The shiny metal hit a seven-month high on Thursday. However, the gold price fell sharply after the US private sector employment data, which could affect the Federal Reserve’s policy direction. Analysts interpret the market and share their forecasts.
“Gold made a good start to the new year”
The gold price fell sharply after hitting its highest level since June 13 on Thursday. At the time of writing, spot gold was trading at $1,828, down 1.38%. U.S. gold futures slid 1.29% to $1,825. The dollar index (DXY) turned north and rose 0.92%. Thus, it made gold more expensive for other currency holders. Brian Lan, managing director of Singapore-based GoldSilver Central, comments:
Gold got off to a good start to the year, aided by a weakening dollar and expectations that the Fed might slow the rate hike. Recession risks and central bank purchases should also bolster gold this year. If employment data reflect that rate hikes are hurting the economy, then the dollar could weaken further and benefit gold.
“Spot gold price could test resistance at $1,869”
cryptocoin.com As you can follow, private sector employment (ADP) in the US increased more than expected in December. Thus, he pointed out that the demand for labor is still strong despite high interest rates. This will be followed by the US Department of Labor’s closely watched nonfarm payrolls (NFP) data on Friday.
Spot gold price could test a resistance at $1,869, according to Reuters technical analyst Wang Tao. A break above this could lead to a gain at $1,883.
“The market is trying to find the reason for the movements at the beginning of the year”
The Fed’s December policy meeting minutes released Wednesday showed that all officials agreed that the US central bank should slow down its aggressive rate hikes. Meanwhile, Minneapolis Fed Chairman Neel Kashkari said on Wednesday that the Fed should continue raising interest rates at least in its next few meetings until it is confident that inflation has peaked. Ole Hansen, head of commodity strategy at Saxo Bank, comments:
The minutes gave us nothing new to act upon. The market is trying to find the reason behind the initial moves in gold at the beginning of the year. Confidence among traders at this time of year tends to be somewhat low. There will be some profit taking after the shiny metal reaches $1,865 levels.
According to StoneX analyst Rhona O’Connell, in the short term, Fed minutes have boosted higher rhetoric for the longer term. However, the analyst says that the immediate reactions to the Fed comments on these lines are gradually decreasing.
“The next big hurdle for the gold price is the $1,875 zone”
Gold’s winning streak continued on Wednesday as dollar and Treasury yields fell. However, Thursday saw the US drop sharply after the ADP. Marios Hadjikyriacos, senior investment analyst at XM, comments:
The macroeconomic landscape, characterized by rising recession risks and central banks completing cycles of tightening, bodes well for gold this year. Besides, the next major hurdle to watch on the upside is the $1,875 zone.
“Gold is always a friend in uncertainty!”
Gold fell for most of 2022 after peaking north of $2,000 an ounce in March. Precious metals traders are now watching to see if it will return to these levels. Stephen Innes, managing partner at SPI Asset Management, says January “seasonality” tends to push gold prices against the euro and the US dollar. In addition, the analyst makes the following statement:
Of course, the reasons are always somewhat vague. Why does it show up every January along with the old with gold? Still, given key economic unknowns, this year is all about portfolio diversification. Gold is always friendly in uncertainty.