Gold prices rose on Friday. It’s on track for the third consecutive week of earnings, despite the key US jobs report coming in better than expected. Analysts interpret the market and share their forecasts.
“Gold prices may continue to attract buyers in 2023”
Spot gold was up 1.54% at $1,860.7 at the time of writing. Gold prices are up about 2% so far this week. U.S. gold futures rose 1.34% to $1,865. At the center of the market was nonfarm payroll (NFP) data from the US Department of Labor. Yeap Jun Rong, IG Market strategist, comments:
Higher-than-expected job gains and more persistent wage data could be catalysts that increase the pressure on gold. Gold prices have been on their way up since November as bullish bets on the dollar and yields eased. Gold prices for 2023 may continue to attract buyers. However, it may face some risks due to hawkish reactions from policy makers.
Few Fed officials on Thursday reiterated their struggle to keep inflation down to the 2% target. However, Louis leader James Bullard said the end of 2023 could bring some relief on the inflation front.
“Gold may be stuck above $1,800 until this time”
Data on Friday showed that US nonfarm payrolls (NFP) rose more than expected in December. In addition, the unemployment rate also declined. This points to a still tight labor market that could force the Fed to continue increasing. Edward Moya, senior analyst at OANDA, highlights in a note:
Labor market weakness is imminent and gold could remain stuck above the $1,800 level until that happens.
Phillip Streible, chief market strategist at Blue Line Futures in Chicago, says strength in the dollar index is pushing gold. He also stresses that as the labor market continues to be strong, the Fed will remain hawkish for longer. The analyst also comments:
If we ‘exceed expectations’ (report) of the same kind, we will likely see another lower expansion in gold and silver. In line with this – $1,805-1,800 is our key level support.
“The power of gold is not confirmed by one of his companions”
cryptocoin.com As you follow, gold prices rose at the beginning of 2023. But Tom McClellan, editor of The McClellan Market Report, says these gains may not be the breakout for prices investors were hoping for. In a note to clients Thursday, McClellan noted:
Precious metal prices remained flat throughout December 2022. That’s why the recent price hike excited investors. However, the strength of gold is not confirmed by one of his companions. The 0.02% split between the performance of near-term gold futures and iShares TIPS Bonds exchange-traded fund TIP is significant.
McClellan points out that while the principal amount of TIPS bonds can appreciate with inflation, inflation also means that interest rates will generally rise. In this context, “Therefore, the value of fixed interest rate payments suffers. It also lowers the value of the bond even if its final maturity value rises due to inflation.”
“This is not the time to start that big bull trend for gold prices”
Ideally, buyers of TIPS bonds want to see a lot of inflation. But there is no general increase in interest rates among other bonds. However, McClellan said, “Life doesn’t usually work that way. However, these TIPS bonds generally correlate well with gold prices and are currently bearish.”
McClellan says that the price of the iShares TIP Bond ETF is in a downward trend in December 2022, while gold prices are in an upward trend. Such divergences in the past have seen gold prices fall “too hard for the price of TIPS to sync with what they are doing.” McClellan finally makes the following statement:
So it’s really fun for gold investors that gold prices kick off another big 1970s-style bull market. However, the bearish trend between gold prices and TIP’s share price tells us that now is not the time to start that big bull trend.