BBI INFO
1. Market review: On Tuesday, spot gold first fell and then rose. A series of economic data that was not as expected pushed the price of gold to 1830 US dollars per ounce, a new high since February 23, and finally closed up 0.54% to 1827.03 US dollars / oz, fell more than 5% in February, marking the worst month since mid-212021; ounce.
2. A series of data in the United States performed poorly starting from the monthly wholesale inventory rate in January at 21:30, including the housing price data of S&P/CS 20 major cities in the United States in December, the Consumer Confidence Index of the Road Chamber of Commerce in February, and the Chicago PMI in the United States in February A series of U.S. data, including the U.S. Richmond Fed manufacturing index in February, were lower than expected, boosting risk sentiment before the U.S. market.
3. The minutes of the Fed discount rate meeting showed that three Federal Reserve Bank committees hoped to increase the discount rate by 50 basis points in January, including board members of the Cleveland Fed, St. Louis Fed and Minneapolis Fed.
4. According to the latest forecast of the U.S. Congressional Budget Office (CBO), by 2033, the U.S. annual national debt interest payment will reach 1.4 trillion U.S. dollars.
MARKET VIEWPOINTS
Kitco analyst Jim Wyckoff
From a technical perspective, gold futures for April delivery hit a nine-week low on Tuesday before reversing course with a bullish outbound pattern on the daily line. The rise in gold prices may have been triggered by short covering. The bears still have an overall technical advantage in the short term. On the daily chart, the downward trend in prices is still in place. Bulls’ next upside objective is expected to be closing above solid resistance at last week’s high of $1,856.40. Bears’ next short-term downside objective is a break below solid technical support at $1,800. During this period, first resistance was seen at $1841.20, then at $1850, first support at $1825, then yesterday’s low at $1810.80. (Note: The price of April gold futures is about $7 higher than spot gold).
Joy Yang, Director, MarketVector
The market expects that the Federal Reserve may raise interest rates above 5% this year and maintain it until the end of the year, and the price of gold fell to a new low for the year. Still, gold remains an attractive asset because the size of global markets has a larger sphere of influence than U.S. monetary policy. Gold has struggled because investors are hyper-focused on inflation and ignoring other risks. While yields have risen to multi-year highs, the yield curve is still at its most inverted in 40 years, a strong recession signal that is expected to support higher gold prices.
Looking at the broader financial market landscape, even if the Fed raises interest rates, there is no guarantee that it will reduce inflation. At present, more and more people believe that the Fed may adjust its inflation target from 2% to 3%. The move is significant as it signals that the economy has entered a period of high inflation and means the Fed doesn’t have to raise rates as much as it has in the past to hit its new inflation target. In addition, the continued de-dollarization trend will support the long-term bullishness of gold. Central banks bought 1,136 tonnes of gold last year, the largest annual purchase since records began in the 1950s. I don’t think the dollar will lose its status as the world’s reserve currency anytime soon, but neither is the de-dollarization trend. Finally, it is expected that the market will still have sufficient liquidity, and gold can stabilize above the support of 1700, and it is expected to rise to 2000. But it will be a sideways market, with wild swings in gold prices. However, given the above bullish factors, I think gold has more upside potential.
Degussa economist Thorsten Polleit
A rate hike frenzy by central banks is not good for gold. Higher interest rates increase the opportunity cost of holding gold, reducing demand and thus lowering the price of gold. Excessive rate hikes by central banks will disrupt economic cycles and financial markets, and they may need to end and reverse monetary tightening later this year. And that’s when gold prices could soar. I expect gold to average $2,000 this year, with upside potential up to $2,200. Based on the performance of gold over the past 20 years, the price of gold has increased by 8% per year, which offsets the impact of inflation on investors. Gold prices have not been closely correlated with inflation over the past two years, but that will be temporary. Additionally, investors are not fully appreciating the fact that the U.S. money supply is contracting for the first time since 1959, raising the prospect of a recession. There is also the possibility that the fall in inflation will be much worse than people expect. We may see 3% CPI later this year. Finally, the de-dollarization trend has also greatly supported the rise in gold prices this year. Central bank gold purchases hit record highs in 2022. The theme of de-dollarization is still playing out this year, especially as de-globalization accelerates. As non-Western central banks continue to diversify their assets and reduce their exposure to the dollar, they are still expected to buy gold aggressively in dollar terms. would lose its status as a global reserve currency overnight, but I do expect more private and institutional investors to sell some of their dollar holdings and move into other assets including gold, which should also push up gold’s market valuation .
Nicky Shiels, Head of Metals Strategy, MKS PAMP
Investment demand will be a catalyst to support gold prices
Investors need to remember that the effects of monetary policy always have a lag. The rate hikes we saw last year are back dominating the market, but the Fed will eventually break out before gold prices fall. In addition, investment demand will be a catalyst to support gold prices. The massive net outflow of ETFs was a headwind for gold prices last year. This year, we will see a resurgence of investment demand as the dollar is thought to have peaked. Moreover, the recent devastating earthquake in Turkey is unlikely to affect the country’s long-term demand for gold. Last year, Turkey was the largest official buyer of gold, buying 148 tonnes. If the earthquake has a negative impact on the economy, the lira will weaken further, but in the medium to long term, Turkey’s physical demand for gold and central bank demand will rebound. Therefore, taking into account stagflation and rising recession risks, coupled with a pick-up in physical demand, the average gold price is expected to be $1,880.
