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On July 31, three Federal Reserve policymakers stated that the dissenting votes for a rate hike this week stemmed from persistent inflationary pressures, indicating increasing internal pressure on Fed Chair Warsh to act. In a statement released Friday morning, Hamack and Kashkari expressed concern that while the current price increases may stem from short-term factors such as President Trumps tariff policies and the Iran war, the inflation situation now warrants Fed action. Logan joined in, stating that even if inflation cools somewhat, it is unlikely to fall completely back to the Feds 2% target level without a rate hike; in the absence of any policy constraints, inflation could continue to rise above the target level until an unexpected shock occurs. Kashkari indicated that if inflation remains stubborn, he might support a series of rate hikes, rather than just one, to prevent further entrenching of inflation. He said, "A series of small policy adjustments may be better than waiting for the situation to develop and ultimately having to take stronger action." Hamack stated that if the Fed does not tighten policy, the pace of price increases could continue to accelerate. She stated, "Inflation has been stubbornly above 2% for more than five years, and I am not confident that it will fall back to our target level on its own."Russian Defense Ministry: Russian forces struck a ship delivering supplies to Ukrainian troops in the Black Sea.According to the Iranian news agency IRNA: The foreign ministers of Iran and the United Kingdom spoke by phone to discuss regional developments.July 31 - The Philadelphia Semiconductor Index nearly erased its intraday gains, after rising as much as 5%. SanDisk (SNDK.O) fell about 7%, Micron Technology (MU.O) fell more than 4%, and SK Hynix (SKHY.O) fell more than 2%. The Nasdaq Composite Index is currently down about 0.2%.On July 31, Federal Reserve Chairman Logan stated that inflation risks are tilted to the upside, and the robust job market is strengthening slightly. Currently, monetary policy is not suppressing the economy, and inflation is not moving towards the 2% target. He believes the Federal Open Market Committee (FOMC) cannot rely on unexpected shocks to achieve its goals. He indicated a preference for raising interest rates by 25 basis points to better balance the economic outlook and risks. The Feds recent moderate action will reduce the likelihood of needing more forceful action in the future. Without any policy constraints, inflation could persist above target until an unexpected shock occurs.

June Gold Buyers May Face Difficulties at $1987.60

Larissa Barlow

Apr 14, 2022 10:14

The market's strength is being fueled by demand for a hedge against rising inflation during the Russia-Ukraine conflict, lessening pressure from expectations of an aggressive US interest rate hike, and the US Dollar's intraday reversal top.

 

June Comex gold futures are currently trading at $1982.70, up $6.60 or 0.33 percent from their previous close. The SPDR Gold Shares ETF (GLD) is currently trading at $184.66, up $0.89 or 0.48 percent from its previous close.

 

Gold is regarded as an inflation hedge and a hedge against geopolitical concerns. However, higher interest rates in the United States would increase the opportunity cost of storing non-yielding bullion and strengthen the dollar against which it is valued.

 

However, the price action shows that gold buyers are seeking insurance against inflation and are not very concerned about opportunity costs at the moment. Despite all of the Fed's hawkish rhetoric and anticipation for aggressive rate hikes, we have yet to witness a shift in the direction of inflation.

 

Gold is likely to remain underpinned for the foreseeable future as long as the inflation arrow continues to point upward and the Ukraine war continues.

 

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Technical Analysis of the Daily Swing Chart

According to the daily swing chart, the primary trend is upward. A move over the intraday high of $1985.50 reaffirms the uptrend. A break of $1916.20 will revert the major trend to the downside.

 

On the upside, the retracement zone between $1987.60 and $2009.90 is the nearest objective.

 

On the downside, the long-term Fibonacci level at $1958.70 serves as the initial support, followed by the short-term 50% level at $1932.90.

Technical Forecast for the Daily Swing Chart

The June Comex gold futures market's path through Wednesday's close is likely to be dictated by trader reaction to the 50% level at $1987.60.

Scenario of Bullishness

A sustained move above $1987.60 will signal that buyers are present. This could provide the necessary momentum for a test of the Fibonacci level at $2009.90. This is a trigger point for an upside acceleration.

Scenario of the Bear

A persistent decline below $1987.60 indicates the existence of sellers. They intend to attempt the formation of a secondary lower top. This, if successful, might result in a break into $1958.70.

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