While gold and silver traders are not dancing in the streets, they are quietly rejoicing. Their assumptions, knowledge, and expectations that both gold and silver have been oversold and undervalued were greatly rewarded today.

As anticipated the Federal Reserve concluded the July FOMC meeting with an announcement that they will raise rates by 75 basis points or 3/4%. While this was overwhelmingly expected as opposed to a larger 1% rate hike, there were subtle changes in the statement as well as comments made by Chairman Powell during the press conference.

A change in the Chairman's tone

Currently both spot gold and futures are trading fractionally lower on the day. However, this is deceiving as market participants have been actively moving gold higher. It is dollar strength that is moving gold prices negative as dollar strength has outweighed any modest gains from normal trading.

Two exceedingly important events will take place this week. The Federal Reserve will convene and conclude the July FOMC meeting. The Open Market Committee will begin on Tuesday and conclude on Wednesday, July 27 when they will release a statement containing their updated and revised monetary policy. This will be followed by a press conference by Chairman Jerome Powell.

On January 3 gold opened at $1800 and began a dynamic rally that concluded on March 9 when gold hit its highest value this year of $2077. In just over three months gold gained roughly $277 in value or 13.33%. On March 15 the Federal Reserve enacted its first interest rate hike since 2018 and marked the beginning of a major correction that continues to this day.

While President Theodore Roosevelt’s statement “a date which will live in infamy” certainly does not apply to August 9, 2021, it is a date that professional gold traders will forever remember. Prior to the open of gold trading in New York it was evident in Asia that a major move in gold was beginning to take place.

Since last Friday the U.S. dollar has traded under pressure losing value on Friday, Monday, and Tuesday. During the same period gold has been trading under mild selling pressure holding on to a price point just above $1700 per ounce. Recently the dollar hit a high just above 109 on Thursday, July 14 before trading lower for three consecutive days.

Over the last three trading days, market participants have been active sellers of the dollar taking the dollar index substantially lower. On Thursday, July 14 the dollar hit its highest value during this rally taking the index to an intraday high of 109.12.

As of 5:44 PM EDT gold futures basis, the most active August 2022 contract is fixed at $1707 after factoring in today’s gain of $3.40 or 0.20%. At the same time, the dollar gave up 0.57% and is fixed at 107.30. This means that gold had a fractional decline before factoring in the increase because of dollar weakness.

Over the two trading days gold futures have traded below $1700 (marked X) and, on both occasions, recovered closing above that case psychological level. So, it is not illogical to wonder whether or not this price point will become a sustainable level of support or simply a pause before gold heads to lower prices.