The gold price eased on Wednesday as the US dollar rose. However, due to the absence of any new random triggers, prices moved in a narrow range in calm trading. Analysts interpret the market and share their assumptions.
“These will be the main factors affecting the gold price”
Spot gold was trading at $1,804.50, down 0.5% at press time. U.S. gold futures fell 0.55% to $1,813.10. Hareesh V., commodity research leader at Geojit Financial Services, says gold is seeing limited price action as trading activity is light ahead of the New Year holiday and there is no valuable economic information planned this week.
In the middle, the dollar index (DXY) rose 0.1%. Thus, it made dollar-priced gold more valuable to offshore buyers. In addition, the 10-year benchmark bond yields fell from a one-month high in the previous session. Hareesh ve comments:
The performance of the dollar, inflation information, the Fed’s rate hike path, developments in China and geopolitical tension will be the most important factors affecting gold prices in 2023. In the middle, the relaxation of restrictions in China due to the expectations of increasing demand will have a positive effect on industrial metals.
“Gold price follows China’s decisions to relax Covid restrictions”
The Fed cut its rate hike rate to 50 basis points (bps) in December, following four consecutive increases of 75 basis points each. But Fed Leader Jerome Powell has warned that the central bank will raise interest rates further next year. The expectations that the Fed will slow down the rate of increase in interest rates weakened the attractiveness of the dollar. That’s why gold rose nearly $200 at the end of September from the low it’s seen in over two years.
China, the biggest gold consumer, has relaxed its quarantine rules in a major step towards easing borders on its borders, which have been largely closed since 2020. Bob Haberkorn, senior market strategist at RJO Futures, comments:
Gold is following China’s decisions to further loosen Covid restrictions amid rising returns and anticipation of higher demand from the region.
“Gold price is in an uptrend”
Kitco Metals senior analyst Jim Wyckoff says gold futures bulls generally have a short-term technical advantage. The analyst draws attention to the following technical levels for the gold price:
Prices are in a seven-week uptrend on the daily bar chart. The bulls’ next upside is to close the February futures contracts above the solid resistance at $1,900.00. Resistance one stands at $1,825.00 followed by last week’s high at $1,833.80.
“Sustainable smoothing is possible if the Fed returns”
Exinity chief market analyst Han Tan says that gold performs in line with risky assets. In this context, the analyst makes the following statement:
Other signs that the king dollar is loosening its hold on the safe-haven throne are encouraging gold bulls to push spot prices back above the spiritual $1,800.
OCBC FX strategist Christopher Wong comments on the impact of the latest developments in the market on gold as follows:
Amid aggressive monetary tightening, rising real yields and a stronger dollar, gold was weak for most of 2022. With the Fed going into policy adjustment mode, the trend reversed. Therefore, a sustainable recovery in gold prices is possible if the Fed returns.
“This will be a positive catalyst behind gold”
Analysts at Sevens Report say the following for their 2023 projections:
Gold continues to quickly drop below multi-month highs. Also, if the opposite idea of a weakening dollar in 2023 bears fruit (and there is reason to believe it will), there will be a positive catalyst behind gold as we start the new year.