The big question after the FOMC meeting is
- Whether gold and silver and copper have formed a short-term bottom and are on a one-way bullish trend?
- Has the US dollar Index formed a medium-term top?
- Bond yields topped out or more to come?
I believe that gold and silver have formed a medium-term bottom. It will be almost impossible for copper to fall below $9000 unless there is a sharp increase in supplies.
Bond yields have formed a short-term top. A long-term top will be formed in US bond yields in the next three months. The incremental rise in bond yields will be way less as compared to the rise till yesterday.
US dollar Index will fall slowly as the interest rate gap will reduce (with other central banks).
The Federal Reserve raised its benchmark overnight interest rate by half a percentage point, the biggest jump in 22 years, and said it would begin trimming its bond holdings next month. It set its target federal funds rate to a range between 0.75% and 1% in a unanimous decision, with further rises in borrowing costs of perhaps similar magnitude likely to follow.
Our View on the FOMC meeting
Long-term Inflation will not be curtailed significantly by half a percentage interest rate hike and other money supply reduction measures. The Federal Reserve chairman was very candid in accepting that they are helpless in addressing supply chain issues. They are just hoping that a reduction in demand (due to a rise in interest rates) will cause an increase in supplies and reduce inflation. The key issue haunting everyone is the unthinkable increase in food costs and other “survival expenses”. Consumer durables demand and unnecessary service demand will take a big hit as more spending goes to “survival expenses”. For a common man, a rapid increase in conveyance cost, communication cost, children’s education, and food costs will ensure an increase in debt levels for them along will a sharp reduction in all other expenses. Slowdown, recession, or stagflation by whichever name you call will be here to stay. They will eradicate only on paper and for the media. Gold, silver, and precious metals are the best hedge as long as nations and central banks do not make any effort to address supply chain issues.
Chairman Powell further said that incoming US economic data releases will dictate interest rate hikes for June meeting and July meetings. Next week’s inflation number and energy price trend this month will dictate the interest rate for June meeting. Ukraine situation is the unknown factor is the reason by Powell was not explicit on June interest rate stance.
Spot Gold:
- Key support is between $1875.10-$1892.00
- Key resistance: $1905.70 and $1918.80
- Gold needs to trade over $1905.70 initial resistance to continue its yesterday’s rise and target $1918.70 and $1943.60.
- There will be a sell off only if gold trades below $1892.00 after London AM Fix to $1869 and more.
COMEX COPPER JULY 2022
- Copper needs to trade over $437.50 to rise to $447.50 and $459.60.
- Copper will rise quickly if it trades over $447.50.
- One needs to keep a close watch at $447.50 all the time.
Disclaimer: Any opinions as to the commentary, market information, and future direction of prices of specific currencies, metals and commodities reflect the views of the individual analyst, In no event shall Insignia Consultants or its employees have any liability for any losses incurred in connection with any decision made, action or inaction taken by any party in reliance upon the information provided in this material; or in any delays, inaccuracies, errors in, or omissions of Information. Nothing in this article is, or should be construed as, investment advice. All analyses used herein are subjective opinions of the author and should not be considered as specific investment advice. Investors/Traders must consider all relevant risk factors including their own personal financial situation before trading. Prepared by Chintan Karnani Website www.insigniaconsultants.in.
Disclosure: Insignia consultants or it employees do not have any trading positions on the trading strategies mentioned above. Our clients do have positions on the trading strategies mentioned in the above report.
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