Welcome to Kitco News’ Outlook 2023 series. Uncertainty still grips the financial markets as central bank monetary policies push the global economy into recession to calm inflation. Stay tuned to Kitco News to learn from the experts on how to navigate the turbulent financial markets in 2023.
(Kitco News) – Inc gold The market ends the week at a nine-month high as renewed demand for the safe haven pushed prices above $1,920 an ounce, which some analysts emphasized as an important resistance level.
Analysts said that increasing economic uncertainty and shifting market fundamentals could help push prices back to $2,000 sooner than expected.
February gold futures are looking to close out the week with a gain of nearly 1%, with prices last trading at $1,922.80 an ounce.
“There is a pull to $2,000, and it will only go higher as prices continue to rise,” said Philip Stripel, chief market strategist at Blue Line Futures.
Gold’s rally came in the late afternoon after US Treasury Secretary Janet Yellen sent a letter to Congress warning lawmakers that the government could reach its debt limit on January 19.
Growing fears that the US might default on its debt obligations have grown recently as the narrow GOP majority in the US House of Representatives is expected to complicate negotiations. Some Republican politicians have already said that any increase in the debt limit must be accompanied by deep spending cuts.
“We knew the debt issue would be an issue in 2023, but we didn’t expect it to rise to prominence so soon,” said Edward Moya, North America senior market analyst at OANDA. The short term reaction gold Justified, while showing how much uncertainty there is currently.”
However, Moya added that while safe haven demand in the near term should continue to be supported gold Prices, there are much larger factors affecting the gold market.
“It is too early to see how that will play out. In the short term, this is positive for gold, but if there is any major chaos, that will support the dollar and affect gold,” he said.
Moya said he sees some resistance for gold at $1,950 an ounce, and if a break does occur, there won’t be much to stop the market from rising back to $2,000 an ounce.
“There’s a lot of momentum in the market right now and I think $2,000 is a target just about when we get there,” he said.
The Fed’s monetary policy remains the primary driver of gold
Looking at near-term volatility, analysts said the most important impact on gold continues to be shifting expectations regarding the Federal Reserve and the impact of inflation easing on bond yields and the US dollar.
Last week’s consumer inflation data showed price pressures easing in line with expectations, which some analysts said gives the Federal Reserve room to slow its aggressive stance on monetary policy.
According to CME’s FedWatch tool, markets see a more than 90% chance that the US central bank will raise the federal funds rate by 25 basis points next month.
Investors expected the Federal Reserve to approach the end of its tightening cycle, which sent bond yields lower and weighed heavily on the US dollar.
The US Dollar Index is looking to end the week at a seven-month low as it tests support at 102 points.
Kevin Grady, president of Phoenix Futures and Options, said investors are seeing a fundamental change in the financial markets, which is supporting gold prices, even if market momentum appears technically exhausting.
“I was waiting for a fundamental change in the market and I think we are starting to see that,” said Grady. “The bond market is suggesting interest rates will be lower than what the Fed says and that is bullish for gold.”
Pay attention to the US dollar; Seems oversold
Although gold prices have room to rise next week, some analysts said that investors should exercise some caution at these levels and not chase the market.
While many analysts are strongly bullish on gold in the near term, they said that investors should look to buy the precious metal on dips.
Darren Newsom, chief market analyst at Barchart, said he sees gold prices rising with a clear uptick in short- and medium-term trends.
However, he added that bullish investors may have to be nimble because gold can correct quickly. He said that key goldThe short-term impetus would be the US dollar, which said it was severely oversold. He pointed out that 102.17 is an important retracement level from last year’s historical high.
“when [gold] Decide to turn around, and that could be sometime next week, it could go down fast. “The markets go up the stairs and the elevator goes down.”
Mark Chandler, Managing Director at Bannockburn Global Forex, said he also sees the US dollar as oversold. He noted that although inflation is down, the Federal Reserve is still expected to raise interest rates, which could help stem the dollar’s bearish momentum.
Davos and economic data to watch
Although the US will see a shorter trading week with markets closing on Monday for Martin Luther King Jr. day, there will be plenty of economic data to digest throughout the week.
Analysts said the market may be sensitive to comments made during the annual World Economic Forum, which kicks off in Davos next week. The World Economic Forum has already raised concerns about mounting geopolitical uncertainty and the persistent threat of inflation. Analysts said any bleak outlook could boost further goldSafe Haven Call.
Markets will also receive more retail sales figures, inflation data and regional manufacturing figures from the New York Federal Reserve and the Philadelphia Federal Reserve.
Economists also said that investors need to watch the Bank of Japan’s monetary policy decision as this could provide some bullish momentum for the US dollar, which in turn will affect gold.
Tuesday: Empire State Manufacturing Index, BoJ Monetary Policy Decision
Wednesday: PPI, retail sales
Thursday: Philadelphia Fed Survey, Weekly Unemployment Claims, Homebuilding and Building Permits
Friday: Existing Home Sales
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