Kinesis Money Macroeconomic Analysis
Yesterday, Jerome Powell appeared at the Senate for his re-nomination, as his second term mandate begins. In the hearing, he confirmed that the high rate of inflation was seen as a threat by the Federal Reserve, stating that the US central bank plans to raise interest rates this year in an attempt to run down its trillionaire balance sheet.
It seems that the markets were already well aware of the inflation risk, especially after the minutes from the FOMC meeting last December were released. Powell was calm while stating that the Federal Reserve is expecting month-over-month inflation to be moderate in the months ahead. That being said, the year-over-year inflation figures could be on the way to reaching a historical average in the second part of 2022, after the recent rally in which a three-decade-high was reached.
After a series of hawkish interventions, yesterday's speech was, in fact, interpreted as slightly more on the dovish side. Although, the Fed remains on track for (at least) 3 rate hikes in 2022. The markets are currently pricing 3 rate increases with certainty, with the anticipation of an additional fourth hike (25 basis points) in December 2022.
Overall, the market reaction was positive, with stock indices closing the day positively and Europe opening in green this morning. However, the US dollar has slowed its upwards climb, while the 10-year treasuries yields remained above 1.70%.
The focus is now moving to US inflation data (to be released at 14:30 CET), as a continuation of the price rally which could influence the Fed’s upcoming decisions.
Kinesis Money Gold Analysis
Following Jerome Powell’s intervention with the Senate, the gold price rebounded to reach a one-week-high. Despite the markets’ expectation that interest rates will rise significantly in the next few months, investors are showing a significant interest in gold.
Bullion jumped to $1,820 and is now just a dozen dollars off the resistance level placed at $1,830-$1,832. A clear surpass of this threshold would open space for new recoveries, while a signal of weakness would be evident with a decline to $1,800.
Today's main catalyst is likely to be the release of US inflation data. Any figures below expectations, could curb the dollar's rebound and help gold continue on its path to recovery.
Kinesis Money Silver Analysis
Today, silver is now consolidating the recovery it has undergone over the last few days. The price seems to be stabilising between $22 and $23, while the risk zones of $22 and $21.5 are well out of reach. A surpass of $23 would certainly be a positive signal for silver, while the price currently remains in its consolidation phase.
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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.