For now, the gold market maintains the solid benefits it achieved last month. According to analysts, the yellow metal may be on the verge of a new bull market as the new year begins.
“Gold, ready to explode”
The yellow metal aims to end the last trading day of 2022, about $5 below its opening price at the beginning of the year. February gold futures traded lastly at $1,825.70. The Federal Reserve’s aggressive monetary policy stance weighed on investment demand. In early November, gold prices dropped to a two-year low at $1,618.
However, since these lows, gold prices have increased by about 13%. It is possible that this is the beginning of another movement. “Gold is poised to explode,” says Ole Hansen, head of commodity strategy at Saxo Bank.
Cordovatrading founder Julia Cordova says that if gold holds the $1,820 support, it will likely trigger a real move to $1,860. Cordova commented on Twitter on Thursday:
Gold threatens to explode once again. Also, if he manages to hold it this time, a big breakthrough is coming.
Yellow metal closes the year in neutral territory
Gold struggled to attract the attention of investors until 2022. However, it was still one of the most underperforming assets this year. Yellow metal ends the year in neutral territory. However, the S&P 500 expects a 20% loss and the last run is at 3,803 points. At the same time, silver performs better than gold, closing the year in a strong form. March silver futures are poised to close the year around $24, up more than 2% since the start of the year.
Last month, gold and silver benefited from shifting interest rate expectations. Economists assume that the Federal Reserve will continue to raise interest rates. However, many see a peak in the first half of the year. At the same time, there is a significant fear of calm in the market. This adds to the claims that the Fed will start cutting interest rates in late 2023 or early 2024.
Markets will follow US workforce information
According to some economists, it is possible that the labor market report coming next week will determine the course of the markets for at least the first quarter of the year. Fed Leader Jerome Powell warned investors at a news conference on Dec. 14 that the labor market is too tight to change the central bank’s aggressive monetary policy stance.
Economists have been looking closely at the Department of Labor’s monthly Job Openings and Workforce Term Survey, or JOLTS report, lately. Economists point out that further declines in the number of available jobs will signal higher unemployment over the next few months. Economists at TD Securities say the December nonfarm payrolls report expects continued resistance in the US labor market. In this context, Economists underline the following issues in a note released on Friday:
Job creation likely picked up pace in December, with payrolls strengthening at the close of the year, the latest indicator of tight labor market conditions in the US. Unemployment rate has also probably dropped to 3.6%. However, we expect the price increase to remain high at 0.4% monthly after accelerating to 0.6% in November.
“Gold is up, but struggling to gain momentum”
Market analysts continue to argue that the Fed will start lowering interest rates again next year. In the midst of this, gold rallied this week as the weakening US dollar supported the price of the metals. Oanda’s senior market analyst, Craig Erlam, says in a note that gold has risen but is struggling to gain momentum. Based on this, the analyst makes the following comment:
The outlook for the yellow metal may still look very positive as central banks are bound to approach peak interest rates and the economic outlook is rather bleak. But in the near term, a correction may be on the cards in the absence of another bullish catalyst.