The dollar eased ahead of US inflation data and the Federal Reserve’s policy decision to limit overall movements next week. In this environment, gold prices strengthened just below the key $1,800 level on Friday.
“We can see a perfect storm coming on the horizon of gold”
Investors are now giving a 93% chance of a 50bps rate hike at the Fed’s policy meeting on December 13-14. Meanwhile, on December 13, the US Consumer Price Index (CPI) November report will arrive. ACY Securities chief economist Clifford Bennett points to the FOMC meeting next week. He also talks about the importance of the US CPI data to be announced. Bennett says gold is likely to move higher, with CPI data and the FOMC. In this context, The Economist makes the following statement:
It is possible that the Fed will slow the pace in line with expectations and the dollar will weaken with the relatively moderate CPI data. Also, we’re likely to see a perfect storm looming over gold’s horizon all of a sudden.
“Gold will be volatile and sideways trading until FOMC”
OANDA senior analyst Edward Moya said in a note that traders will be interested in what the Fed has to say to get an idea of the inflation trend and where rates will peak. The analyst also comments:
Gold is likely to find a home around $1,800 until it gains more indicators.
Jim Wyckoff, senior analyst at Kitco Metals, evaluates the developments as follows:
We’re just waiting for some fresh essential input. Gold prices will likely trade ‘fluctuating and sideways’ until the Fed’s policy meeting next week. What traders will watch is not only whether the Fed will raise it by 50 bps or 75 bps, but also the course of its rhetoric about the pace of future rate hikes.
“Employment report could stop bullish ahead of FOMC”
However, the recent strong US economic data has slightly changed the course of things. The data has sparked fears that the Fed will raise interest rates more than anticipated in the near future. cryptocoin.com As you follow, US jobless claims increased moderately last week. This points to a still tight and strong labor market despite growing recession fears. Craig Erlam, senior market analyst at OANDA, comments:
The jobs report was a downturn, and it’s possible another upswing could stand in the way before the Fed meeting.
“In this case, $2,000 for gold is possible”
Meanwhile, China has recently announced measures to roll back some of the Covid-19 restrictions. According to Chintan Karnani, research director of Insignia Consultants, the Chinese central bank’s buying gold is one of the reasons gold is soaring. The analyst says it’s possible for China’s individual gold demand to rise sharply as the country reopens. Karnani also explains his expectation:
A price of $2,000 is possible if gold trades above $1,800 after the FOMC decision.
