Kinesis Money macroeconomic analysis
The Federal Reserve postponed the start of tapering once again. Even after the long-awaited FOMC meeting, the exact date for the planned start of the process is not 100% confirmed. With new Covid variants constantly emerging and potentially causing another delay, the severely ($300bn) indebted Chinese property company, Evergrande, provokes even more fear in the market.
Despite this, the financial market is focused on hawkish elements included in the FOMC statement and this has been a bearish catalyst for the gold price in the last 36 hours.
Particularly, the FOMC used the wording “inflation is elevated” (in contrast to the former statement: “inflation has risen”) while the numbers of rate hikes expected by the Fed’s members grew in 2022 and 2023. There are now 9 out of 18 members expecting at least one interest rate hike the next year. Moreover, the bond purchasing process might already be completed by mid-2022. In other words, the tapering could be a relatively quick expedited process, while the economy is solidly continuing its recovery from the economic crisis generated by the Covid-19 pandemic.
Meanwhile, the Bank of England is also focused on inflation risks; an energy price surge is expected to increase inflation by over 4% in the upcoming months.
On the foreign exchange market (forex), the Dollar index remains above 93, while the EUR/USD is traded at 1.175 and the GBP/USD is exchanged just above 1,37.
Kinesis Money Gold Analysis
The hawkish tone of the FOMC statement was a bearish element for the gold price. In fact, bullion lost around $25, declining to $1,750, after having reached a low at $1,740 during yesterday’s trading session.
In the last few hours, a small decline of the greenback helped gold to recover $1,755. Overall, the short-term trend is relatively weak. Markets are still digesting the FOMC Meeting, which highlighted the growing inflationary pressures.
Technically, we can find an important support zone at $1,745 – 1,750. Therefore, it is crucial for bullion to hold above this threshold. On the other hand, there could be space for further decline.
On the positive side, a clear surpass of $1,760 would increase the chances of seeing gold returning to the resistance zone of $1,785 – 1,790.
Kinesis Money Silver Analysis
Silver is currently traded at $22,7 and is showing some signals of consolidation after the decline seen over the past few weeks. Indeed, the gold-silver ratio declined from 78 to 77,25, showing the relative strength of silver against gold.
From a technical point of view, a solid recovery of $22,8 could open space for further recoveries to $23.1.
For a proper inversion, however, we should wait for a return of prices above the $24 mark.
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.
