Precious metals week from 7/25/2022 to 7/29/2022
Last trading week was characterized mainly by economic and inflationary data on both sides of the Atlantic and Wednesday’s meeting of the US Federal Reserve, where it raised the main interest rate by 0.75%. This is already seen by some market participants as a monetary policy error as the economy already seems to be cooling down considerably. This is also indicated by the declining long-term public yields in the US. However, this is a real political problem ahead of the upcoming mid-term elections to the US Congress on November 8, 2022. The net effect for the markets was the practically unchanged exchange rate of the US dollar against the euro, the Swiss franc, which continued to appreciate against the euro, friendly stock exchanges and very strong precious metals. This week the markets focused on silver in particular.
The price of gold has risen significantly
The week under review was mainly characterized by the interplay of economic data and monetary policy decisions in the US in the run-up to the mid-term election. The US Federal Reserve raised the base rate by 0.75% on Wednesday and plans further significant rate hikes in the coming months. Considering persistently high inflation and officially high employment levels, this is not surprising. However, some economists are already seeing that the FED is on the way to a monetary error as key economic indicators have cooled sharply and the US economy may already be stuck in a recession.
For this reason, the US dollar benefited little from the interest rate hike and instead fell slightly 0.1% week-on-week to $ 1.02266 per euro. The safe currency of the Swiss Franc, on the other hand, benefited from the ongoing weakness of the euro and gained 0.9% weekly against it against CHF 0.97302 per euro. Bitcoin gained 4.8% to $ 23,764.
The yield on the 10-year US Treasury fell to 2.618% from 2.784% week on week, and the 10-year Bund fell to 0.828% from 1.038%, despite inflation in Germany at 7.5% and the euro area at 8.9%. The stock exchanges were friendly. The Dow Jones Industrial Average (DJIA) gained 3% week on week to 32,845 points and the DAX gained 1.7% to 13,484 points.
Precious metals appreciated significantly on falling profitability and the risk of US interest rates slowing sharply from present levels. Gold prices have risen 2.2% this week to $ 1,766.26.
Consequently, the technical situation of gold clearly eased again as the price of gold not only receded from the central, static support level of $ 1,676.87, but also broke through the medium-term uptrend that had continued from the beginning of the year during the week. Crown failure March 2020 Line.
It also closed above the resistance line at around $ 1,750 based on the weekly candlestick that formed in September 2021 (see upper red horizontal line in the chart).
In futures markets, the CoT data for 07/26/2022 for gold showed a 3% drop in commercial short to just 108,422 contracts, while open positions fell by 7% to 487,515 contracts in parallel. This means that commercial traders have less gold than they have been for at least 3 years.
Overall, the technical situation for the gold price has clearly improved, but it is too early to speak of an uptrend reversal. Sales are simply too low for that, even on a monthly basis. However, the fact that gold rises during the phase of significant interest rate hikes by central banks shows that it is not too easy to justify falling gold prices. If the interest rate hikes by the US Federal Reserve are indeed a monetary policy error, the rising gold price already heralds another monetary easing or a much less pronounced interest rate hike than previously announced by the FED. However, the technical starting point for “kings’ money” has brightened up considerably again this week.
Gold on TradingView
Silver is the weekly winner
Silver prices jumped 9.5% this week, closing at $ 20.36, not only back above the round $ 20 level, but perhaps more importantly above key monthly support of $ 20.34 . A look at the monthly silver candlestick chart shows the technical importance of this level, which corresponds to the monthly close of July 2016 ($ 20.33693).
Because on a larger scale (months) it shapes the level of significance of the breakthrough down. As we emphasized in previous weekly reports, the level from the end of July 2022 is the key for the assessment of the monthly silver meltdown. A look at the chart now shows that silver has recovered all its losses for the month and was even able to record a small monthly gain.
This development appears as a long chart candlestick based on a monthly candlestick. This is a very good sign and confirms our repeated assumption that silver may complete the consolidation lasting from August 2020, again with a slingshot move. The development in July 2022 is a big step in this direction of interpretation!
Prospectively, this interpretation is also supported by the development on the futures market. Because not only stocks for servicing COMEX silver futures are falling there. The CoT data for July 26, 2022 shows a rather huge drop in ad short position by a very high 68% to just 2653 silver contracts. At the same time, the interest rate for open contracts slightly increased by 2% to 147,784 contracts. This puts the short position of commercial market participants at the lowest level in at least 3 years.
Overall, the specs of silver also improved significantly from week to week, and each month it laid the groundwork for a surprisingly sharp upward move that COMEX ad positioning strongly supports, albeit only briefly. However, this trend continued for weeks and significantly changed the overall structure of the futures market for silver.
As with gold, the low turnover remains the “graphical fly in the ointment”, which greatly diminishes the importance of the price movement. However, it may soon be “delivered later.” If the monetary nature of silver continues to gain importance in the coming weeks, this positive price stimulus should more than offset the negative impact of weaker economic development.
Silver on TradingView
Platinum continues to rise
Platinum gained 3.1% over the week to $ 889.20, and its July 2022 monthly candle, which shares a long hanging thread like silver, has long-term dynamic support on a broken downtrend line that has lasted since March 2008, successfully tested.
At the same time, platinum also closed above the October 2020 static support at $ 845.80, as indicated by the horizontal blue line on the chart. Sales were slightly higher than gold and silver. The significance of the pattern is not as great with platinum as it is with gold or silver, but platinum’s reputation as a “technical weaker plot” has to come from somewhere. However, this reputation could soon be seriously tested, given the many factors pointing to the rising price of platinum!
This is indicated by the situation on the futures market. Because the CoT data from 07/26/2022 shows a drop in the already small short ad position by 37% to just 171 platinum deals, while the percentage of open positions fell by 2% to 73,423 contracts.
The situation on the futures market, where advertisements are practically not cut, remains optimistic in the face of rising platinum prices.
Overall, platinum’s technical condition improved qualitatively, in particular due to the fact that it successfully tested its most important long-term dynamic support within a month, and then quickly drifted away from that mark. Like silver, platinum is not yet “detached” in terms of the charts, but the technical basis for the early upward move has been laid.
Platinum on TradingView
Palladium double fractal bottom?
Palladium rose 4.8% to $ 2,125.22 over the week, further building its fractal (time-stable) double bottom. If our assumption is true, the all-time high of $ 3,410.25 on March 7, 2022 is the relative symmetry of the second bottom of the large double bottom (see chart).
This interpretation is confirmed by the order of rotation and the qualitative turning points of individual soils. This assumption is falsified on all time scales if the rating drops below $ 1,494.05!
Qualitatively, this assumption is also confirmed by the development on the futures markets. As CoT data for July 26, 2022 points to a 9% drop in (unusually) long ad position to 3,894 palladium contracts, the long positioning of commercial market participants is in itself a very positive indication of an increase in price palladium. Open interest rates also rose by 3% to 7,124 contracts during the week.
Overall, this week, palladium further increased the symmetry of its temporal and geometric fractal (self-similar) bottom formation, further improving the technical starting conditions of the chart for a new long-term uptrend.
A chart structure that self-validates across time scales also reduces the importance of trading to confirm the significance of price movements. Here, palladium appears as a test case for which indicators are better suited for confirming price signals.
Palladium on TradingView
July 30, 2022 – Arndt Kümpel
Your rating, comment or question to the editor
Ratings, comments and questions to the editor
Reservation – EMH News AG is not responsible for the correctness of product recommendations or descriptions, price information, typographical errors and technical changes. (Detailed disclaimer)