Macroeconomic Analysis
The long wait is over. Today, the FOMC meeting draws to a close, resulting in investors learning whether or not the Federal Reserve is willing to increase the pace of the tapering.
The US central bank is now reducing its purchase of bonds, currently at $15bn per month. This figure might potentially increase to $20bn, while a jump to $25bn – however unlikely – could negatively impact the markets.
What is the current scenario? The rhetoric displayed in Powell’s last speech to the US Senate, certified fears surrounding rising inflation. The markets are predicting that the FOMC will take a hawkish stance, which was earlier confirmed by the recovery of the greenback. In addition, this stance was further confirmed by the fall of the EUR/USD trading pair, which dipped below 1.13, to 1.127.
The question is: how hawkish will Powell be? When should investors expect the first rate hike from the Federal Reserve?
Many questions still remain. It should be noted that, in this scenario, the evolution of the pandemic – with the new Omicron variant – and further lockdowns, still appears as relatively secondary. Investors are mostly focusing their attention on the upcoming decision to be made by the Federal Reserve.
Kinesis Money Gold Analysis
Gold: double or quits? Here we are, once again.
The bullion price languished over the past 2 weeks within the channel of $1,760 and $1,800 – showing little volatility. The decision-making of the Federal Open Market Committee is expected to be a significant catalyst, giving a clearer directionality to the gold price.
It could put an end to this unnerving lateral trading range, which has presented investors with some interesting trading opportunities over the last few days.
The key levels remain unchanged. A clear surpass of $1,800 would denote a recovery of positive momentum, while a fall below $1,760 could confirm investors’ anxiety around the hawkish mode of the FOMC.
In the last 24 hours, bullion has retreated, falling below $1,770. This can be attributed to the USD rebound, as investors are now pricing increased chances of a hawkish decision from the Fed. However, this will only be confirmed with an official decision from the FOMC.
Kinesis Money Silver Analysis
Silver remains traded below $22, hit by the recovery of the US dollar, which is exacerbating the bearish scenario at present. Indeed, silver is now down 12%, in comparison with just a month prior and 17% YTD, failing to show any concrete rebound signal.
Despite this, it is unlikely that the supply of the precious metal will increase significantly. The main trend remains weak, with a first support zone placed at $21.5, while a positive signal will become apparent with a return of the spot price above $23.
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Carlo Alberto De Casa is an external 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.
