Gold- Near & Long Term

It’s a roller coaster ride, all the way up especially when a falling USD suddenly sparks a pullback which further sends the metals into spiralling mode. Alongside the metals, we saw a significant unwind! However, the 1% jump in USD caused -2 to 3% cuts in gold and silver on Monday, 5th December in the late trading sessions. Constantly improving data and positive numbers from the US leaves an impression that the Fed’s effort to cool down the economy by calibrating interest rate hikes, does stand as a partially achieved step only. The USD Index showed an uptick along with US Bond yields and marred the Tech and Metal sectors in Asia Markets.

According to Prithviraj Kothari, “The price of gold advanced after Federal Reserve Chair Jerome Powell signalled the pace of tightening would slow at the next meeting, ahead of economic data that could bear on the central bank’s future rate hikes.”

The Bullion King of India also shared that, “The gold market, seeing a solid breakout from last month’s two-year lows, appears to be getting comfortable around $1,780 an ounce; however, one bank is warning investors that gold’s recovery looks fragile. There is a risk that gold prices retest supports at $1,750 an ounce and in spite of this rally, there is some hesitancy in the marketplace. Investors – big and small, continued to liquidate their holdings in gold-backed exchange-traded products.”

Giant gold-backed investment fund the SPDR Gold Trust yesterday saw shareholder liquidation for the 3rd session running, shrinking the world’s largest gold ETF by 0.5% since last Wednesday

Prithviraj Kothari, Managing Director, Riddhi Siddhi Bullion Limited (RSBL) also believes that” Gold is still in danger of falling lower and giving up its recent gains, but the longer-term outlook is more constructive as the Federal Reserve shifts from tightening to easing next year. Gold has been seeing head-turning gains in November and the beginning of December, but the rally has a high chance of fizzling out as the U.S. central bank is still raising rates. But looking into next year, things begin to shift for the precious metal, which has been battered down by this year’s strong U.S. dollar and higher yields.”
Global economic uncertainty and heightened geopolitical tensions will create a “worldwide war economy” that prioritizes domestic supplies and price caps, ensuring that inflation will remain persistently high through 2023.

The tone of the gold market is getting more positive as Jerome Powell signalled the pace of rate hikes would slow at the Fed’s next meeting. In some ways, the market has taken the lead from the Fed. In November, gold gained 8% with talk of Covid loosening in China, but the dollar lost 5% in conjunction with a rise in gold and some anticipation that the Fed can’t keep raising rates this fast. We had a major blow up with the crypto space, and now Blackstone’s $69 billion real estate fund for wealthy individuals announced it is limiting redemption requests on the fund as total requests to liquidate exceed the threshold withdrawal limits. Gold is beginning to get interesting as other investment returns look less certain.

Higher for longer consumer prices, improvement in Chinas economy, pumping liquidity into the global financial markets by the central banks (owing to the great recession), will drive gold prices dramatically high.

As well as being an inflation hedge, gold will also remain an attractive asset for nations looking to further reduce their exposure to the U.S. dollar.
Gold is still in danger of falling lower and giving up its recent gains, but the longer-term outlook is more constructive as the Federal Reserve shifts from tightening to easing next year

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