Gold prices were all over the place throughout the week as we tried to figure out which way to go in the longer term. The Wall Street Journal’s report that the Federal Reserve will likely start slowing rate hikes after its November monetary policy meeting was a lifeline for the gold market, which slumped to a two-year low.
“The challenging environment for gold prices is still here”
Gold prices managed to close the week above $1,650, which is an important short-term psychological level for many investors and technical analysts. Unfortunately, gold investors were frustrated in their earlier false hopes. Now, the markets are whispering about a potential pivot. So gold investors jumped into the market and created a short-term buying spree.
cryptocoin.com As you follow, we’ve seen rallies so far this year to be short-lived. Because, the truth is, with persistently high inflation, the Federal Reserve and other global central banks have not yet finished tightening their monetary policy. It is possible that the Fed will slow rate hikes until 2023. Despite this, expectations for a final interest rate of over 5% remain. Until that changes, the US dollar will continue to see significant bullish momentum, according to many market analysts. Market analyst Neils Christensen comments:
It’s not just in US dollars. The Federal Reserve’s tightening cycle pushed 10-year yields above 4%, the highest since 2008. Real returns, as measured by Treasury Inflation-Protected Securities (TIPS), are trading at 1.7%, a 13-year high. Whichever way you look at it, it’s a tough environment for gold and precious metals.
“Now is not the time to buy!”
For now, the key word for gold investors seems to be “patience”. This was the main theme during the London Bullion Market Association’s Global Precious Metals Conference. Gold remains an attractive asset in the long run. Many analysts say now is not the time to buy as the US dollar and rising interest rates will keep gold in check.
We recognize that the market is challenging. However, many analysts say that when the Fed Funds rate peaks, it highlights the potential for boom below solid physical demand. Neils Christensen interprets the current situation as follows:
What makes this new gold rally a little different and sustainable is, of course, the fact that consumers are starting to feel the effects of rising interest rates and tighter market conditions are turning financial markets upside down.
So what should you invest in?
The great uncertainty in the British bond market and the collapse of the Truss government after only 44 days in power show just how turbulent the global economy is. At the same time, the BOJ is constantly intervening in the foreign exchange markets to protect its economy from the unprecedented strength of the US dollar.
Even some major economists warn of a serious recession looming on the horizon. Roubini Macro Associate CEO and professor at NYU Stern School of Business, Dr. Nouriel Roubini, nicknamed the apocalypse, wrote in a recent comment that it is possible for the US to enter a recession by the end of the year. He warns investors that in the next decade, the world may face ‘an unprecedented Stagflationary Debt Crisis’.
In this environment, Roubini also says, consumers need to invest in assets to protect themselves against inflation, geopolitical risk and environmental damage. These include short-term government bonds and inflation-indexed bonds. In addition, gold and other precious metals and real estate are among these assets. The last rally under it is likely to be short-lived. However, there is a feeling that investors should focus on the long-term potential.
Gold prices weekly technical analysis
Technical analyst Christopher Lewis draws attention to the following in the technical picture of gold this week. Gold markets went back and forth throughout the week. Because now it is under the threat of a fresh break and falling to a new low. But there is some light on the market. Also, the BOJ intervened in the Forex markets on Friday by selling US dollars. This broke the market. They gave it a little breather. However, it is unlikely to hold at the end of the day. The fact that central bank manipulation can happen from time to time is obvious. Despite this, we need to look at the overall picture and continue to see the future.
At this point, if it breaks below the weekly candlestick, it will likely go much lower. Maybe we can drop to the $1,600 level. After that, the market is likely to see a move up to the $1,500 level. Looking at this chart, we see that any rally is likely facing significant resistance near the $1,680 level. Then there is a resistance at $1,700 where the 200-Week EMA is likely. Either way, I wouldn’t consider going long until I got there. At this point, the exhaustion will probably reassert itself.
I don’t like gold, at least as long as US interest rates continue to be higher. This works against gold. Of course, the strengthening US dollar does the same. I’m not considering buying the shiny metal until the Federal Reserve changes its monetary policy.
