The gold market closed the week at a nine-month high as renewed demand for safe harbors pushed prices above $1,920, which some analysts highlighted as a valuable level of resistance. Analysts interpret the market and share their predictions.
“This guarantees a short-term reflection of the gold price”
Analysts say heightened economic uncertainty and shifting market fundamentals could help prices rise to $2,000 sooner than expected. Phillip Streible, chief market strategist at Blue Line Futures, said, “There’s a real gravitational pull to $2,000. It will, however, rise as prices continue to rise,” he says.
Gold’s rally on Friday came after US Treasury Secretary Janet Yellen sent a letter to Congress warning lawmakers that the government could reach its debt limit on Jan. The weak majority of the Republican Party in the US House of Representatives is expected to complicate negotiations. Thus, growing concerns that the United States could potentially meet its debt obligations have recently increased. Some Republican politicians are actually saying that any increase in the debt limit should be accompanied by significant spending cuts. Edward Moya, senior North America market analyst at OANDA, comments:
We knew the debt problem would be a problem in 2023. But we did not expect it to gain value in such a short time. The short-term reaction of gold is guaranteed. This shows how much uncertainty there is at the moment.
“There is a lot of momentum in the market right now”
However, Moya says short-term safe harbor demand should continue to support gold prices. He also states that there are much larger factors affecting the gold market. “It is too early now to see how this will turn out,” Moya said. Positive for gold in the short term. “But if there’s massive chaos, it will boost the dollar and put pressure on gold,” he said.
Moya also notes that gold is seeing some resistance at $1,950 and if that breaks, there isn’t much to stop the market from rising to $2,000 again. In this context, “There is a lot of momentum in the market right now and I think $2,000 is a goal. When we get there is just a question,” she says.
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Fed’s monetary policy remains critical driver for gold
Analysts look beyond near-term volatility and say that the most valuable impact on gold continues to change expectations for the Federal Reserve, with the inflation-modifying effect on bond yields and the US dollar. Last week’s consumer inflation information showed that price pressures cooled in line with expectations. Also, according to some analysts, this gives the Fed room to slow the face of its aggressive monetary policy stance.
cryptocoin.com According to CME’s FedWatch Tool, markets see a more than 90% probability that the US central bank will increase the Fed Funds rate by 25 bps next month. Assuming the Fed is nearing the end of its tightening cycle, investors have dragged bond yields down and put a strain on the US dollar. Phoenix Futures and Options lead Kevin Grady notes that investors are seeing a fundamental change in the financial markets that supports gold prices, even if the market momentum seems technically very tense. Accordingly, Grady makes the following statement:
I was expecting a fundamental change in the market and I think we are starting to see it. The bond market is signaling that interest rates will be lower than the Fed says. This means bullish for gold.
“The markets take the stairs up and the elevator down!”
While gold prices have room to rise next week, some analysts say investors should be a little cautious at these levels and not chase the market. While many analysts expect gold to rise strongly in the near term, they say that investors should try to buy the precious metal from the lows.
Darin Newsom, senior market analyst at Barchart, is predicting higher gold prices as both short-term and medium-term trends are firmly on the upside. However, he adds that investors with a bullish trend may need to be agile as gold can recover quickly. He says the key to gold’s short-term momentum will be the sharply best-selling US dollar. In this context, he comments:
When gold decides to turn around and that could be at some point next week, it could drop fast. Markets go up by stairs and down by elevator.
Marc Chandler, managing director of Bannockburn Global Forex, also says the US dollar is well-sold. He notes that despite the cooling of inflation, the Fed is still expected to raise interest rates, which could help curb the dollar’s downward momentum.
Davos and economic data to watch
The U.S. markets saw Martin Luther King Jr. Due to being closed for the day, it will see a shortened process week. However, there will be a lot of economic information to digest throughout the week. Analysts say the market may be sensitive to comments made during the annual World Economic Forum (DEF), which begins next week in Davos. The DEF voiced its concerns about growing geopolitical uncertainty and the ever-present threat of inflation. Analysts state that a random bad look can further increase the attractiveness of gold.
Markets will also receive more retail sales numbers, inflation information and regional manufacturing numbers from the New York Federal Reserve and Philadelphia Federal Reserve. Economists also say that investors should keep an eye on the Bank of Japan’s monetary policy decision. Because, they state that this can provide a measure of upward momentum for the US dollar and this will also suppress gold.
weekly gold technical analysis
Technical analyst Christopher Lewis describes what he saw in the technical photo of gold as follows. Gold markets rose more than once during the week and climbed above the $1,900 level and naturally the channel it is in. Therefore, it seems that we are about to enter the impulsive stage of the market. Also, short-term pullbacks will likely result in nice buying opportunities. I’m not interested in short selling in this market, although I think we might pull back a bit.
At this point, I’m assuming the market will likely look towards the $1,950 level and then the $2,000 level. I don’t know if we’ll simply get there, and I think we’re bound to be late to pull back a bit. However, this is a very bullish market overall. So, I’m not interested in trying to get shorted, at least not anytime soon. That being the case, I think there is a situation where the market is strictly leaning to one side. But if you can avoid it, you definitely don’t want to chase it here.
In the long run, there was a negative correlation between the US dollar and gold. However, this correlation has been broken lately. Gold is rising more than anything else as a form of wealth defense. So, at least right now, I’m not that concerned with what’s going on in the Forex markets when it comes to gold trading. I will look for price and hopefully find it in the next few weeks.