The minutes of the US Federal Reserve’s latest policy meeting signaled slower rate hikes. Gold prices then bounced above the key $1,750 level on Thursday. We have compiled analysts’ gold forecasts and market comments for our readers.
FOMC minutes point to slowdown, gold rises
Spot gold was up 0.3% at $1,754.49 at the time of writing. U.S. gold futures rose 0.5% to $1,755.00. High interest rates increase the opportunity cost of holding non-yielding bullion. That’s why markets watch closely the FOMC minutes, which provide clues to the Fed’s rate hikes.
cryptocoin.comAs you follow, the minutes of the Fed’s November 1-2 meeting were published on Wednesday. The minutes showed that a significant majority of policy makers agreed that it would be appropriate to slow the pace of rate hikes. David Mitchell, managing director of Indigo Precious Metals in Singapore, explains:
There is a market reaction that the FOMC minutes and the slowdown in rate hikes are pushing the metals markets up in Asia.
ANZ Bank gold predictions
Providing more support to gold, the dollar fell further overall after the Fed minutes. This made gold cheaper for offshore buyers. Meanwhile, Fed funds futures are pricing a 50bps rate hike at 85% probability at its December meeting. However, ANZ analysts say in a note that rising real interest rates through early 2023 will continue to be tough ground for non-yielding gold.
However, intensifying recession and geopolitical risks in 2023, strong physical demand from emerging markets and record-high purchases by central banks trying to diversify their foreign exchange reserves suggest that gold will still outperform real interest rates, according to ANZ.
“Gold rises on a relief rally”
Tai Wong of New York Heraeus Precious Metals comments on the latest developments as follows:
Fed minutes contain no hawkish surprises. It also confirms that the rate of increase will drop to 50 bps in December. Under the influence of these, gold rallied on a relief rally. Financial markets believe the Fed is over-tightening. Therefore, he interprets the minutes in a dovish manner, which, according to the Fed’s comments over the past two weeks, does not contain any real surprises.
“There is no longer a dark cloud of interest rate hikes hovering over the gold market”
A slower move would allow the FOMC to assess progress toward maximum employment and price stability goals, according to the minutes of the Fed’s November 1-2 meeting. David Meger, head of metals trading at High Ridge Future, comments:
The market had already accounted for most of these interest rate increases. Knowing this, I can say that there is no longer a dark cloud of interest rate hikes looming over the gold market.
Credit Suisse gold predictions
Gold remains capped at $1,801 by the 200-Day Moving Average (DMA). A move is needed here for more gains towards the June high of $1,877, according to the report by Credit Suisse strategists. Strategists point out the following levels for gold forecasts:
55DMA needs to break back below $1,685 to restore bearish momentum to the market. Subsequent supports are seen at $1,614, a recent year low, before retracing 50% of the 2015/2020 uptrend seen at $1,560. It needs to break above the 200DMA at $1,801 to open the door for a potential rise towards the June high of $1,877 and also to reassert a broad consolidation phase.
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