Gold & Silver; Confused FOMC

NEW YORK (Aug 23)  It is becoming a norm to see more currencies devaluation across the board and it raises important questions about the true value of holding one’s wealth in cash. The inconvenient truth is it happened in emerging and developed economies as their government look at ways to devalue and promote an export oriented economy as they struggle with large outflow of easy money. US dollar index is the first place of safety as investors started to see value once again after a rather mixed FOMC statement. Tapering was mentioned but the statement showed how clueless the Fed members are about the economy.

Gold managed to hold rather well on the release of the statement as it broke higher – trying to break $ 1380 but lack of follow through and dollar strength soon overcame. Sellers came in but more short covering eventually took over. We felt that the short term bullishness favour a higher gold prices as short sellers are busy covering and took those opportunities when prices pulled back. Only a break below $ 1350 will allow more selling to dominate and could potentially trigger more stop loss. However, the gold bulls are pushing to the next resistance for a move higher – potentially to break $ 1392 and $ 1400 area. At the moment, the range between $ 1350 and $ 1380 is where prices continue to trade. A break of either side will give a stronger direction and it depends on the next set of economic data from the US.

As per our last commentary, we warned our readers on the possible US dollar strength: The US dollar index continues to weaken and a break below the technical level of 80.95 could further weaken it. Therefore, the upcoming events could provide a base for the dollar index to regain some strength. Otherwise, we expect more weakness going into Septapering period.