Wary traders are waiting for economic data to be released later in the day to gauge the Federal Reserve’s interest rate stance. Amid this wait, the gold price entered a tight range in weak trading on Friday. Analysts interpret the market and share their forecasts.
“We expect gold to continue its upward trend in 2023”
Spot gold was up 0.2% at $1,796.43 at press time. U.S. gold futures rose 0.5% to $1,804.40. Investors’ attention is on personal consumption expenditures (PCE) data, which will be released today for clues on inflation. Brian Lan, managing director of Singapore-based GoldSilver Central, explains:
Gold will rise if the data shows inflation reining a bit, which raises expectations that the Fed will slow rate hikes. We expect gold prices to be less volatile next year. We expect it to continue its uptrend, probably with the recession seen in the picture.
“After the data, the market is in a mood of intimidation”
US economic data released yesterday showed that the country’s economy is recovering faster than previously anticipated. This also boosted the dollar. It also potentially put the Fed on a sharper path in tackling inflation. After that, the gold price fell more than 1% on Thursday. Ilya Spivak, head of global macro at Tastytlive, comments:
After yesterday’s data, the market is in a mood of intimidation. Ahead of the Christmas holidays, we saw a strong move towards news that wasn’t particularly dramatic due to the low liquidity in the market.
“While the US economy is showing resistance, the gold price is on the decline”
Meanwhile, new applications for unemployment benefits in the US rose less than expected last week. In addition, the economy recovered faster in the third quarter, growing 3.2% compared to the previously estimated 2.9%. Edward Moya, senior analyst at OANDA, interprets the data as follows:
Gold is on the decline as the US economy continues to show resistance. It is possible that this will allow the Fed to tighten much more than the market is pricing in.
“Gold price will rise in early 2023”
cryptocoin.com As you watch on , the price of gold is on its way to a second consecutive annual decline, dropping more than $250 since March highs as central bankers hiked interest rates to rein in inflation. Jeffrey Sica, CEO of Circle Squared Alternative Investments, comments:
The price of gold will rise as the Fed raises interest rates and has an inflow of gold from equities in early 2023, following safe-haven trading. But not as much as the Fed is committed to its 2% inflation target.
Independent analyst Ross Norman says weak markets are often prone to exaggerated movements in small volumes. Therefore, it underlines the issue of taking new positions early before the end of the year, before the account comparison or the New Year’s rush.
“These continue to be headwinds for the gold price”
Rob Haworth, senior investment strategist at Bank Wealth Management, says gold prices jumped mid-week amid weak inflation data and hopes that the Fed will soon end its rate hikes. The strategist continues his assessment as follows:
Late Wednesday, the Fed’s hawk announcement weighed on gold as investors were pricing in a higher final interest rate. The Fed’s latest economic forecasts show that top Fed officials expect to keep interest rates above 5% by 2024. Looking ahead, higher interest rates and softer inflation data continue to be headwinds for gold investors.
“Gold price will see strong rise in January!”
Higher interest rates typically favor dollar and Treasury yields. It also makes non-returning assets such as precious metals less attractive in comparison. The rise in interest rates with the dollar reduces the attractiveness of gold as an unyielding hedge, said Adrian Ash, director of research at BullionVault. Ash continues his explanation as follows:
Still, the resistance in bullion prices this year is in stark contrast to the crash in 2013. It also contrasts with the worst year in living memory for stock/bond portfolios. As a portfolio diversifier, gold will gain attention around the new year, both due to seasonal rebalancing and as January brings Chinese New Year and is currently the busiest single gold buying festival in the world. These two factors mean that gold will typically see a strong rise in January.
“Precious metals are likely to underperform in this situation”
Looking ahead, however, Matthew Miller, an equity analyst at CFRA Research, expects industrial metals to rise and precious metals neutral to slightly lower. Miller expresses his views as follows:
As long as real yields are positive and rising, precious metals are likely to underperform.
