Gold prices have actually increased by about 5% since the start of the year. Also, even though the year is just getting started, the bullish sentiment in the market is almost palpable. We’re just over $1,900 for now, but some investors and analysts are already keeping their eyes on the $2,000 target.
“Investors will flock to gold!”
Some heavyweight market players are jumping on the gold bandwagon as prices rise $300 from November’s two-year low. Nouriel Roubini, CEO of Roubini Macro Associates and Professor Emeritus at the NYU Stern School of Business, says investors will flock to gold because of the 10 ‘megathreats’ threatening the global economy.
Nouriel Roubini predicts that gold prices will rise to $3,000 by 2028. ‘Dr. “I expect rates of return to be around 10% a year over the next five years,” says Roubini, nicknamed the ‘Apocalypse’.
“A pretty good time to buy gold”
Along with Roubini, billionaire ‘bond tycoon’ Jeffrey Gundlach says gold is on the rise when prices rise above $1,800. Doubleline CEO says gold is one of his recommendations for 2023. “This is a pretty good time to buy and own gold,” Gundlach says.
Many investors stayed away from gold in 2022 as the Federal Reserve’s aggressive monetary policy stance pushed bond yields to a 12-year high and the US dollar to a 20-year high. But analysts say this trend could reverse in 2023 as the Federal Reserve approaches the end of its tightening cycle.
Analysts say US bond yields have priced the final Fed Funds rate below 5%, causing the US dollar to tumble to a seven-month low this week. Many analysts state that both bond yields and the US dollar have peaked, supporting gold’s rally.
China’s gold purchases continue at full speed
But gold is more than the sum of investment demand. Global geopolitical uncertainty continues to support the precious metal as a critical element in global currency markets. This week, the People’s Bank of China announced that it bought 30 tons of gold in December. This follows the purchase of 32 tonnes of gold in November, the first officially recorded purchase since September 2019.
In a recent report, BNP Paribas market analyst Chi Lo says gold will be a crucial element in China’s plan to strengthen the yuan’s international credibility and challenge the US dollar’s status as the world’s reserve currency. In his report, Lo highlights the following:
Making the renminbi convertible to gold transforms the currency into a global investmentable asset for foreign renminbi holders and increases their confidence and demand for the Chinese currency. A gold-backed petro-yuan does not require full renminbi convertibility to operate. It therefore allows China to simultaneously maintain control of the capital account and increase the internationalization of the renminbi.
Will the market or the Fed breathe a sigh of relief?
cryptocoin.comAs you follow, data on Thursday showed that US consumer prices fell in December for the first time in more than 2.5 years. Following the data, Fed policymakers expressed relief that at their next policy meeting in February, inflation continued to fall in December, paving the way for a possible step towards a 25 basis point rate hike. Daniel Ghali, commodity strategist at TD Securities, comments on the latest developments as follows:
Gold prices are rising after the in-line CPI, which the market is well positioned to highlight as another source of buying activity in the gold markets.
“We believe the gold market will initially take a breather, until it becomes clear who predicts the future course of US monetary policy is more accurate: the market or the Fed,” Commerzbank analysts wrote in a note. gives its assessment.
“Golden Cross will attract more buys from technical traders”
Gold Newsletter editor Brien Lundin said, “Gold easily surpassed the $1,900 level. Achieving these big numbers helps attract investors on a trend,” he says. Lundin predicts that the ‘golden cross’ for gold will attract more purchases from tech-oriented traders. Brien Lundin says the dollar is helping below the downtrend and it looks “likely to continue”.
According to Rupert Rowling, market analyst at Kinesis Money, CPI data confirms that inflation is currently on a downward trajectory. However, it is still well above the Fed’s 2% target. Therefore, the analyst sees it as likely the Fed will raise benchmark interest rates when the FOMC meets later this month. However, currently the expectation is that the increase will be only 25 basis points.
“Both results would be bullish for gold”
Brien Lundin says there are basically two main paths to monetary policy. The Fed pauses and perhaps returns after successfully bringing inflation closer to its target level. The second way is that the Fed does it near the 2% target without reducing inflation. Regarding the results of these two paths, the analyst states:
Both results would be bullish for gold. But the latter is even more so, as there will be no bullishness for stocks or bonds. It also said it would attract much more allocations from diversified portfolios. From both a fundamental and technical standpoint, this gold rally seems to have some legs. There is some overbought at the moment. So a pause next week wouldn’t be surprising. However, we should not ignore the momentum that the shiny metal is currently showing.
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