This is a big Federal Reserve meeting week. Comex gold august futures are also expiring this week. There is a fear that gold, silver, copper, and industrial metals can start the falling trend once again after the FOMC meeting on Wednesday (27th July). 28th July for Asia. I see a lot of traders remaining on the sidelines.
A 0.75% interest rate hike is already factored in by the traders.
An interest rate hike of 1.00% on Wednesday can result in temporary gains for the US dollar.
What will happen after the Federal Reserve meeting? Possibilities?
A 0.75% interest rate is to be followed by a smaller interest rate hike of 0.25% to 0.50% in September and November meetings. There can be temporary gains for the US dollar index, mild fall in base metals, precious metals and stocks. But it will not last long. Maybe between two weeks to four weeks at the most.
A 1.00% interest rate hike followed by either (i) A pause in the September meeting or (ii) interest rate hike dependent on incoming inflation numbers or (iii) A 0.25% interest rate hike in September and November meetings will result in a highly volatile but two-way price moves with US Bond yields as key price dictator.
How to invest in gold and silver (investment is for hundred days to one year)
Use a buy on any crashes strategy with a stop loss below $1590 for gold and $1661.20 for silver. I remain bullish on gold and silver around end October (Diwali). All price fall up to $1590-$1611 zone will be part and parcel of the bullish trend.
Janet Yellen’s Sunday’s comment
US treasury secretary Janet Yellen on the weekend said that U.S. economic growth is slowing and she acknowledged the risk of a recession, but she said a downturn was not inevitable. "This is not an economy that is in recession," said Yellen. "But we’re in a period of transition in which growth is slowing and that’s necessary and appropriate." Yellen said inflation "is way too high" and recent Federal Reserve interest rates hikes were helping to bring soaring prices back in check.
Our View on the above: (i) Global stock markets will rise or restart its bullish trend if recession does not occur. (ii) Federal Reserve can continue with aggressive interest rate hikes to control inflation (without causing any recession in USA). (iii) USA dollar Index can fall but still be on a rising trajectory. (iv) Emerging markets currencies weakness may not be over against the US dollar.
Key US economic data releases this week
26th July (Tuesday): CB consumer confidence July.
27th July (Wednesday): Durable goods (June), FOMC meeting
28th July (Thursday): Q2 GDP, PCE Q2
Second quarter GDP number is the key. The economic impact of interest rate hikes will be felt in July to September quarter. Traders will be assessing whether Q2 GDP continue for the rest of the year.
COMEX SILVER SEPTEMBER 2022 (current market price $1842.50)
- Silver has to trade over $1770-$1816 wider range till end August to rise to $1952.70, $1988.20 and $2249.00.
- All price fall up to $1770 will be a part of the bullish trend reversal.
- Silver will crash if it does not break $1907.20 by closing on 28th July.
- Silver will also crash if it trades below $1816.20 in USA session to $1735.20 and $1661.20 and $1518.20.
- Today silver will crash if it trades below $1830.00.
WTI CRUDE OIL current contract 2022 (current market price July $93.59)
- Key long term support is between $88-$90 zone.
- Crude oil needs to trade over $88-$90 zone to rise to 104.90.
- Immediate trend is down as crude oil is trading below both 100 day simple moving average (107.20) and two hundred day moving average (94.10).
- August will be a big travel season in Europe and USA. Crude oil demand in Europe and USA will be the key.
- Bearish trend will be there only a daily close below $94.00 for four consecutive trading calls.
MCX SILVER SEPTEMBER (current market price Rs.54595.00)
- Two hundred week moving average around Rs.54086.00 is the key long term support.
- Fifty month moving average: Rs.52672.00.
- MCX silver September has to trade over Rs.52672-Rs.54086 zone till end August to rise to Rs.57350 and Rs.62670.
- All price fall up to Rs.52672 is a part and parcel of the long term bullish trend.
- MCX silver September will crash only if it does not break initial resistance of Rs.57350 by 10th August.
- Silver is the best investment at current prices.
- Even if I am horribly wrong and silver price plunges then I do not foresee MCX silver December future falling below Rs.48500 under the worst case scenario.
- For a short term bullish trend MCX silver September has to trade over Rs.54086 on daily closing basis continuously till 10th August.
(prices are in Indian Rupees above).
Inflation and Ukrainian situation will be the driver for precious metals, base metals and stocks. Recession and its impact to a certain extent is being reflected by price in all asset classes.
Next week’s July nonfarm payrolls on 5th August will be trend changing only if the number comes in very low.