Gold prices struggled to gain momentum Wednesday as market participants weighed the Fed’s early rate hike expectations against rising Covid-19 cases. Opinions and forecasts of analysts evaluating gold markets cryptocoin.com compiled for our readers.
Brian Lan: Gold investors more cautious as Fed worries
Brian Lan, managing director of GoldSilver Central, attributes the pressure on gold to investors being more cautious on this issue, with the expectation that interest rates will rise in March. But Brian Lan notes that if Omicron is not reined in and remains a problem globally, gold should be backed by safe-haven demand as more central banks will buy gold.
The US dollar index (DXY), which has made gold less attractive to other currency holders, was close to the two-week high it touched on Monday, following gains in US Treasury yields. The 10-year benchmark bond yields rose to the highest level in more than a month on Tuesday as investors are ready to raise the Fed rates by mid-year to rein in stubbornly high inflation. It should be noted that higher interest rates increase the opportunity cost of holding non-interest bearing gold.
Market participants await the minutes of the Federal Reserve’s policy meeting, December 14-15, 2021, at 7:00 GMT, which may provide clues as to the Federal Reserve’s plan to raise interest rates and reduce stimulus from the pandemic. The US reported nearly 1 million new coronavirus infections on Monday, setting a global record, according to the Reuters agenda.
Gold is below $1,800 in the medium term, according to Michael Langford
“Gold’s upside is being suppressed as other asset classes offer better leverage for risk and return,” commented AirGuide director of corporate consulting, Michael Langford, pointing to the following levels for the yellow metal:
See gold’s short-term gains at $1,820, but the overall medium-term outlook is below $1,800.
Ed Moya, senior market analyst at OANDA brokerage firm, says that the year started with new records for stocks, but as it is difficult to determine whether this streak will continue, investors are again turning to the safe haven. Ed Moya comments, “The effect of Omicron will be felt mostly on the inflation side and the economic recovery”.
Meanwhile, Wall Street trimmed gains after an optimistic start to the New Year as investors turned down risk-taking after data showed U.S. manufacturing slowed last month and Covid-19 concerns persisted.
“This inconsistency imposes an upper limit on prices”
TD Securities comments that concerns over the Omicron variant triggered the safe-haven offer for gold.
Higher gold prices are inconsistent with global market pricing with a 70% probability of a Fed rate hike in March, putting a cap on prices.
Kitco Metals senior analyst Jim Wyckoff says in a note that renewed inflation concerns could hit the market in the short term and dampen risk appetite as bond yields are likely to continue to rise.
The gold gains, however, came as Fed fund futures traders were pricing in three rate hikes by the Federal Reserve through the end of 2022, despite higher yields on US Treasuries and a stronger dollar.
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