Despite the FOMC removing “patient” from the policy statement on Wednesday afternoon, the tone of the statement and Chair Yellen’s subsequent press conference clearly had a more dovish tone than the markets were expecting as witnessed by the big rally that ensued in most markets. As the policy statement was being read, the USD weakened sharply Wednesday afternoon, rallied yesterday and is weaker again this morning as its direction sets the course for gold and silver. While there remains a possibility of a 25 basis point rate hike at any time now, most commentators see the hike coming in August. As Chair Yellen and the FOMC would like to see the unemployment rate fall further while the inflation rate stabilizes at higher levels, I do not think a rate hike will come before the fourth quarter and I am still not convinced we will see one this year.
On the back of this we have seen speculative short covering and fresh buying both in the paper and physical market which I expect to continue. This morning’s broad-based buying has gold challenging resistance at $1,185.00. Technically speaking, gold and silver could be poised for a big rally next week if we can build a bit more on this morning’s early gains and close strong. A close in gold above $1,185.00 sets us up for a run at the 100-day average which currently sits at $1,207.75 and a further run at the major resistance at the 50-day average which is currently $1,224.50. A close in silver above the current 10-day average, which is $15.77 could see it run quickly to $16.45 – $16.77 which are the current 100 and 50-day averages.
Have a good weekend,
Roy