The dollar retreated on the perception of a dovish trend in the US Federal Reserve’s interest rate increase strategy. Supported by this, gold prices remained stable on Friday on the weekly earnings path. Analysts interpret the market and share their forecasts.
Pigeon FOMC minutes, recession fears bolster gold
According to some analysts, gold continues to benefit from changing expectations that the Federal Reserve will slow aggressive rate increases from next month. Also, growing fears of a global recession are supporting gold prices. However, many analysts do not expect to see any significant movement in the two days before the long weekend. Colin Cieszynski, chief market strategist at SIA Wealth Management, comments:
News about World Cup matches will likely dominate more than corporate or economic events. Investors can look to Black Friday mall traffic reports for insights into consumer holiday spending.
cryptocoin.comAs you follow, the minutes of the Fed’s November monetary policy meeting signaled that interest rate hikes will slow down as of December. After that, gold started to move back above $1,750. However, the markets were pricing a 50 bps move before the minutes. Craig Erlam, senior market analyst at OANDA, said:
All things considered, it hasn’t been the busiest of weeks. But the FOMC minutes left investors a little high for the Thanksgiving holiday.
“The trend for gold prices remains bearish”
The yellow metal looks set to close the week solidly. However, some analysts state that there is still no uptrend that will push prices higher. DailyFX strategist Manish Jaradi says gold rally above $1,730 has broken the long bearish trend of the month. However, he states that it has not yet gained enough momentum to break the $1,800 resistance. In this context, the analyst makes the following statement:
Short-term dynamics point to a changing scenario. Given the massive losses this year, it remains unclear whether this month’s recovery (downtrend) heralds a reversal or a corrective rally. In the context of a multi-week chart, the trend remains bearish.
“There is no movement in long-term investor demand yet”
Ole Hansen, head of commodity strategy at Saxo Bank, says the gold market needs a new catalyst to break the initial resistance between $1,757 and $1,765. The analyst continues his statement as follows:
Demand for ETFs from long-term investors is yet to show any signs of recovery. In this environment, further expansion will likely require further reductions in yields. Also, money, US dollars, or some other catalyst is running to safety.
“This leaves gold vulnerable to future data”
According to the FOMC minutes, a significant majority of respondents agreed that it would be appropriate to reduce the pace of rate hikes. This put the dollar under pressure and made gold cheaper for offshore buyers. IG market strategist Yeap Jun Rong comments on the latest developments as follows:
The slowing rate outlook is seen as a sign of the highest falconry in the yellow metal to further loosen the bearish position since the beginning of the year. Therefore, the dollar’s pullback supported gold well. But the December meeting will be a “black box” event, given the differences in forecasts before and after US inflation data are colder than expected. This leaves gold sensitive to future data as buyers expect more confidence that current rate hike expectations are well-fixed.
“Gold prices will probably jump to this level by the end of December”
Jigar Trivedi, an analyst at Mumbai-based Reliance Securities, predicts gold will likely bounce to $1,790-1,820 by the end of December, led by safe-haven demand and the dollar’s weakness in the dove Fed environment. Meanwhile, most traders expect a 50 basis point rate hike from the Fed at its December meeting.
Kinesis Money analyst Carlo Alberto De-Casa says the Fed is on a dovish path, according to investor expectations. He also adds that the weakening of the US dollar is also a positive catalyst for bullion.
“Gold prices are on rough ground, but…”
ANZ analysts note in a note that real interest rates will rise by early 2023. Therefore, they note that it will continue to be a difficult ground for non-yielding gold. However, intensifying recession and geopolitical risks in 2023, strong physical demand from emerging markets and record purchases by central banks suggest that gold will still outperform real interest rates, according to ANZ.
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