CPI - Brace for volatility
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Gold bulls got the move over $1685, which, as suggested, immediately led to an extension higher (to the tune of $30, intraday); they have begun to test the $1710-15 level. The below updated weekly chart shows the breakout; For swing traders, a path to $1800 is clearing up. The below is an updated weekly chart depicting the open space on the way to $1800, but also shows that the level should be expected to serve as very stiff resistance.
Silver has finally reached into the resistance level we showed weeks ago, shown in yellow, on the weekly time frame. The higher yellow bar shows where silver maybe headed, before it encounters its own, likely stiff resistance at the top of the range should this move extend. Clearly, price is already staggering a little at the 50-week moving average, while stochastic RSI is pushing into overbought territory where bulls would like to see it stay, or very quickly revert to, should a short consolidation of the gain from the bottom begin to take place.
With CPI on deck tomorrow morning, market participants should be prepared to face outsized volatility, yet again. Would it be surprising to see gold come back down to retest the breakout at $1685? No, a weekly close above $1685 would remain constructive. Silver may also retrace back to the $20.80-50 level.
That said, should CPI come in under expectations, all assets denominated in USD will most likely continue to be bid up. The below weekly DXY chart should be very familiar with regular readers. We have been showing a negative divergence in RSI for quite some time and that negative divergence seems to be playing out in earnest. Although it may yet take some time for the DXY price to catch down to momentum, the target remains the prior breakout point around the 102-3 level. A lower-than-expected CPI print would probably accelerate the process.
Thanks and have a nice day,