Inflations Fears are Adding Pressure on The Fed and Stocks

Kinesis Market Analysis

The forth week of July started with markets in dark red. It seems that investors realized, suddenly, that variants could still be a serious issue for the post pandemic recovery. But the sell off seen yesterday should be related also to last week US inflation figures, which certified a 5.4% jump in prices.

The real matter – for stocks – is not the inflation, but the fact that the Fed can not ignore this forever and will be forced to start the tapering relatively soon.
The reaction on FX was, once again, a strengthening of the greenback, while equity sharply declined.

Today’s early trading is showing a rebound of stock’s, while the US Dollar remains strong confirming that investors would not change their mind on US inflation and expectation of some hawkish monetary policy from the Federal Reserve.

Investors are carefully monitoring stocks, trying to understand if yesterday’s sell-off could be seen as a single episode, or if markets are ready for further corrections. Today’s decent start is increasing chances that we are still in the first option, with the bullish trend of the last 15 months not yet over.

Kinesis Gold & Silver analysis

Let us focus on the gold scenario. Bullion tested the $1,800 support zone, before rebounding to $1,818. Despite the US Dollar remaining strong, investors are betting on gold, seen as a hedge against inflation risks. In this scenario, gold outperformed silver in the last few trading sessions, showing more solidity.

Bullion price quickly recovered to the resistance area of $1,820. A news surpass of this threshold will improve again the momentum for gold, opening space for new recoveries, with a potential target to $1,850 zone.

Analyzing the price per gram, gold remains above $58.

Moving to silver, it appears clear that the sell-off seen on Friday has weakened the short term technical scenario for silver, as the price has lost the support zone of $26. The main reason for this decline can be found in the strength of the greenback and the consequent weakness of the whole precious metal sector. For a quick come-back, it will be crucial seeing prices trying to recover the $26 mark, while the next resistance is placed at $26.5/26.6.

But the long term trend could still offer interesting chances. Indeed, any spike in inflation or any new rush on commodity price, would definitely also involve silver price, which is still traded almost 50% below its historical highest.

Carlo Alberto provides regular commentary for UK outlets including the BBC, Telegraph, the Independent, Bloomberg & Reuters. He is also a commentator for CNBC Italy. He worked for Bloomberg as their Equity Research Fundamental Analyst before joining brokerage ActivTrades in 2011 to specialize in currency markets and commodities. In 2014 he published a 250-pages book on gold and the gold market, followed in 2018 by a new updated edition. 

 

About Kinesis

Kinesis is a global monetary system, based 1:1 on allocated physical gold and silver. Through digitalising physical gold and silver, Kinesis is introducing a new era of precious metals

Kinesis set out to bring back a stable, debt-free store of value to the global monetary system. A global fintech company specialising in payments technology, Kinesis has combined the timeless value of physical gold and silver with the latest technological advancements. Creating a digital currency with the everyday utility of a fiat currency; the borderless value and efficiency of a cryptocurrency, and none of the inherent volatility. Kinesis currencies enable allocated gold and silver bullion to be instantly purchased, traded, spent and sent anywhere in the world, bringing real-world access, value, and utility to physical precious metals. Kinesis operates our global platform from our offices in Australia, London and Liechtenstein, with vaulting facilities across all major trading hubs: Brisbane, Dubai, Hong Kong, Liechtenstein, London, New York, Singapore, Sydney and Zurich.

---

This report is not an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of future performance.