Macroeconomic Analysis
In the upcoming meeting, the financial markets are expecting the Federal Reserve to announce the beginning of tapering – the procedure of reducing liquidity in the system. This process is scheduled to last 6-8 months, ending in the middle of 2022.
Swiftly following this, the Federal Reserve could raise interest rates for the first time after the pandemic. It seems that, for the next few months, the intention of monetary policy brought on by the Fed is relatively clear.
In Europe, there is no precise timeline in place as yet, although tapering is expected to start much later. This can be attributed to the fact that both economic growth and inflation levels are lower than those recorded in the US, within the last few months.
Despite this, it’s clear that a spike in the inflation rate could flip this scenario on its head. Hence, the report set to be published today concerning price growth in the Eurozone is being carefully monitored by both investors and traders.
In August, the Consumer Price Index (CPI) increased by 3.4%. Forecasts predict that this index will remain steady, with an additional 3.4% increase for September. Any reports above this level could place further pressure on the European Central Bank (ECB) to anticipate the next moves.
On the other hand, if inflation figures are lower, markets may feel that there is no need for the ECB to act preemptively with hawkish monetary policies.
Consequently, if markets expect the ECB to act later, this could result in the depreciation of Eurozone currency, while any hawkish news is expected to strengthen the Euro.
In the end, this will, of course, reflect on the price ofo gold and silver, which often rises in conjunction with dovish monetary policies.
Analysing the commodities markets, investors are also looking at Oil Inventories, which has been one of the main drivers for the growth in oil prices. The price of the barrel has climbed above $80 for both WTI and Brent – the two major benchmarks for oil.
Kinesis Money Gold Analysis
It is clear that investors are waiting for Eurozone CPI data. For now, it is possible to say that the scenario remains supportive, as buyers are strongly active each time that price falls to $1,760.
Yesterday, we saw another quick rally to $1,782, but the price did not manage to continue its rebound, correcting slightly in the final part of the day. Overall, bullion is being traded just a few dollars below, in a scenario that still appears supportive.
Kinesis Money Silver Price Analysis
Like gold, silver is offering positive signals to investors, as the price is holding above the crucial level of $23.5 with a spot price in the region of $23.8. Yesterday we saw a spike that would permit gold to jump above the 24 dollar mark.
In the last few weeks, we have seen a proper inversion, as investors rediscovered the precious metal, which appeared “cheap” after the falls of August and September.
From a technical point of view, the area $24.2 – $24.3 represents an important resistance, and a clear break up of these levels could open space for new recoveries to the peak of $24 reached in early September.
The first support zone is positioned at $23.6, with a danger signal ringing if silver falls below $23.2.
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.
