now.