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Asian Metals Market Update: Jackson Hole recap

Momentum and technical are bearish for gold. Right now, all price fall in gold and silver upto 13th september, US august CPI number will be a short term investing opportunity. US August nonfarm payrolls will be impactful only if it comes in on the lowest side of expectation. Personally, I expect US jobs softness in September to November months. August should be on the higher side.

Every central banker in Jackson hole has said that slowdown and even recession is needed to bring down inflation. Faster and longer interest rate hikes (to curb inflation) has been the unanimous policy action to curb inflation. September to December jobs growth in USA and Europe will be less than this year’s average. The cyclical jobs creation and cyclical summer spending (in USA, UK, and Eurozone) will be over this week. A sharp rise in the cost of survival and fear of an extreme rise in food bills and energy bills this winter will result in a sharp fall in consumer spending from next week. An extreme frugal living will see its people’s diameter rise. Inflation will automatically be tamed as demand-side inflation nosedives. We need to focus on supply-side inflation more than demand-side inflation. Supply pressures on any base metals and energy will ensure that price remain firm or fall way less than they should.

Powell at Jackson Hole meeting

  1. Bringing Down Inflation will cause pain to households and businesses.
  2. Fed is taking "forceful steps" to fight inflation and will keep at it until job is done.
  3. Lower Inflation readings in July is welcome but falls far short of what fed needs to see.

The Politics behind Powell move.

Federal Reserve stance is a pre US Senate election move to support the democrats or Biden.

  • Powell or the Federal Reserve is using a stronger US dollar to bring down inflation.
  • Powell is uncomfortable with rising US stock markets. He wants US stock markets to trade with a falling trend till headline inflation does not come down.
  • Powell wants a slowdown as opposed to recession in US economy to curb inflation. If I rephrase it, Powell does not like a stronger US economy before the US senate election. Mild slowdown is fine.

My analysis is based on 50/75 bps interest rate hike in September meeting followed by 25 bps interest rate hike in November and December meetings. I expect a pause in interest rate hikes by the Federal Reserve in 2023. I also expect aggressive interest rate cuts by the Federal Reserve in 2024.

The “X factor” till March 2023 is the weather in USA, UK, and Europe. (X) A very warm winter in USA and Europe will be anti-inflation and will cause a pause in interest rate hike earlier than the current market expectation. (XI) Traders are currently factoring in normal winter conditions in USA and Europe. Natural gas price’s historical rise and the bullish momentum is due to expectation of severe Ng shortage in Europe during the winters. A Polar Vertex blast (if any) in USA and Europe between end November and end March will result in Federal Reserve raising interest rates in the first quarter of next year too. 

London is closed today. Trend after 5:00 pm Indian Time is the key for all metals and energies. There can be abrupt one way price moves. Spot silver if it falls for the rest of the day can test $17.90 and more. All the price fall in copper today will be a buying opportunity for tomorrow.

COMEX SILVER DECEMBER 2022 (current market price $1854.50)

  • Key daily support: $1800.60
  • Key daily resistance is at $1892.00
  • Silver will crash if it trades below $1837 to $1800 and $1761.30.
  • Overall trend is down as long as silver trades below $1880.

NYMEX CRUDE OIL (October 2022) current market price $94.22)

  • Crude oil has to trade over $92.00 to rise to $97.10 and $99.90.
  • There will be sellers only if crude oil trades below $92.00.

MCX SILVER 30th November 5KG MINI (current market price Rs.55700)

  • Key weekly support is between Rs.54800-Rs.55044 zone.
  • Key weekly resistance is at Rs.56496
  • MCX silver 5kg mini will crash if it trades below Rs.55215 today, tomorrow, and this week to Rs.54318 and Rs.53368.
  • Momentum is down and very bearish.
  • There can be rallies if MCX silver 5kg mini does not fall below Rs.54800 this week to Rs.57222 and Rs.58811.

(price in Indian Rupees above)  

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