Gold prices pushed gains to an eight-month high on Monday as a weakening dollar made dollar-priced bullion cheaper for offshore buyers and investors bet on a less aggressive rate-raising trajectory from the US Federal Reserve this year.
“For gold prices, US CPI data will be key”
Spot gold rose to $1,878.06, its highest level since May 9, 2022. U.S. gold futures were also up 0.7% at $1,881.90. The dollar index (DXY) fell 0.3%. OCBC FX strategist Christopher Wong comments:
Weakening US data on Friday increased the appeal of gold. The data shows that the Fed’s cumulative tightening in 2022 has started to have its effects on the economy and that the Fed may be willing to slow down the pace of tightening.
Data on Friday showed a slowdown in US wage growth and a contraction in services sector activity in December. Thus, it triggered an increase of approximately 2% in gold prices. Investors are now focused on Fed Chairman Jerome Powell’s speech at a central bank conference in Stockholm on Tuesday and US consumer price index data due this week for more clues about the pace of rate hikes. Wong comments:
This week’s CPI data will be key. Another slowdown in price pressures could increase appetite for gold as the dollar remains under pressure. However, an unexpected increase in CPI may spoil the sentiment.
“Industrial demand may increase exponentially in the short run”
Higher interest rates reduce gold’s appeal as an inflation hedge. It also raises the opportunity cost of holding the non-returning asset. “Industrial demand could increase exponentially in the short run as major producers re-engage,” said Clifford Bennett, chief economist at ACY Securities.
Gold bugs believe the yellow metal will shine in 2023
cryptocoin.comAs you can follow, gold continues to rise according to market prices for the last seven days. Gold jumped from $1,823 to $1,866 in that time frame. The yellow metal is up 2.36% against the US dollar, while pure silver is down roughly 0.58% since the start of the year. However, in the last two months, both gold and silver have increased tremendously. Gold rose 14.55% and silver rose 22.31%. As precious metals rise, the ‘gold beetles’ believe the yellow metal will ‘shine in 2023’.
‘Gold Mining Bull’, author of Seeking Alpha, argues that gold will outperform in 2023 in a two-part series. The author cites central bank demand and ‘ongoing geopolitical tensions’ as reasons for optimism. Gold Mining Bull has been keeping a close eye on central bank gold purchases this year. The analyst makes the following assessment:
Central banks around the world are buying gold at a record pace, especially in China, Turkey and India. This trend has continued for the last 13 years in a row. But lately the speed has increased. They have been increasing their gold reserves in recent years as a way to diversify their foreign exchange holdings and reduce reliance on the US dollar.
In addition, the analyst believes that there are six other things that can increase the price of gold. These are: a recovery in jewelery demand, the Fed’s eventual pivot, the escalation of the Ukraine-Russia war, a weaker US dollar, a limited supply of new minerals, and the possibility of a Chinese invasion of Taiwan.
In the last year, especially central bank gold purchases were effective in the increase in gold. According to analysts of the Financial Times, Russia and China have accumulated the most gold in terms of demand in 2022.
MKS Pamp Group’s gold price forecast
Nicky Shiels, head of metals strategy and macro at MKS Pamp Group, says there is pent-up demand for gold. He also states that this could signal a positive market trend. Shiels is addressing rising US nonfarm payrolls this week, noting that “there is nothing recession-related” in the report. Shiels explains:
Depending on whether gold can hold its weekly gains (which seems more and more likely), it’s solidifying that gold is trading aggressively since it formed a slight uptrend since early November. A decent amount of bull ‘suppressed’ demand, inherited from last year and fired at the right data point (CPI and PCE), would make much more sense.
Nicky Shiels shares MKS Pamp Group’s 2023 precious metals forecast, with an average expectation of $1,880 for gold and $22.50 for silver. According to the forecast, in 2023 gold can reach $ 2,100 and silver $ 28
Record forecasts for gold prices
Meanwhile, ABN AMRO expects gold to be around $1,900 in 2023. Saxo Bank says gold could reach $3,000 this year. “2023 is the year the market finally discovers that inflation will remain bright for the foreseeable future,” says Ole Hansen, Saxo’s head of commodities strategy. Juerg Kiener, managing director and chief investment officer of Swiss Asia Capital, thinks that gold could even reach $4,000 in 2023.
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