Asian Metals Market Update: Will the US dollar Index continue to rise this week?

Will the US dollar Index continue to rise this week and negatively impact precious metals and base metals? OR has a short term bottom been formed in gold, silver, copper, zinc and natural gas?

Gold, silver and copper fell last week on the back of a technical breakout in the US dollar Index and below par growth in China. Traders and short term investors reduced net long positions in silver, copper and zinc. Very short term traders exited gold as it fell below $2000. US economic data releases last week have not impacted any asset class.

Positive was gold price did not fall below $1935, silver price did not fall below $23.00 and copper managed to trade over $360.00. Natural Gas is trading over fifty day moving average after a very long time.

The question which I am asking myself is will be there new lows  in gold, silver and copper or will be they near/break the high price of the month of May? I will prefer a buy on crash strategy for gold and silver and copper till Friday (before the release of April core PCE numbers.) I will prefer to be long with higher trailing stop loss before the release of PCE numbers on Friday.

Gold, silver, and copper will sink to new monthly low and even see a short term technical breakdown if and only if price core PCE numbers come in very high. Not an iota of traders is prepared for a June interest rate hike. If there is an over twenty percent probability of June interest rate hike, then gold and silver and copper will see a quick sell off.

A fall in core PCE numbers will increase bets for an interest rate pause for the rest of the year by the Federal Reserve. I am personally expecting a not so significant fall in core PCE number but nonetheless I expect a fall in core PCE inflation number. My call is an interest rate pause next month and for the rest of the year. Interest rate will be cut in 1^st November FOMC meeting, only if consumer spending disappoints this summer (till middle of October).

From a technical perspective spot gold has to trade over $1934.30 till 15^th June to be in a short term bullish zone. Spot silver has to trade over $22.82 till 15^th June to be in a short term bullish zone. The next wave of sell off will be there on a fall below these price if not then high price of this month will be tested or broken.

DECODING SHORT TERM TREND WITH SIMPLE MOVING AVERAGE

# Gold, silver, copper and crude oil have closed below the fifty-day simple moving average. This implies that there can be more correction in case fifty day moving average are not broken by Friday close or just after the release of April PCE numbers.

## There can be rallies and even new yearly high’s in gold and silver if they manage to trade over hundred day moving average.

### For the bears, gold and silver have to trade below one hundred day moving average for minimum three consecutive trading sessions (after 1^st June) to plunge and test two hundred day moving average.

##### Traders will prefer to be long in gold and silver before the memorial day vacations unless gold and silver trade below fifty day moving average on Friday.

###### As long as copper trades over $350.00 the medium term bullish trend is intact. But copper as to trade over two hundred day moving average of $380.10 to be in a short term bullish zone and target $435 and more.

FEDERAL RESERVE CHAIRMAN’S COMMENTS ON FRIDAY

1. The central bank would now make decisions "meeting by meeting," but also flagged that after a year of aggressive rate increases, officials "can afford to look at the data and the evolving outlook to make careful assessments."
2. It is still unclear if U.S. interest rates will need to rise further, as central bank officials balance uncertainty about the impact of past hikes in borrowing costs and recent bank credit tightening with the fact that inflation is proving hard to control.
3. "We face uncertainty about the lagged effects of our tightening so far, and about the extent of credit tightening from recent banking stresses,".
4. "So today, our guidance is limited to identifying the factors we'll be monitoring as we assess the extent to which additional policy firming may be appropriate to return inflation to 2%."
5. "The risks of doing too much or doing too little are becoming more balanced and our policy adjusted to reflect that,"
6. "We haven't made any decisions about the extent to which additional policy firming will be appropriate."
7. Powell said he felt that data so far "support the committee's view that bringing inflation down will take some time." He noted, for example, that some of the factors that may keep inflation elevated, such as the tight labor market, have yet to ease - particularly in the service industries where inflation is proving more persistent.

[ the above has been copied from Reuters News]

Our View on interest rates after the Federal Reserve chairman’s comments

• A falling trend in nonfarm payrolls and other jobs parameters is needed for an early then expected interest rate cut.
• Interest rate will be paused if May and June inflation numbers fall. I expect an interest rate pause on or from June FOMC meeting.
• If Inflation falls with robust hiring, then interest rate will be on pause mode.
• Jobs and inflation numbers will continue to be the key factor for short term decisions in all asset classes and not just precious metals and forex.

COMEX GOLD JUNE 2023 (closing price on 19^th May: $1981.80)

• Key prices to watch: $1962.90 and $1993.90
• THIS WEEK: Gold needs to trade over $1962.90 on daily closing basis for the whole week to rise to $2018.10 and $2054.70 and $2083.2.
• Crash or sell off will be there if gold June does not break $1993.90 this week to $1945.10 and $1930.80 and $1916.10.
• Mild sell off will be there if gold June trades below $1962.90 any day this week.

Indian physical gold demand (smuggled and official) will rise sharply as government withdraws the legal status of Rs.2000 currency notes from September. Some of the Rs.2000 currency notes deposited in bank will get converted into gold. It could be a trend that the elected government bans any form of legally issued currency. Converting the idle long term cash into physical gold is the only solution against such state run Ponzi schemes. State run banks are in a mess in India. Economic growth is “K shaped”. Incoming inequality rises sharply in a “K shaped” economic growth. The government resorted to the low hanging fruit of banning of Rs.2000 currency notes to jump start the Indian economy before next year’s central election.

Long term investors of any metal need not worry. Day traders, jobbers and weekly traders have to remain on the sidelines this week.