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

Markets wait for 2022 to end on a positive note

 “Gold ticked higher on Monday as a retreat in the dollar made bullion more attractive for other currency holders, drawing further support from some safe-haven demand from China amid wide protests over its strict COVID-19 curbs.” says the top gold dealer in india.
 
The US markets fell on Monday post the sudden hawkish comments released by the Fed and also the ongoing unrest in China. But on Tuesday morning there were reports that China State Council will have a press conference to hopefully call off the zero Covid policy. This created a direct and positive impact ion Hong Kong and Shanghai markets, noted by bullion dealers in India.
If the China COVID situation does not come under control and the crisis gets worse then it could be positive for the gold market.
On one hand we have the escalating crisis in China and on the other hand we have hawkish Fed comments. Both these are acting as opposite drivers for the yellow metal.
Gold prices slipped from a more than one-week high on Monday, as the dollar rose from session lows on hawkish comments from members of the U.S. Federal Reserve reiterating their fight against inflation.
Various members of the Federal Reserve have been extremely vocal about upcoming interest rate hikes. One of the more hawkish Federal Reserve members is the St. Louis Fed President James Bullard. Last week he commented on the need for the Federal Reserve's benchmark rate to go as high as 7% to deal with lowering inflation. This week speaking to Greg Robb an editor at Market Watch when asked a question about how long expects the fed funds rate will need to remain in the 5% to 7% range, he said that "the Federal Reserve will likely need to keep its benchmark policy rate north of 5% for most of 2023 and into 2024 to succeed in taming inflation.

Spot gold last fell 0.86% to $1,740.557 per ounce, after hitting its highest since Nov. 18 earlier in the day. U.S. gold futures settled down 0.8% at $1,740.3.
The dollar turned positive after falling to a near two-week low earlier in the session. A stronger dollar makes greenback-priced metals more expensive for other currency holders.
Fed Presidents James Bullard and John Williams stated that there was a long way to go to fight inflation, with Bullard stating that rates should be held high “throughout next year and into 2024.”

But a very strange or rather bizarre trend being witnessed in some of the leading economies (excluding US) is the reduced dollar dependency.
This has been highlighted even more post the Russian –Ukraine War.
West sanctions against Russia are backfiring, particularly fir the US dollar, which is slowly but surely losing its grip on global dominance.
After witnessing western nations unilaterally freeze Russia’s foreign assets in response to Moscow’s military operation in Ukraine, largest bullion dealers in India noticed that central banks have been boosting their gold reserves so the same thing doesn’t happen to them should Washington suddenly turn unfriendly. Over $300 billion of Russian foreign reserves— not including assets owned by businesses and individuals— were frozen by the Biden administration and other western allies
 
China and Russia are allies with the former closely associated with the World Economic Forum, whose plans to implement the Chinese social credit system globally are well advanced.
On the other hand, social unrest, inflation, disrupted supply chain and food supplies etc have created pressure on the dollar and its importance as a world currency has depleted.
If this continues to happen, the U.S. will no longer be able to exchange piles of intrinsically worthless paper for the goods and services produced by the rest of the world and will rapidly become a banana republic, kind of like Haiti but without the mild winter climate. China and Russia have been moving toward this goal for many years, which is why they have been accumulating vast quantities of gold at knockdown prices in preparation for the day when they will launch a gold-backed currency that will see the dollar might lose its significant hold at astonishing speed.
They have been waiting for the right moment, and with the Fed doubling the number of dollars in existence every few years now, that time is believed to have arrived. The imminence of this may explain why the dollar tanked this month.
But this data is not being supported by strong evidence and we can do nothing but wait for concrete facts. Meanwhile some important data coming up-
 
Jerome Powell is due to speak at a Brookings Institution event on Wednesday, on the outlook for the U.S. economy and the labour market
U.S. non-farm payroll data for November is due on Friday, which might shift expectations around the Fed’s policy move in December. Traders currently anticipating a 50-basis-point rate hike.

Keeping fingers crossed, we at RiddiSiddhi Bullions Limited hope global markets to end 2022 on a positive note, thus benefiting the max.