Kinesis Money Macroeconomic Analysis
The gold price is typically hedging down whenever the US Dollar is strengthening. Similarly, if the greenback is weakening, there are good chances of seeing bullion rebounding.
Long story short: gold has an inverse relationship with the U.S. Dollar. It is not always the case, but from a statistical perspective, gold and dollar are, more often than not, inversely related. Because bullion is priced in the US Dollar, whenever American currency is getting stronger, gold generally starts appearing less convenient for buyers from outside the United States.
This is exactly what we have seen yesterday, with the Dollar Index jumping to a 3-week-high, while gold lost $40, more than 2% of its overall value, while silver declined sharply, surpassing 5%.
The fall in other currencies (as in the Euro or the British pound examples) was slightly lower, as it was mitigated by the exchange rate.
The reason behind the dollar appreciation can be found in the U.S. labour data. Indeed, the U.S. government announced the continuing jobless claims down to 2.67 million (from 2.85 million).
On top of this, the Philadelphia Fed Manufacturing Index has risen to 30.7 points, strongly above analysts’ forecast of 18.8. This data is adding pressure on the Federal Reserve, meeting on the 21-22 September to decide next steps of monetary policies. Higher chances of a sooner-than-expected tapering are of course a supportive market driver for the USD.
Kinesis Money Gold Analysis
Bullion has lost the support zone of $1,790, falling down to $1,750 in a couple of hours.
This decline worsened both the technical and graphical pictures, as investors are concerned about the upcoming tapering.
Despite this, Friday started in green, with an interesting rebound to $1,765, confirming that the price has found a new support zone at $1,750. In case of further declines, the next support zone is placed at $1,727 – 1,730.
The bottom reached in August at $1,676 is still $90 below the current prices.
Kinesis Money Silver Analysis
The silver decline was even sharper than the gold decline, confirming the weakness observed over the past two months. The precious metal’s price lost over 5% in yesterday’s trading session, falling below $23.
After a low in the region of $22.6, silver is now trying to recover to $23. Despite this modest rebound, the majority of technical indicators are still showing some fragility.
Despite that, in the medium – long term fundamental basis appears much more solid, both from industry and jewellery.
Carlo Alberto De Casa is Market Analyst for Kinesis Money.
He also writes as a technical analyst for the Italian newspaper La Stampa.
Carlo Alberto provides regular commentary for UK outlets including the BBC, Telegraph, the Independent Bloomberg & Reuters. He is also a commentator for CNBC Italy. He worked for Bloomberg as their Equity Research Fundamental Analyst before joining brokerage ActivTrades in 2011 to specialize in currency markets and commodities. In 2014 he published a book on gold and the gold market, followed by a new updated edition in 2018.
This report is not an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of future performance.
