Gold prices may be at their peak after spending more than $35 this week in response to a more aggressive Federal Reserve meeting minutes, according to analysts. Analysts consider this a positive signal that the golden bulls are following them closely. Market assessments and gold forecasts from master analysts Cryptocoin. com we have compiled it for its readers.
Hawk stance prevails in FOMC minutes
The big news that rocked the gold market this week was the Fed’s December meeting minutes, which showed that a ‘tight’ US labor market and troubled inflation could require faster rate hikes and balance sheet shrinkage.
“Participants generally noted that, given their individual outlook on the economy, labor market and inflation, it could be warranted to raise the policy rate sooner or more quickly than participants previously anticipated,” the minutes said. They also pointed to a more hawkish stance by stating, “Some respondents also indicated that it may be appropriate to start shrinking the Federal Reserve’s balance sheet soon after policy begins to increase interest rates.”
Bart Melek: Gold prices can rally between $40-50
Analysts point out that this view may be outdated given the rise in Omicron cases in December and January. “Omicron has an impact,” Bart Melek, head of global strategy at TD Securities, said in a statement. We have already started to see this in employment data,” he comments.
US nonfarm payrolls (NFP) rose just 199,000 in December, well below consensus estimates of 400,000. November data was revised and 249.000 positions were added. Meanwhile, the US unemployment rate fell to 3.9%, beating market consensus expectations of a decline to 4.1%. Bart Melek makes the following assessment:
Today was a big disappointment. But despite weak employment, the relative consensus is that inflationary pressures are still there. Gold prices may still rally between $40-50 in the first quarter. But then gold is likely to slide lower. There is no guarantee that the Fed will be restrictive. The market believes the Fed will take firm action, but I’m not so sure they can.
Gold will survive this sale, according to Phillip Streible
In light of changes in macro data and the Omicron epidemic, the Fed may have peaked this week in how hawkish it is perceived, Phillip Streible, chief market strategist for Blue Line Futures, said in a statement:
Gold will survive this sale. We use this fix to get gold again. Currently, it is trading at the bottom of its range. It is useful to step in at these price levels. But we still don’t have a major catalyst to push gold significantly higher. Yet we are at the pinnacle of falconry.
Edward Moya: $1,770 is a good support level for gold prices
After that, the markets asked, “How many rate hikes can the Fed commit to in 2022? Will be busy with the question. Wall Street is now struggling to figure out what would be neutral interest. “Several rate hikes are already priced in for 2022,” said Edward Moya, senior market analyst at OANDA.
But everyone wonders if some of the balance sheet flow will replace some of the future rate hikes. Gold had a bad week, but it could have been much worse when you consider that the 10-year Treasury rate has risen from 1.53% to 1.75%.
Edward Moya sees $1,770 as a good support level for gold prices next week.
“This should bring gold closer to $1,900”
Gainesville Coins precious metals expert Everett Millman notes that long-term investors still support higher gold prices:
Even if interest rates rise, real interest rates will still be negative due to high inflation. This is positive for gold. In addition, in the last two rate hike cycles, gold prices performed very well at the beginning of these increases. We may see a repeat of this when the Fed starts raising rates later this year. That should bring gold closer to $1,900.
Data to track and its implications
One of the macro data to watch out for next week will be the latest US inflation figures, scheduled for release on Wednesday. Market consensus forecasts the consumer price index to rise to 7% year-on-year in December. James Knightley, ING’s chief international economist, evaluates the prospects and impact as follows:
The numbers for the coming week will show the headline CPI breaking over 7% year-on-year and the core rate fast approaching a 40-year high as the core rate climbs well above 5% year-on-year. This will only increase pressure on the Fed to start raising interest rates.
Also, Thursday’s scheduled US PPI and jobless claims and Friday’s US retail sales will play a key role. Markets will also focus on Tuesday’s nomination hearing for Fed Chairman Jerome Powell to the U.S. Senate Committee on Banking, Housing and Urban Affairs.