Nothing or nobody welcomes 2023 with a bang the way gold did. The yellow metal had a glittering start to the year as it hit another six-month high on Wednesday, 4th January. “Safe-haven demand is featured so far this first trading week of 2023, amid shaky global stock markets, global economic growth worries, rising Covid infections, the dollar and inflation worries.” shared Prithviraj Kothari, Managing Director of Riddhisiddhi Bullion Limited (RSBL)
MINUTES – Gold price clanged to gains around $1850 following the release of the Federal Reserve’s Open Market Committee (FOMC) minutes for the last meeting, which emphasized the need for the central bank to tighten conditions amid stubbornly high inflation levels.
The Federal Reserve released the minutes from last month’s FOMC meeting. Unanimously Fed officials agreed that the central bank should slow the pace of its aggressive rate hikes. This would allow them to continue to ratchet up the cost of credit to curb inflation. They continue to be worried that market participants have an inaccurate perception of hoping for rate cuts this year. However, they left the door open to tightening even more aggressively if inflation rises.
According to Prithviraj Kothari’s view on Gold, “Gold and silver prices did back well down from their daily highs ahead of the early-afternoon release of the minutes from the last Open Market Committee meeting of the Federal Reserve (FOMC). Metals traders were wondering if the minutes might produce a hawkish surprise. The December minutes showed that policymakers agreed to slow the pace of interest rate hikes but added that a slowdown is not a “weakening commitment to achieving price stability on that inflation is already on a persistent downward path.”
Fed officials added that the US central bank had made significant progress in moving to restrictive policies and added that no rate cuts would be necessary for 2023.
In the minutes, officials noted that a slower pace of rate hikes does not mean an easing of financial conditions. The gold market was able to hold some of its daily gains following the release of the Federal Reserve’s December meeting minutes, with price trading above the $1,850 an ounce level.
At the December meeting, Fed officials confirmed their commitment to bringing down inflation and warned against “unwarranted” loosening of financial conditions.
The meeting minutes also revealed that officials were worried about any “misperception” in financial markets around their actions.
RISING COVID INFECTIONS– This week’s rallies in the gold and silver markets also come amid worries about rising Covid infections in China continuing to crimp the world’s second-largest economy.
SLOW ECONOMIC GROWTH-Global stock markets were mostly firmer overnight. U.S. stock indexes are higher today. Still, there is keener trepidation in the marketplace this week. Potentially slowing economic growth in the major industrialized countries along with problematic price inflation in 2023 are keeping traders pensive and prompting safe-haven demand for the precious metals
Gold prices ticked higher on Thursday, aided by a softer dollar, while market participants braced for U.S. jobs data that could influence the Federal Reserve’s policy trajectory.
INFLATION WORRIES- Additionally, policymakers added that inflation risks could be more persistent and that further increases to the Federal Funds rate (FFR) would be appropriate.
Gold price is holding close to the highest level in seven months above $1,860 in the European session, accelerating the upbeat momentum, as the US Dollar tumbled across the board following a hot start to 2023.
U.S. DOLLAR– the US Dollar remains under heavy selling pressure, as the European equities opened higher. Further, the sell-off in the US Treasury bond yields gathered steam and exacerbated the pain in the greenback, allowing the non-yielding Gold price to extend its uptrend into the fourth straight session.
According to the Bullion King of India, “Bullion is seen as a hedge against inflation, but rising rates dull a non-yielding asset’s appeal. The short-term expectation is that gold will climb to $1,880 per ounce and trade broadly around $1,800 for most of the year
Gold has had an excellent start to the year, helped by a weaker dollar and expectations that the Fed might slow its pace of rate hikes. Recession risks and central bank buying should also support bullion this year.