Wary traders are waiting for economic information 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 trades on Friday. Analysts interpret the market and share their predictions.
- 1 “We expect gold to continue its upward trend in 2023”
- 2 “After the data, the market is in a mood of intimidation”
- 3 “While the US economy is showing resistance, the gold price is on the decline”
- 4 “Gold price will rise in early 2023”
- 5 “These continue to be headwinds for the gold price”
- 6 “Gold price will see strong rise in January!”
- 7 “In this case, precious metals are likely to underperform”
“We expect gold to continue its upward trend in 2023”
Spot gold was trading at $1,796.43 at press time, up 0.2%. US 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 assume that gold prices will be less volatile next year. We expect it to continue its uptrend, probably with the calmness seen in the photo.
“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 assumed. This also boosted the dollar. It also potentially put the Fed on a sharper path in dealing with inflation. Subsequently, the gold price fell more than 1% on Thursday. Tastytlive global macro leader Ilya Spivak comments:
After yesterday’s information, the market is in a mood of intimidation. Ahead of the Christmas holidays, we saw a strong move to the news, which is not particularly dramatic due to low liquidity in the market.
“While the US economy is showing resistance, the gold price is on the decline”
In the midst of this, new applications for unemployment benefits in the US rose less than expected last week. In addition, the economy recovered more rapidly in the third quarter, growing by 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”
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 in the beginning of 2023 gold inflows from stocks following the safe harbor trade. But not as much as the Fed’s 2% inflation target.
Independent analyst Ross Norman says weak markets are often prone to exaggeration in small volumes. Therefore, it underlines the issue of account comparison before the end of the year or the early acquisition of new positions before 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 information and hopes that the Fed will soon end its rate hikes. The Strategist continues his assessment on the following side:
Late Wednesday, the Fed’s hawk announcement weighed on gold as investors priced in a higher final interest rate. The Fed’s latest economic assumptions show that top Fed officials expect to keep interest rates above 5% by 2024. Looking ahead, higher interest rates and softer inflation information continue to be headwinds for gold investors.
“Gold price will see strong rise in January!”
Higher interest rates typically bolster dollar and Treasury yields. It also makes non-yielding assets such as price metals less attractive in comparison. BullionVault’s director of research, Adrian Ash, says that rising interest rates with the dollar reduces the attractiveness of gold as an unyielding defense tool. Ash continues his explanation in the form:
Still, the resistance in bullion prices this year is in stark contrast to the crash in 2013. It also contrasts directly 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 as well as the fact that January brings the Chinese New Year and is currently the heaviest single gold buying fest in the world. These two factors mean that gold will typically see a strong rise in January.
“In this case, precious metals are likely to underperform”
Looking ahead, however, Matthew Miller, equity analyst at CFRA Research, expects industrial metals to rise and price metals neutral to slightly lower. Miller describes his views as follows:
As long as real yields are positive and rising, it is possible for precious metals to underperform.