Gold & Silver Market Analysis for Friday 17th December

Macroeconomic Analysis

Just 6 weeks after the official tapering announcement, the Federal Reserve decided to accelerate the process. The U.S. Central bank is scaling back $30 billion a month instead of the originally announced $15 billion. Therefore, bond purchases will end in Q1 2022 instead of mid-year, as announced in November.

After many extremely dovish years, the Fed changed its clothes and became hawkish. This happened with some notice, but this meeting signalled a strong acceleration of the tapering process and changed expectations for hike rates in 2022 (which should now be 3 instead of 1). 

Despite this, markets reacted positively. Differently from 2013, we have not seen any taper tantrums (chaotic reactions on the markets). Quite the opposite, after a few minutes of indecisiveness, stock indices started to recover and moved in green. A similar scenario was seen on both gold and silver as well as in WTI and Brent.

Even the hawkish decisions of the Bank of England, with a rate hike from 0.10% to 0.25% did not change the cards. The bullish scenario on stocks is less strong than a few months ago but remains intact. Investors are still buying the dips, despite new Covid-19 variants continuously emerging and new lockdowns just around the corner. We don’t know how long this situation will last, but for the time being, this is still the main rule.

Kinesis Money Gold Analysis

A large majority of investors and analysts would have bet that after such a hawkish FOMC’s meeting gold was buried. And they would have been terribly wrong. After having declined on Wednesday to $1,760, bullion strongly rebounded to the key resistance level of $1,800. This threshold has been surpassed in the last few hours, with a new positive impulse. 

Technically, gold is regaining momentum, helped by the stabilization of the U.S. 10-year Treasury yields (below 1.50%), while the greenback lost grain, with the dollar index which has moderately slowed down to 96 points.

Closing the week above $1,800 would represent a signal of strength for bullion, which – surprisingly – is on a track for the positive week, after one of the most hawkish FOMC meetings of the last few years.

Kinesis Money Silver Analysis

There is a big question mark pending on silver. Have the last 48 hours marked a significant inversion signal for the grey metal or we are only seeing a temporary rebound? It is probably too early to say it, but the strength of the rebound was significant and silver clearly overperformed gold.

For calling this movement a proper inversion, we should wait for a clear surpass of the resistance zone of $23. It is remarkable that silver, once again, found solid support at $21.5, recovering first $22 and continuing the rebound to $22.5, profiting from markets’ positive momentum.

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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.