Gold Technical Report: Gold prices, opned near the close and high of the earlier trading session but retraced back as it faced profit booking after the rally of earlier 3 consecutive days. Gold has recovered almost 100 USD in those 3 trading sessions and also posted a 3 white soldiers pattern on daily charts. It still has a support near 50 Day Moving Average (DMA) @ 1874. Since both 10 DMA @ 1857 and 50 DMA are trading over 200 DMA @ 1776, 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 90 (it is considered overbought when above 80 and oversold when below 20) and Relative Strength Index (RSI) is at 61 (it is considered overbought when above 70 and oversold when below 30) .
Silver Technical Report: The silver prices remained rangebound with negative bias after it had moved up and forcefully crossed above 200 DMA@ 20.89 day beore yesterday. The medium term trend can be considered up only if the prices move above 100 DMA @ 22.16. The Short term Stochastics Oscillator is at 74 and Relative Strength Index near 53.
Fundamental Report: Gold reacts as US inflation continues to slowly dissipate from 6.4% year-over-year in January to 6% in February. Core inflation also remains elevated coming in at 5.5% year-over-year compared to 5.6% in January. Housing which includes mortgages and rentals composed the largest category and accounted for more than 70% of last month’s increase in the CPI. The repercussions of CPI report are that the Federal Reserve is likely to raise their terminal rate by ¼% at the next FOMC meeting (March 21 – 22). According to the CME’s FedWatch tool, the probability of a 25-bps rate hike is 81.9% and the probability that the Fed will not raise rates is 18.1%. It is noteworthy that according to the FedWatch tool, the probability that the Fed will not raise rates at its next meeting was 35% yesterday versus 0% one week and one month ago. The Federal Reserve has been caught between a rock and a hard place attempting to raise rates enough which intrinsically results in a contracting economy to lessen the current level of inflation but not too much to result in a recession. It seems more and more unlikely that the Federal Reserve will be able to pull off a “soft landing”. The banking crisis that was reported this weekend further exacerbates the ability of the Fed to reduce inflation and not lead the country into a recession. Continued rate hikes by the Federal Reserve create bearish market sentiment for gold prices because gold does not yield interest. However, higher inflation has the opposite effect creating bullish market sentiment for gold. Collectively these two forces work against each other with elevated inflation pushing prices higher and rising interest rates pulling prices lower. That being said, gold prices were able to hold near the key psychological level of $1900 per ounce.