Kinesis Money Macroeconomic Analysis
The week has started with the Futures index in dark red. Investors are worried about the possibility of further lockdowns, as multiple Covid variants continue to spread, globally. Notably, the Central Bank of China has cut prime loan rates, confirming investors’ fears about an anaemic recovery.
In the US, the legislative crisis within the Democratic party is slowing down the process of budget approval. Indeed, Senator Joe Manchin declared that he will not be voting in favour of Biden’s spending bill. This has halted Biden’s $2 trillion tax-and-spending package.
This is a very different scenario from last week, especially when we compare it to the meetings held by the Federal Reserve and the Bank of England, respectively. Indeed, the FOMC meeting (on the 14th-15th December) was one of the most hawkish seen over the last few years, which set in motion an acceleration to the pace of tapering.
In Europe, the Bank of England hiked the interest rate for the first time after the pandemic in order to curb the effects of inflation. On the other hand, the Bank of Japan announced that it is planning to start reducing bond purchases in Q1 (of 2022) with increased pressure on prices.
Not accounting for the Eurozone – where, according to Lagarde of the European Central Bank, inflation remains “transitory” – many central banks are preoccupied with rising prices and inflationary risks.
It is likely that these drivers have already been priced into the current market scenario. In the case of accelerated inflation, it is likely that gold will play a key role in the lead up to, and during, the year 2022.
The World Gold Council recently reminded investors that sustained inflation could boost institutional demand for bullion, as a hedge against inflation, or alternatively, market risks.
Kinesis Money Gold Analysis
Despite the Federal Reserve doubling the tapering from $15bn per month to $30bn, the gold price recovered from $1,760 to $1,814.
The rebound lost strength in the last few hours of Friday’s trading session. During this time, gold pulled back to its former resistance zone, resting at the support zone of $1,800 per ounce.
This morning, while we are seeing growing volatility for the stock market index, and oil, gold remains stable, dancing around the $1,800 area.
From a technical point of view, gold has regained momentum, although the challenge between bulls and bears has not yet found a clear directionality.
A confirmation above the $1,800 mark would reinforce the bullish impulse, opening space for new rallies at $1,830. A new test in the region of $1,870-1,880 now seems less likely, considering the strength of the greenback.
Kinesis Money Silver Analysis
The silver price started the new week in a fractional decline, trading above $22. The rebound last seen on Thursday has lost momentum, and the next few weeks could be crucial for silver, which underperformed gold in 2021. From a technical point of view, $21.5 remains a key support zone. There will be a proper inversion only with a return of the price above the $23 mark.
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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.