Skip to main content

Asian Metals Market Update: Powell says the Fed can't fail fighting inflation

Gold, silver, and copper should trade with a falling trend for the next two weeks. Only quarter-end profit-taking can cause a bear market rally. July to September quarter is generally a cyclical period of low demand for gold and silver. Trading volumes generally fall between July and middle of September every year in comex and LBMA in gold and silver.

If you are long in gold, silver, and copper then you have to use trailing stop loss or use any rise to reduce losses. Fundamentals and technical are very weak for silver and copper. Gold is not getting the benefit of a safe haven in the short term. Gold will also crash below $1750 in July in case it does not break $1875-$1895 zone. Fatigue will be there among medium-term gold investors in case gold does not break $1895 in July month.

Never Mix day trading with investment. Losses can be unlimited.

Powell Says in his semi-annual testimony to the US congress (key points)

  • Fed has the resolve it will take to get inflation back to 2% target.
  • Fed "cant" fail on its task to get inflation back down to 2% rate.
  • Fed sees a soft landing for the economy.
  • Goal of soft landing has been made “significantly" more challenging in the last few months.
  • US economy is very strong and can handle additional rate hikes that are coming.
  • Recession "is certainly a possibility" but not the intended outcome of rate hikes.
  • Inflation has surprises to the upside and “further surprises could be in store”.
  • US economy can handle tighter monetary policy.
  • Risk of a recession not particularly elevated right now.

The big question is what will happen to US jobs growth after the summer travel season gets over. In Q3, migrant workers are traveling to their homeland to meet their parents/families or their (migrant workers) families are traveling to meet their sons and daughters. Plus those who can afford in Asia are holidaying in Europe and USA. Airlines, hospitality, travel, tourism and other allied activity are overbooked till the first week of October. There will be huge job creation in this sector worldwide. A close cousin’s mother is visiting her son in USA. In transit visa for a one day stopover in a European city was not available in the embassy in Delhi. She had to go to Calcutta city (some 1200 kilometers away) to get the single day in transit visa. All I am trying to convey is will these Q3 jobs continue in Q4 and Q1 of 2023 or there will be a sharp reduction.

The Federal Reserve chairman Powell comments yesterday that USA can withstand higher interest rates is partly due to the above-mentioned factor. The cyclical third quarter job creation will be huge in selected sectors. If jobs creation falters in Q4, then interest rate hike in September meeting will be a modest 0.25% followed by a long yearly pause. Results from interest rate hike by central banks takes a lot of time for a trickle-down impact. The Interest rate hike till July FOMC meeting will cause an inflation plunge in October. Inflation will plunge in Q4 this year and be near central bank targets (not just Federal Reserve). Gold, silver, stocks and base metals should form a long-term bottom by middle of October (around Columbus day holiday). However, bulls will have a nightmarish time till 15th October.

Spot Gold: (current price $1833.30)

  • Key intraday support: $1814.00 and $1822.70
  • Key intraday resistance: $1838.10 and $1849.00
  • Gold can fall to $1814 and $1785.70 (by Friday) as long as it trades below $1852.20.
  • Gold needs to trade over $1852.20 to be in a bullish zone till Monday.

NYMEX CRUDE OIL (August 2022) (current price $103.34)

  • 50 day SMA: $109.63
  • 100 day SMA: $102.70
  • Key resistance is at $108.10 and $110.30
  • Key support is at $102.16 and $97.90
  • Crude oil will plunge if it trades below $102.10 to $97.90 and $94.10.
  • A daily close below $102.00 today, tomorrow and Monday will start a short term bearish trend.
  • Overall bullish trend is intact for Q3 as long as crude oil trade over two hundred day moving average of $88.50.

About the author

Average: 5 (1 vote)

Newsletter Signup

GoldSeek Free Newsletters
GoldSeek Daily Edition
Gold & Silver Seeker Report
Gold Seek -- Peter Spina