Weekly Gold Price Technical Analysis: Concerns Mount as Debt Ceiling Discussions Persist

Banking Stress, Declining Corporate Profits, and Tough Decisions on the Horizon

As discussions surrounding the US debt ceiling persist, worries intensify in various sectors of the economy. Notably, borrowing through emergency funding for US banks remains at nearly $100 billion, signalling ongoing concerns about banking stress and its potential ramifications.

Of particular focus are regional banks, as scrutiny grows over their balance sheets and the impending maturity of their debt in the coming years. Economists estimate that the market assets of the US banking system are worth over $2 trillion less than their book value. This revelation raises questions about the soundness of these institutions, drawing parallels to the scenario where a mortgage holder seeks to refinance but finds their home equity significantly diminished. In such cases, additional funds are unlikely to be extended, and the homeowner may even be required to cover the equity loss.

Another troubling development is the sharp decline in recorded corporate profits, which fell by 5.1% in the first quarter, marking the third consecutive quarterly decline. The last time such a sustained decline occurred was back in 2015. The erosion of profit can be attributed to increased costs of doing business, including rising wages across multiple sectors. As inflation remains a pressing concern, and with corporate profits on the decline, businesses are faced with difficult choices to bolster their bottom line. These choices may involve increasing sale prices, which could further fuel inflation, or reducing wages or costs of goods sold (COGS). Both options carry significant implications, as increasing sale prices could exacerbate inflationary pressures, while reducing wages may lead to higher unemployment rates. The stage is set for consequential decisions that could have far-reaching effects on the economy.

Gold and Silver have endured a hard week, with gold positioned almost $US40 below its $1985 start to the week and Silver retracing from $US24 to $22.79 at time of writing.

Both seem to racing towards their moving average in consolidation. We’ve included these charts here today, for visibility. Note, technical indicators for both Gold and Silver forecast a STRONG BUY through their monthly projections.

Gold daily chart, with 200MDA

Silver daily chart with 200MDA

Gold Technical Analysis

Gold Futures monthly analysis continues to recommend a STRONG BUY with

Weekly analysis adjusting down slightly to a NEUTRAL signal.

Technical indicators - Monthly Projections

Summary for Monthly forecast: STRONG BUY

Disclaimer

This news and any links provided are for general information only and should not be taken as constituting professional advice from Jaggards. Jaggards is not a financial adviser. We recommend you seek independent financial advice before making any financial decisions based on the information contained in this article.