Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

The Gold Selloff, Fed Taper And Silly Season Of Hypes and Fears

By Investing.com (Barani Krishnan/Investing.com)CommoditiesJun 18, 2021 18:00
au.investing.com/analysis/the-gold-selloff-fed-taper-and-silly-season-of-hypes-and-fears-200472742
The Gold Selloff, Fed Taper And Silly Season Of Hypes and Fears
By Investing.com (Barani Krishnan/Investing.com)   |  Jun 18, 2021 18:00
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Well, it did not get to $2,000 as I argued in my last post.

But gold will still likely get a second chance at mid-$1,800s, which is quite comical from the perspective of longs who have spent half a year chasing the yellow metal as it went from $1,900s highs to mid-$1,800s and even sub-$1,700s at one point, before bouncing back to $1,900s and collapsing again this week to $1,700s.

Technical charts now indicate a return to mid-$1,800s. You know the drill: Rinse, repeat.

What’s amusing though is the inanity of gold bears and Wall Street analysts (read: airheads) who find one ridiculous narrative after another each day to justify the continued selling and cheapening of a commodity that’s supposed to be the world’s number one hedge against inflation—in what is interestingly described now as one of history’s most most supercharged moments for inflation.

In the latest act of this circus, markets had apparently lost confidence in gold altogether on Wednesday after the Federal Reserve laid out what the media managed to sensationalize as an overly hawkish rate and tapering regime coming soon after a year of super-easy monetary policy to accommodate the pandemic.

Gold Weekly
Gold Weekly

All charts courtesy of S.K. Dixit Charting

Let’s be clear about two things.

One: The Fed is NOT raising rates tomorrow. Its so-called dot-plot plan suggests the earliest increase—albeit, two hikes—will come before the end of 2023, which if my maths is correct, tells it as 2-½ years or 30 months away.

Two: The central bank is still seeking data that will point to the appropriate time for it to start scaling back the $120 billion in asset purchases it has been carrying out for the past year to shield the credit markets and the economy from the worst impact of COVID-19. In fact, Fed Chair Jerome Powell went to great pains during his news conference to emphasize that asset tapering—a term so overused in headlines now that its mere print or mention is enough to send shivers down people's spines—will NOT occur until the Fed sees adequate signals to justify such action. Powell also assured that the Fed will telegraph well in advance to investors and traders its taper intentions to avoid inordinate market response.

“Our intention for this process is that it will be orderly, methodical and transparent,” the Fed chief said at his news conference.

“We will do what we can to avoid a market reaction but ultimately when we achieve our macroeconomic goal, we will taper as appropriate. We will taper when we feel that the economy has achieved substantial further progress.”

Gold Daily
Gold Daily

Listening to the talking heads of CNBC and other financial show hosts and their guests, one might have gone away with a different idea as both the rate hike and taper were made to appear imminent, as though they were just a quarter away from happening. Ostensibly, almost every guest on these shows has a position in the markets and they are there to talk their book; unlike analysts like me who do not trade for the sole reason of staying objective and unbiased with my market views. To be sure, I’m not a fan of gold, but a fan of reason and objectivity.

To me, Powell’s words were clear, and to deliberately act against the message of the Fed can be deemed as irresponsible and even stupid; if not for the fact that shorting gold itself in an environment of manufactured hype and fear can be very profitable for the bears and their clients. And so, the gold-bashing charade continues.

What makes this week’s plunge in gold even more absurd is that it came on the back of the first hike in US unemployment claims after seven straight weeks of declines that once again raised questions about the consistency of the labor market recovery from the pandemic. If gold is indeed a protection against financial and political troubles, then an inconsistent job market certainly ticks one of the boxes for investors to get into the yellow metal. Instead, what we witnessed was a near $87, or 5%, plunge on the day that brought gold's losses for the week to more than $120.

Enough of Fed talk and the silly season of hypes and fears over gold. Let’s take a look now at where prices will likely go in the coming days and weeks.

With some sanity returning to the precious metal on the upside, Investing.com’s outlook suggests near term highs in the mid-$1,800 range for gold.

Our Daily Technical Outlook still maintains a “Strong Sell” recommendation for spot gold—we use the spot price because traders and fund managers sometimes decide on the direction for gold by looking at this, instead of gold futures—but a rebound certainly seems on the cards.

Under our combined ‘Fibonacci’ and ‘Classic’ forecasting models, gold could be trading between $1,847 and $1,869 in the near term—between $64 and $86 from where spot gold was trading at the time of trading.

Under the Fibonacci model, spot gold could first attempt a return to $1811, then $1,825 and later $1,847.

In the Classic model, the positive pricing for spot gold could first reach $1,810, then $1,847 and later $1,869.

Sunil Kumar Dixit, chief chartist of S.K. Dixit Charting in Koltata, India, concurs with Investing.com’s targets.

In a technical outlook on spot gold exclusively plotted for us, Dixit said:

“The daily chart stochastic reading at 13/16 indicates the metal has reached oversold territory and a bounce back from the lows is very likely, conditioned by prices holding above $1,770.”

On the flip side, he said weakness in gold could continue if the spot price breaks below the $1770 level, opening up to bearish targets at $1,753 - $1,735.

Adds Dixit:

“The weekly chart stochastic reading at 49/73 indicates that the bounce back may be limited and another bearish wave can trigger if bears challenge the $1,868 zone. Thanks to the damage done to gold in the past 24 hours, it’s very important to see price action behaviour once reaching the tactical resistance zone of $1,868.”

Disclaimer: Barani Krishnan uses a range of views outside his own to bring diversity to his analysis of any market. For neutrality, he sometimes presents contrarian views and market variables. He does not hold a position in the commodities and securities he writes about.

The Gold Selloff, Fed Taper And Silly Season Of Hypes and Fears
 

Related Articles

The Gold Selloff, Fed Taper And Silly Season Of Hypes and Fears

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email