Gold Welcome 2023 With a Bang!

Nothing or nobody welcome 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- 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. 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). Bullion dealers in India 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- The rallies in the gold and silver markets this week 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 today 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. Bullion is seen as a hedge against inflation, but rising rates dull non-yielding asset's appeal. The short-term expectation is that live gold price will climb to $1,880 per ounce and trade broadly around $1,800 for most of the year[Text Wrapping Break] Gold has had a good 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.    

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 large unwind! However, bullion dealers in India noticed that the 1% jump in USD caused -2 to- 3% cuts in gold and silver on Monday, 5th December in the late trading sessions.  A constantly improving data and positive numbers from the US leaves an impression that the Fed’s effort to cool down economy by calibrating interest rate hikes, does stand a partially achieved step only. Having said that, the USD Index showed an uptick along with US Bond yields and marred the Tech and Metal sectors in Asia Markets.

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 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 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

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 rate
But looking into next year, largest bullion dealers in India predict that things might 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 says gold dealers in India at RiddiSiddhi Bullions Limited.

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 top gold dealer in India can assure you that the longer-term outlook is more constructive as the Federal Reserve shifts from tightening to easing next year