The record closing price in November was not enough for gold investors. Thus, the strong momentum has pushed prices to an all-time high ahead of the weekend.
Bulls may send gold prices higher!
Gold contracts for February delivery were last traded at $2,091.90, up more than 4% on a weekly basis. The previous record for gold was at $2,089.20 in August 2020. Markets continue to price in a possible rate cut as early as March. In this environment, the yellow metal is gaining momentum again. The precious metal’s rally is happening even as the central bank maintains its tightening stance.
cryptokoin.comAs you follow from , Federal Reserve Chairman Jerome Powell on Friday said he still wasn’t sure monetary policy was restrictive enough to reduce inflation to 2%. However, the CME FedWatch Tool shows that markets are currently pricing in the possibility of a rate cut of more than 50% in the first quarter of 2024. This shows that the markets do not pay much attention to what Powell says. Forexlive.com Market Analysis Manager Lukman Otunuga makes the following assessment:
While the precious metal is supported by Fed cut bets, technical factors continue to support upside momentum. In the absence of a new fundamental catalyst, November’s monthly close above $2,000 could provide a foundation for the bulls to send prices higher.
Naeem Aslam: There are bright days ahead!
Naeem Aslam, chief investment officer at Zaye Capital Markets, says this is the beginning of a bigger move for gold and “bright days ahead.” In this context, Aslam comments:
Regardless of what some members of the Fed continue to say, we believe the Fed has reached the peak of its rate hike cycle. We think there’s a real chance the Fed will cut interest rates towards the end of the first quarter of next year. However, the threat remains stubborn inflation. If we don’t see the CPI drop to 3% or lower, the Fed could keep interest rates at current levels through the end of the first half of the year.
According to Robert Minter, we will likely see a gold bull market
Some analysts state that the Fed’s aggressive monetary policy still poses a risk for gold. However, they say the slowing economy means the Fed’s next move will be to cut interest rates. Robert Minter, Director of ETF Investment Strategy at abrdn, says cracks continue to appear in the U.S. commercial real estate market, the industry continues to feel the effects of the Fed’s aggressive interest rate hikes, and there are high vacancies as employees continue to work from home. Based on this, Minter makes the following statement:
If we see the commercial real estate bubble starting to burst, there will be more money printing. That’s part of what we’re seeing in the gold price today. Another part is that the market is pricing in that there will be no more interest rate hikes and that the potential for interest rate cuts is higher in the near future. Then we could have a gold bull market like the last three times the Fed Funds rate cycle has been at this point. The last three times the Fed paused its tightening cycle, gold rallied 57%, 235%, and 69%, respectively.
“Gold internalizes that people don’t feel that way!”
Nicky Shiels, head of metals strategy at MKS PAMP, also states that gold may capture the safe-haven bid even though economic data remains quite resilient. Shiels explains his views on this subject as follows:
Shiny metal internalizes that people don’t feel that way. Experts talk of ‘a rupture in our economic health and social fabric’. But less dramatically, people are feeling worse than before. This is expressed through shelters.
Barbara Lambrecht: It is better to be cautious, because…
At the same time, analysts note that gold continues to rise despite most retail investors staying away from the market. Analysts say that once this sentiment starts to change, gold prices will really take off. Despite this optimism, some analysts advise investors to be cautious about gold at these levels. He also says they shouldn’t chase the market. Commerzbank commodity analyst Barbara Lambrecht predicts that gold prices will remain limited ahead of the non-farm payrolls report to be released next Friday. The analyst shares the following assessment:
That’s because current expectations that the Fed will cut interest rates by 50 basis points by mid-24 are more likely to be disappointed. Accordingly, we foresee a correction in the gold market. This situation may be triggered by the US labor market report to be announced at the end of the week.
Data and event agenda for gold investors to follow
Some economists say investors should also pay attention to the University of Michigan consumer sentiment survey, as inflation expectations have risen in recent months. Phillip Streible states that the market is a bit hasty because an interest rate increase in March does not seem likely. Streible says the Fed is unlikely to cut rates until inflation approaches its 2% target.
- Tuesday: ISM Services Sector PMI. USA JOLTS Jobs.
- Wednesday: ADP private sector employment. Bank of Canada monetary policy decision.
- Thursday: Weekly unemployment claims.
- Friday: Non-agricultural employment. University of Michigan consumer sentiment survey.
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