The gold price is up this morning as FOMC prepares to deliver its latest rate hike as it fights the last war. Below are the daily technicals, to be considered along with the positive sentiment and risk/reward backdrops and the ‘still in process’ macro fundamentals.
While gold is trying to hammer out a low at an area a weekly chart would show to have little support, note that it is still clearly in a downtrend since March and has not even taken out the short-term EMA 20. RSI and MACD are in decent postures but the trend is what it is and gold does not begin to undo that until it takes out 1675 and 1690. Even then, it would only be an initial move.
Silver on the other hand has been nesting atop the SMA 50 and what a long-term chart would show to be clear support. It also has a decent RSI and MACD. As long as this has remained the case we’ve kept open a potential for the silver price to test the downtrending SMA 200 (where managing a new macro phase is concerned, we take it step by step because it’s a longer process than many people might find convenient).
Here is where it gets interesting. The Gold/Silver ratio (GSR) is the US dollar’s companion in the market liquidity destruction game and as you can see, the GSR looks anything but stellar as it grapples with the uptrending SMA 200 again trying to hold that trend. If the ugly pattern plays out and GSR breaks down get ready for the theoretical potential of a strong and widespread market rally, likely including the precious metals.
If on the other hand GSR holds up and USD bulls the outlook would be much darker, including potentially in the near-term, the precious metals even though this would eventually shake out as fundamentally positive, especially for the gold mining industry.
Such a macro party atmosphere would be in keeping with the mid-term election cycle’s positive history.
Okay, bring on the noise of the FOMC’s policy decision and the algos, machines and black boxes swimming in its wake.
