As I said in my previous article, we may see lower CPI data for the upcoming period (beginning of 2023) and that is exactly what we saw today with the U.S. YoY CPI decreasing to 6.5% compared to last month's YoY CPI (7.1%). Meanwhile, the expectation is that central banks will continue to raise interest rates in the near term to tame inflation, as in my opinion, inflation is still considered a threat at current levels.
While it’s easy to fall into the trap of conjuring up the specter of the 1970s, I think it’s important to stress that today’s situation is not fully comparable. The world is in a different economic environment – it is unlikely we will see the same wage-price spiral and interest rates are unlikely to go into double digits in advanced economies like the Paul Volcker era because if they do, global economies are more vulnerable than ever to any increase in interest rates and central banks know that. This time, the opportunity cost is far greater.
Although monetary policy typically has long and variable lags on the real economy, the global economy has so far remained resilient in spite of rising interest rates, and that is clearly shown through the unemployment rate and unemployment claims data which are still coming above expectations.
However, a recession is inevitable, and when it becomes official for the public, the Fed "may" intervene through lower the pace of its interest rate hikes or even considering cutting back rates as the economy may not be able to endure additional tightening, but that's a story for the long-run that could be bullish for precious metals.
For now, Silver is trading near a very high key area looking at the daily chart, and not breaking above this area will signal a short-term downside toward retesting the 38.2% Fibonacci Retracement level at around 21.98. Breaking below 21.98 will definitely signal further downside to retest previous lows such as 20.28 and 17.70 before considering any move up.
I believe that 21.98 will be an interesting area to monitor for Silver since Gold is still hovering below the $1,900 psychological area which currently stands tall to challenge Gold's upside momentum. The yellow metal also pays little to the overbought RSI conditions, which in turn suggests that the XAU/USD buyers are running out of steam. A downside break of the $1,870 support line, the previous resistance, could quickly drag the metal toward the one-month-old horizontal support near $1,822 pushing Silver also for a correction.
Both metals are trading near critical key areas and if you're looking for buy opportunities, you better wait for a correction and monitor the levels I have mentioned above. No buy opportunities on Silver before a correction towards at least 21.98 for now. The whole market is in a blurry state. Keep things simple and easy during such volatile periods.
Good luck!
M.Y.
While it’s easy to fall into the trap of conjuring up the specter of the 1970s, I think it’s important to stress that today’s situation is not fully comparable. The world is in a different economic environment – it is unlikely we will see the same wage-price spiral and interest rates are unlikely to go into double digits in advanced economies like the Paul Volcker era because if they do, global economies are more vulnerable than ever to any increase in interest rates and central banks know that. This time, the opportunity cost is far greater.
Although monetary policy typically has long and variable lags on the real economy, the global economy has so far remained resilient in spite of rising interest rates, and that is clearly shown through the unemployment rate and unemployment claims data which are still coming above expectations.
However, a recession is inevitable, and when it becomes official for the public, the Fed "may" intervene through lower the pace of its interest rate hikes or even considering cutting back rates as the economy may not be able to endure additional tightening, but that's a story for the long-run that could be bullish for precious metals.
For now, Silver is trading near a very high key area looking at the daily chart, and not breaking above this area will signal a short-term downside toward retesting the 38.2% Fibonacci Retracement level at around 21.98. Breaking below 21.98 will definitely signal further downside to retest previous lows such as 20.28 and 17.70 before considering any move up.
I believe that 21.98 will be an interesting area to monitor for Silver since Gold is still hovering below the $1,900 psychological area which currently stands tall to challenge Gold's upside momentum. The yellow metal also pays little to the overbought RSI conditions, which in turn suggests that the XAU/USD buyers are running out of steam. A downside break of the $1,870 support line, the previous resistance, could quickly drag the metal toward the one-month-old horizontal support near $1,822 pushing Silver also for a correction.
Both metals are trading near critical key areas and if you're looking for buy opportunities, you better wait for a correction and monitor the levels I have mentioned above. No buy opportunities on Silver before a correction towards at least 21.98 for now. The whole market is in a blurry state. Keep things simple and easy during such volatile periods.
Good luck!
M.Y.