Divyang Shah, Senior IFR Strategist
Let’s highlight the price action since April. Silver has broken its April low and the weakness has accelerated since the break of this support today. Gold is still above its April low but if you ignore those spikes lower then what you are looking at is lower closing low than back in April if we close below 1,350 today.
What both are telling us is that the bounce on gold/silver since the mid-April rout have been corrective in nature and there is yet more in the way of downside left for both.
This is important for two reasons:
1) it supports the expectations for further USD-strength and
2) it also supports the CB view that inflation is not a danger.
For the ECB and BoE the lack of inflation warnings will be a welcome signal but for the Fed it might make things a little difficult on the tapering front.
But the Fed has looked to communicate the message that they are less worried about the low PCE taking comfort from stable inflation expectations as well as quirks in the data.
