Kinesis Money Macroeconomic Analysis
The middle of this week, the 22nd of September is a date marked in bright colour on the investor’s calendar. The 2-day-meeting held by the Federal Market Open Committee (FOMC) – which has the duty of controlling the monetary tools of the Federal Reserve – will end on Wednesday evening.
The solid U.S. macroeconomic data of the last few weeks added pressure on the Fed and induced some restrictive actions. In late August Jerome Powell announced that tapering (the procedure of reducing liquidity in the system) will most likely begin before the end of this year. The main question is; how close are we are from the tapering start?
Over the past few days, we have seen a recovery of the U.S dollar. Was this reaction based on the correct expectation of some imminent, hawkish Fed’s decision? Or, contrarily, will the Fed postpone the tapering once again? The second option still seems quite likely. In this case, the sharp decline shown by gold and silver could probably be seen as an overreaction of the financial markets, opening space for some consolidation or rebounds.
Kinesis Money Gold Analysis
The gold price is holding above the support zone of $1,750, after having lost the key level of $1,790 on Thursday. Gold has tried to rebound on Friday, jumping even above $1,765, but the strength of the greenback, combined with expectations of the Fed’s hawkish statement, have been a bearish catalyst. To summarise: the recovery of the precious metal did not manage to hold and we have seen a new decline in the last trading hours of Friday, with the price testing the $1,750 zone, again.
The sellers’ pressure remains strong, but buyers are showing up and the $1,750 zone seems to be significant support, while investors are trying to wait for the FOMC meeting before taking new positions.
In the short term, a fall below $1,745 – 1,750 could show further fragility, while a surpass of $1,768 may be seen as a first positive signal. Only a solid surpass of $1,790 will represent a positive inversion.
Kinesis Money Silver Analysis
Silver remains in a short-term bearish environment. Indeed, the price has been unable to rebound solidly in the past few weeks. The precious metal has sold massively, which is inversely related to the U.S. dollar strengthening, coupled with the intensifying rumours of an imminent tapering.
The silver price is in moderate gain, traded just below $22,5 per ounce. We should point out that silver lost around $8 from its peak, while the fundamental background does not seem particularly detrimental.
Therefore, especially for long term investors, silver can be extremely interesting, with significant space for rebounds in the medium and long term.
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.