Gold Technical Report: Gold medium term trend is looking bearish on posting 3 consecutive red candles on daily chart. Any slippage down the nearest main bottom at $1786 will reaffirm the downtrend. On the upside, the immediate resistance is the 200 DMA at 1844 and then 50 DMA zone at $1851. A trade through $1851 will change the main trend to up. Short term Stochastics Oscillator is oversold at 14 and RSI momentum is flat but poised just below midline at 42.
Silver Technical Report: Silver medium term trend is flat to bearish. Further slippage down the main bottom at $ 20.00 will reaffirm the downtrend. On the upside, the immediate resistance is the 20 DMA zone at $21.45. A trade through 50 DMA $22.00 will change the main trend to up. Short term Stochastics Oscillator is oversold at 18.
Fundamental Report: The Gold futures are drifting lower for a third straight session on Wednesday amid relatively light volume as traders weighed the prospects of higher interest rates against the potential for recession risks. The price action suggests traders are waiting for more economic data to confirm either result. Without fresh economic data, traders have to rely on benchmarks such as Treasury yields and the U.S. Dollar. Early in the session, capping gains are a stronger U.S. Dollar. However, limiting losses was a dip in U.S. Treasury yields. At 09:17 GMT, August Comex gold futures are trading $1818.60, down $2.60 or -0.14%. The SPDR Gold Shares ETF (GLD) settled at $169.63, down $0.27 or -0.16%
Expectations of aggressive interest rate hikes, especially by the U.S. Federal Reserve, are helping to cap demand for gold. Rising yields increase the opportunity cost of holding non-yielding gold, making bullion a less-attractive investment. However, inflation continues to far exceed the FOMC’s 2% target with the May CPI report indicating hotter than expected inflation despite hopes by the Federal Reserve that it would moderate. He concluded the following; first, the Federal Reserve could push the economy into a recession if it over-tightens in response to supply-driven inflation. Secondly, heightened geopolitical tensions with Russia could result in continued energy shortages, low consumer confidence, and dampening growth. Lastly, he concluded that markets may remain depressed and volatile until investors receive clarity on inflation and the Fed. ECB President Christine Lagarde spoke and the Euro fell, boosting the dollar index, and capping gold prices. The Euro fell below $1.06 as Lagarde offered no fresh insight on the central bank’s policy outlook. With the market already pricing in rate hikes in July and September, Lagarde said the central bank would move gradually but with the option to act decisively on any deterioration in medium-term inflation, especially if there were signs of a de-anchoring of inflation expectations. More importantly, Lagarde played down recession risks, which is probably the statement putting the most pressure on gold’s advancement. “We have markedly revised down our forecasts for growth in the next two years. But we are still expecting positive growth rates due to the domestic buffers against the loss of growth momentum,” Lagarde said Tuesday at the Sintra Forum.
In other news, gold traders showed little response to a U.S. consumer confidence report on Tuesday that fell sharply in June as worries about high inflation left consumers anticipating economic growth would weaken significantly in the second half of the year. The Conference Board said on Tuesday its consumer confidence index dropped 4.5 points to a reading of 98.7 this month. Later today at 12:30 GMT, the U.S. will release Final GDP figures for the first quarter. It is expected to show a 1.5% decline. This would match the preliminary estimate. Final GDP is always tricky because the data is 90 days old. Traders are already looking at 2nd quarter data. Fed Chair Powell is also scheduled to speak at 13:00 GMT. If he talks about monetary policy, he’s expected to reiterate that the Fed is committed to driving down inflation.