Gold is on track to end the year with a slight loss. However, the precious metal has seen a solid rally and is poised for a healthy start to 2023. In this environment, he sees potential to rise above $2,000 under an asset management firm. In addition, hedge funds are increasing their long positions in the precious metal.
“This will ignite an explosive move for gold”
Gold prices hover around $1,800. The precious metal plans to end 2022 with an 11% rise from last month’s two-year low. Eric Strand, the portfolio manager and creator of the European-traded AuAG ESG Gold Mining exchange-traded fund, says the 2023 outlook could be the start of a new bull run beneath it. Strand comments:
We expect an all-time high for gold throughout 2023 and the start of a new sustained bull market once the price breaks above $2,100.
cryptocoin.com As you follow, in 2022 US inflation reached its highest level in 40 years. The Federal Reserve has also embarked on its most aggressive tightening cycle in 40 years to cool inflation. Therefore, investor demand for gold has been sluggish for most of 2022. However, the gold market has shifted in investor interest as the Fed’s aggressive monetary policy stance appears to be nearing its end. Strand says:
We are of the opinion that central banks will focus on interest rate hikes and act dovish throughout 2023. This will ignite an explosive move for gold in the years to come.
“Gold miners are historically cheaper than gold today”
While gold is expected to see an explosive move next year, Strand says the real value will be in the mining sector. The weak price movement of gold last year put pressure on the mining sector. Many analysts say sentiment in the mining sector is worse than the multi-year bear market between 2013 and 2015. Strand points out that valuations in the mining sector are at a historic low against the S&P 500. In this context, Strand makes the following assessment:
Gold miners are historically cheaper today than gold. This situation will return and surpass it in the future continuous gold bull market.
“A lower peak interest rate means bullishness for gold”
Gold’s ability to hold the $1,800 line has prompted hedge funds to increase their long positions in the bottom. It’s finally starting to attract new bulls as funds cut shorts further. According to some analysts, falling inflation has increased expectations that the Fed will begin to slow rate hikes. That’s why investors are testing the precious metals markets.
Commodities analyst from Société Générale notes that after weaker than expected inflation data for November, the precious metals market saw an inflow of $3.6 billion last week. Low inflation is typically bearish for gold. However, bullion has been receiving support from the Fed’s expectation of slowing rate hikes lately. “Because gold is a non-interest bearing asset, a lower peak interest rate means bullion for bullion,” analysts said in a note on Monday.
“Money managers started to create long positions in gold”
The CFTC’s disaggregated Commitments of Traders report for the week ended December 13 showed that money managers increased their speculative gross long positions in Comex gold futures by 10,108 contracts to 103,737. At the same time, shorts fell by 3,854 contracts to 66,288.
The gold market is currently trading net long with 37,449 contracts. It also reached its highest level since the end of August. This provided gold to see significant bullish interest for the first time since the beginning of October. In a note, TD Securities analysts highlight:
After weeks of shorting, money managers once again started creating long positions in the gold market. With the inflation data coming in below expectations, market participants predicted that the upcoming FOMC meeting will lean towards the dove, seeing the yellow metal rise above $1,800 once again.
“Gold has room to rise”
However, TDS expects the Fed’s continued tightening in 2023 to put pressure on gold throughout the first quarter. However, John Reade, chief market strategist at the World Gold Council, said in a comment on Twitter that gold has room to rise. In this context, Reade made the following statement:
Gross longs have come under a lot of pressure from previous periods of gold strength, while gross shorts are on the slightly higher side.
Gross long posiitons remain pretty subdued by previous periods of #gold strength, while gross shorts remaina bit on the high side.
This suggests that there is room for #gold to run further should sentiment improve.
— John Reade (@JReade_WGC) December 19, 2022
