Questions arise about next FOMC meeting; will their decisions remain data-dependent

Exactly one week from today the Federal Reserve will hold the first Federal Open Market Committee meeting for the calendar year 2023. But before Federal Reserve officials meet for the first time this year on Friday, January 27 the government will release its latest data on inflation vis-à-vis the core PCE for December. Currently, the forecast for this week’s core PCE report is that inflationary pressures will continue to subside from 4.7% YoY in November to 4.4% in December 2022.

Inflation has been steadily subsiding as a result of the extremely aggressive monetary policy of the Federal Reserve which has been raising the benchmark “Fed funds” rate beginning in March 2022. The Federal Reserve had maintained its benchmark rate between 0 and ¼% for an extended time even though inflation in 2021 was spiraling out of control quickly approaching a 40-year high. Beginning in March the Federal Reserve raise rates by ¼%, the first-rate hike since 2018.

This was followed by a series of aggressive rate hikes that would define the second half of 2022. The Federal Reserve as they raised rates at each consecutive FOMC meeting from March to December. In May they raised rates by ½% and followed that with a series of ¾% rate hikes in June, July, September, and November. Finally, the Federal Reserve decreased the pace of hikes starting on December 2 by only raising them by ½ %. The totality of the actions by the Federal Reserve last year took the benchmark rate from between 0 and ¼% to between 4 ¼% and 4.5%.

It is widely expected that the Federal Reserve will continue its pivot by slowing the pace of rate hikes with a ¼% rate hike during the January FOMC meeting. The CME’s FedWatch tool currently is forecasting that there is a 98.1% probability that the Fed will raise rates by only ¼% and a 1.9% probability that the Fed will raise rates by ½ %. The Federal Reserve is also on record according to their most recent economic projections released in December of last year that they expect to take their benchmark rate just above 5% and not reduce that level for the entire year and possibly into the first or second quarter 0f 2024.

This raises many questions, the most important being whether or not the Federal Reserve will maintain this aggressive monetary stance in light of recent data that indicates that inflation in the US and globally has peaked and is decreasing every month. Global inflation came in at a six-month low in December but the Federal Reserve maintains that it is unlikely to reverse its hawkish bias.

Their hardline stance that they will keep rates elevated at 5% with no rate reduction in 2023 brings to question whether or not the Federal Reserve is still data dependent, and if they are will they maintain their rigid policy of no rate deductions this year regardless of what the data shows?

While declining levels of inflation allude that the hawkish monetary policy of the Fed with aggressive rate hikes is certainly behind us. The fact that the Federal Reserve is on record stating that they will slow the pace of rate hikes the question becomes; is there any point at which positive data on lower levels of inflation will cause them to backpedal on their stance of no rate reductions in 2023?

This is possibly the most important question on the minds of economists, analysts, and most importantly market participants.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

Gold futures remain steady as investors await the PCE report and FOMC meeting

Gold futures traded marginally higher as market participants focus on next week’s FOMC meeting. As of 4:00 PM EST, the most active February contract of gold futures is up $3.80 and fixed at $1932. Silver futures traded under pressure with the most active March contract currently down $0.37 and fixed at $23.565. The dollar had little influence on precious metals pricing today with the dollar index in essence unchanged, up 0.01%, and fixed at 101.795.

Next week, the Federal Reserve will hold the first federal Open Market Committee meeting for the year where they will most likely implement the next interest rate hike. Last week, we received a series of mixed messages from different Federal Reserve officials. James Bullard, the president of the St. Louis Federal Reserve for example expressed the need for the Federal Reserve to rapidly move to their target rate of 5% or higher saying “why stall”.

Another advocate continuing to raise rates at an accelerated rate was Cleveland Fed President Loretta Mester. Last week she commented, "I just think we need to keep going, and we'll discuss at the meeting how much to do."

However, it is still highly anticipated that the Federal Reserve will continue with a slower pace of rate hikes as seen at the last FOMC meeting in December when the Fed raised rates by ¼%, the smallest interest rate hike since March of last year. Several officials of the Federal Reserve have alluded to slowing the pace of rate hikes including Gov. Christopher Waller, who said in a speech at the Council on foreign relations that he favors a ¼% rate hike at the next FOMC meeting.

This is in alignment with the CME’s FedWatch tool which is predicting a 99.1% probability that the outcome of next week’s FOMC meeting will be a rate hike of 25-BPS, and only a 0.9% probability that the Fed will enact a more aggressive stance raising rates by 50-BPS.

One of the most important reports that will occur before the FOMC meeting is the release of the US core PCE (Personal Consumption Expenditures Price Index) index on January 27. The last report came in at 4.7% for November and it is currently believed that this month’s report will show that inflation has subsided to 4.4% in December of last year.

Gary S. Wagner

For Kitco News

Time to Buy Gold and Silver

David

Gold price eyes $1,950 but it might have to wait until the Fed meeting before moving on to $2,000 – analysts

Gold's January rally took prices to nine-month highs Friday, with the precious metal up more than 5% since the start of the year. But industry experts are not ruling out some consolidation ahead of the Federal Reserve's February meeting.

Gold hit a nine-month high of $1,939 an ounce Friday on bullish technical momentum and safe-haven buying. At the time of writing, February Comex gold futures were at $1,925.20, flat on the day after some profit-taking.

Is gold overbought?

Analysts describe a rapid rally in gold and warn that conditions are starting to look overbought.

"It is going to be choppy. I am neutral on gold until the Fed's meeting on February 1. Major resistance is at $2,000. But I would be surprised if we move above $1,950. We are likely to consolidate here until the Fed meeting," OANDA senior market analyst Edward Moya told Kitco News.

The overall outlook on gold remains strongly bullish, with many analysts looking for the precious to eventually get to $2,000 an ounce later this year and potentially even later this quarter. It is only the short-term view that looks potentially overstretched.

"It's been a skyrocketing move higher. If selling pressure kicks in, $1,900 might not be a strong level of support," Moya noted.

Technically, gold is approaching overbought territory, noted RJO Futures senior market strategist Frank Cholly, adding that the trend higher remains strong.

"The gold market is moving higher at a ridiculous rate. It is seeing higher highs, higher lows, and higher closes. That is good. And the U.S. dollar has been trending lower. Any correction at these levels would be a buying opportunity," Cholly told Kitco News. "I expect gold to continue to trend higher. I am bullish until we see a pullback to $1,850."

The $2,000 target is still very much on the table for Cholly. "Even though we had a little trouble achieving a close at $1,950, I see a clear pathway to $2,000," he said.

Cholly explained that gold is a unique market in that higher prices make the asset more attractive. "In other markets, such as raw commodities that are supply and demand driven, you reach a point where high prices are the cure for high prices — meaning that people stop buying at a certain price target or producers increase production. For gold, the higher it goes, the more people want it. We can easily achieve $2,000 in the first half of this year, if not sooner," he added.

Fed expectations

The beginning of the year saw recession fears and movement in Treasuries, which was good for gold. "Year-to-date, gold is off to a good start," Moya said. "I still maintain my 2023 bullish outlook. We've seen it rally quite a bit, so there could be some weakness here."

All eyes will be on the Fed messaging come February 1, with markets pricing in a downshift to a 25-basis-point hike. This is a significant change of pace after the Fed went from hiking by 75 basis points in the fall to 50 basis points in December.

"The Fed has done enough messaging. But the labor market is a bit confusing. There has been enough weakness in the data already. They are likely to downshift to 25 basis points," said Moya. "For the Fed, a big risk is that inflation doesn't go all the way down."

The U.S. dollar moves are critical to watch in the next few weeks as markets anticipate a lower dollar as the Fed slows down rate hikes, added Cholly.

Data next week

There are several critical data releases next week, including the U.S. Q4 GDP and the Fed's favorite inflation measure — the core personal consumer expenditure.

Despite deteriorating manufacturing and service sector data, the fourth quarter GDP is expected to show the U.S. economy expanding 2.6% after reporting growth of 3.2% in Q3.

"Consumer spending should be an important driver given the strong performance in October, but aside from that, the growth will largely be focused on net trade and inventory building," said ING's chief international economist James Knightley. "This is not 'good' growth. Imports are falling because of the deteriorating domestic growth story, while inventories are increasing, partly because of improved supply chains but also because demand is not as strong as many businesses expected. The GDP growth figures over the next few quarters will be much weaker."

The core PCE price index is expected to slow to 4.4% on an annual basis in December from November's pace of 4.7%.

"[This] would confirm the easing trend in price pressures. There are no scheduled Federal Reserve speakers due to the proximity to the upcoming FOMC meeting and the self-imposed 'quiet period'. We expect a 25bp interest rate increase on February 1," Knightley added.

Wednesday: Bank of Canada rate decision

Thursday: U.S. GDP Q4, U.S. jobless claims, U.S. durable goods orders

Friday: U.S. PCE price index, U.S. pending home sales

By Anna Golubova

For Kitco News

Time to Buy Gold and Silver

David

Gold prices holding steady gains above $1,925 as U.S. existing home sales drop 1.5% in December

Gold prices, while down from their nine-month highs, are holding modest gains following another drop in U.S. existing home sales, according to the latest report from the National Association of Realtors (NAR).

Friday, the association said that existing home sales fell 1.5% to a sales rate of 4.02 million homes in December, the market's eleventh consecutive drop. Although home sales continued to decline into the year-end, the data was better than expected. Economists were looking for a sales rate of 3.95 million.

The gold market is seeing a muted reaction to the latest economic data as some traders take profits after prices hit a nine-month high at the start of the North American trading session. February gold futures last traded at $1.927.10 an ounce, up 0.17% on the day.

The NAR said that existing home sales totaled 5.03 million in 2022, a drop of 17.8% from 2021. Economists note that the Federal Reserve's aggressive monetary policy action, raising interest rates 425 basis points last year, kept many potential home buyers out of the market. At the same time, low supplies of homes for sale kept prices elevated through 2022.

"December was another difficult month for buyers, who continue to face limited inventory and high mortgage rates," said NAR Chief Economist Lawrence Yun. "However, expect sales to pick up again soon since mortgage rates have markedly declined after peaking late last year."

The report said the median price for existing homes in December was $366,900, up 2.3% compared to last year. "This marks 130 consecutive months of year-over-year increases, the longest-running streak on record," the report said.

However, Yun noted that prices could start to reverse as the supply of homes for sale grows

"Home prices nationwide are still positive, though mildly," Yun added. "Markets in roughly half of the country are likely to offer potential buyers discounted prices compared to last year."

Looking at housing inventories, the report said that as of the end of December, there were 970,000 units for sale, down 13.4% from November but up 10.2% for the year. The number of homes for sale represents a 2.9-month supply, the report added.

By Neils Christensen

For Kitco News

Time to Buy Gold and Silver

David

Solid gains for gold on bullish charts, some safe-haven buying

Gold prices are solidly higher and near this week’s nine-month high in midday U.S. trading Thursday. The technical traders continue to flow to the long side of the gold market due to bullish charts. Some modest safe-haven demand may be surfacing due to worries about the U.S. government going into default on its debt. February gold was last up $13.40 at $1,920.50 and March silver was up $0.048 at $23.695.

The U.S. Treasury Department said it is poised to take defensive action to prevent a default that could do "irreparable harm" to the economy, reports said.

Global stock markets were mixed but mostly lower overnight. U.S. stock indexes are lower at midday. The U.S. stock index bulls were derailed Wednesday when U.S. retail sales data came in weaker than expected, which revived notions the U.S. economy could slip into recession in 2023. The U.S. government debt concerns are also limiting buying interest in stocks.

The world could run out of gold by 2050 as demand grows to keep up with evolving society, says researcher

The key outside markets today see the U.S. dollar index slightly lower. Nymex crude oil futures prices are higher and trading around $81.00 a barrel. Meantime, the yield on the benchmark U.S. 10-year Treasury note is presently fetching around 3.38%percent. U.S. Treasury yields have dropped in the wake of a tamer U.S. producer price index report on Wednesday and the weaker U.S. retail sales report.

Technically, February gold futures prices hit a nine-month high Tuesday. Bulls have the solid overall near-term technical advantage. A 2.5-month-old uptrend is in place on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at $1,950.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,870.00. First resistance is seen at this week’s high of $1,931.80 and then at $1,950.00. First support is seen at $1,900.00 and then at $1,885.00. Wyckoff's Market Rating: 8.5

March silver futures bulls have the overall near-term technical advantage. However, they have faded recently as a four-month-old uptrend on the daily bar chart has turned into sideways trading. Silver bulls' next upside price objective is closing prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at $22.50. First resistance is seen at $24.00 and then at $24.50. Next support is seen at the January low of $23.26 and then at $23.00. Wyckoff's Market Rating: 6.5.

March N.Y. copper closed down 40 points at 423.05 cents today. Prices closed nearer the session high today. Prices Wednesday hit a 6.5-month high. The copper bulls have the solid overall near-term technical advantage. However, the bulls are short-term exhausted. A three-month-old uptrend is still in place on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 450.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 400.00 cents. First resistance is seen at today’s high of 426.85 cents and then at 430.00 cents. First support is seen at today’s low of 416.80 cents and then at this week’s low of 411.05 cents. Wyckoff's Market Rating: 7.5.

By Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Gold trades lower as Fed’s Bullard advocates front-loading rate hikes

“Front-loading” is a process of distributing unevenly, with a greater proportion at the beginning of the process, and James Bullard thinks this should apply to rate hikes.

In an interview with the Wall Street Journal James Bullard, President of the St. Louis Federal Reserve said that the “Federal Reserve should not stall” on raising its rates. He said that he likes the idea of “front-loading” rate hikes saying that “the Federal Reserve should move as rapidly as it can to get its policy rate over 5% and then it can react to the data”, adding “Why not go to where we’re supposed to go. Why stall? James Bullard is not a voting member of the Fed’s interest rate committee this year.

His sentiment is also echoed by Loretta Mester, President of the Cleveland Federal Reserve who is advocating that the Fed needs to raise its interest rate a “little bit” higher than the Fed’s current target of 5% to 5 ¼%. In an interview with the Associated Press today she said, "I just think we need to keep going, and we'll discuss at the meeting how much to do”.

This goes against a central message presented by many officials of the Federal Reserve last year. The latest message delivered by Chairman Powell expressed that the Fed intended to slow the pace of interest-rate hikes in 2023. This message was reinforced today by Patrick Harker the president of the Philadelphia Federal Reserve. Reuters news reported that “he‘s ready for the U.S. central bank to move to a slower pace of interest rate rises amid some signs that hot inflation is cooling off”.

Currently, analysts and market participants are anticipating that the Fed will raise rates by ¼% at the next FOMC meeting. This is in alignment with the CME’s FedWatch Tool which is forecasting a 93.3% probability of a 25-bps rate hike, and a 6.7% probability of a 50-bps rate hike by the Fed at their next meeting.

The Federal Reserve raised its benchmark rate more aggressively last year than any other time since the 1980s. Beginning in March 2022 the Fed raised rates at every FOMC meeting with four consecutive jumbo 75-bps rate hikes. This took the Fed’s benchmark rate from 0-25 bps in February to 425-450 bps by the end of the year. The Federal Reserve is currently anticipating that they will raise rates until they reach their target of 5 ¼ to 5 ½% this year.

The mixed messages sent by Federal Reserve officials have raised concerns that the Federal Reserve will backpedal the idea of slowing down the pace of interest-rate hikes.

This has pressured gold prices to drop over the last two days. After hitting an intraday high yesterday of $1931 the price of February gold futures has softened considerably. As of 3:50 PM EST, the most active futures contract is currently fixed at $1905.60, after factoring in yesterday’s decline and an additional $4.10 today. If the price of gold futures breaks below $1900 it could decline to approximately $1880 which is the next technical level of support.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

Profit taking, routine corrective pullbacks for gold, silver

Welcome to Kitco News' 2023 Outlook Series. Uncertainty continues to dominate financial markets as central bank monetary policies push the global economy into a recession to cool down inflation. Stay tuned to Kitco News to learn from the experts on how to navigate turbulent financial markets in 2023.

(Kitco News) – Gold and silver prices are weaker in midday U.S. trading Tuesday, after gold scored a nine-month high overnight. Normal downside price corrections, in existing uptrends, were featured in the two metals markets. Profit taking from the shorter-term futures traders was also seen. The gold and silver bulls still have the solid technical advantage. February gold was last down $12.10 at $1,909.60 and March silver was down $0.292 at $24.08.

U.S. stock indexes are weaker at midday on some disappointing corporate earnings reports.

In overnight/weekend news, China got more downbeat economic data, as Covid continues to punish the world's second-largest economy. China's economic growth slowed to 3% in 2022 from 8.1% in 2021, official data said Tuesday. Except for the pandemic year of 2020, that's the worst annual economic growth rate for China since 1976. The dour China news has traders and investors more risk averse to start this holiday-shortened U.S. trading week.

Royal Mint sees record bullion demand in 2022 as sales increase 25% for gold, 29% for silver

The key outside markets today see the U.S. dollar index higher. Nymex crude oil futures prices are slightly higher and trading around $80.30 a barrel. Meantime, the yield on the benchmark U.S. 10-year Treasury note is presently fetching around 3.518%.

Technically, February gold futures prices hit a nine-month high early on today. Bulls have the solid overall near-term technical advantage. A 2.5-month-old uptrend is in place on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at $1,950.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,870.00. First resistance is seen at today's high of $1,931.80 and then at $1,950.00. First support is seen at today's low of $1,906.80 and then at $1,900.00. Wyckoff's Market Rating: 8.0

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March silver futures bulls have the firm overall near-term technical advantage. However, a four-month-old uptrend on the daily bar chart has turned into sideways trading. Silver bulls' next upside price objective is closing prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at $22.50. First resistance is seen at today's high of $24.67 and then at the January high of $24.775. Next support is seen at $24.00 and then at $23.50. Wyckoff's Market Rating: 7.0.

March N.Y. copper closed up 65 points at 422.25 cents today. Prices closed near the session high today, hit a 6.5-month high and scored a bullish "outside day" up on the daily bar chart. The copper bulls have the solid overall near-term technical advantage. A three-month-old uptrend is in place on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 450.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 400.00 cents. First resistance is seen at today's high of 423.70 cents and then at 425.00 cents. First support is seen at 415.00 cents and then at today's low of 411.05 cents. Wyckoff's Market Rating: 8.0.

By Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Gold’s bull market is just beginning as European fund managers take a bigger stake – HANetf

Gold's bull market is just beginning as European fund managers take a bigger stake – HANetf

The gold market has started 2023 on solid footing and one European-based fund sees strong potential as investors take a renewed interest in the precious metal.

In November, analysts at HANetf surveyed 100 European and British wealth fund managers, and according to the results, 89% of respondents said that they intend to increase their exposure to gold in 2023.

According to the survey, wealth fund managers see central bank demand for gold as a major bullish factor for the precious metal. According to data from the World Gold Council, last year, as of the end of the third quarter, central banks bought 673 tonnes of gold, the most accumulated in a single year since 1967.

The survey shows that 83% of managers expect central banks to continue buying gold in the new year.

Along with central bank demand, wealth fund managers said that gold remains an attractive inflation hedge and a protection against further equity market volatility and risk.

When the survey was conducted, gold prices were trading near a two-year low and according to the survey, fund managers said those prices represented an attractive long-term entry point.

"It now may be the case that a lot of the negative sentiment towards gold has passed," said Tom Bailey, head of ETF research at HANetf, in the report. "Many analysts now see the Federal Reserve slowing rate hikes, while the dollar's strength now seems potentially in retreat. That should provide some relief for gold prices and potentially result in a pick-up in investment demand.

Last month Eric Strand, portfolio manager and creator of the European-listed AuAG ESG Gold Mining exchange-traded fund (LSE: ESGO), said that gold could be on the cusp of a new bull market.

With gold ending the week above $1,900, analysts turn their focus to $2,000

Strand said that he sees gold prices gaining 20% in 2023.

Along with gold, Strand expects the precious metal mining sector, which has underperformed compared to the commodity, will attract new momentum in the new year.

"Gold miners are today historically cheap relative to gold, something that will revert and overshoot in the coming secular bull market," he said. "Gold miners have a very low correlation with the broad stock market and are becoming more interesting for larger investors looking for possible/alternative return drivers and that may result in strong capital flows, which will then take equity prices higher."

Along with the AuAG ESG Gold Mining exchange-traded fund, HANetf also manages a second environmental and social governance (ESG)-focused fund: The Royal Mint Responsibly Sourced Physical Gold ETC (LSE: RMAU). Last year RMAU saw growth of 130%, bucking the global downtrend in the ETF market.

According to the survey, wealth managers see a potential premium for ESG-focused funds, with 36% of fund managers expecting a dramatic increase in transfers to gold funds with strong ESG credentials while 54% of respondents see a slight increase in switching.

By Neils Christensen

For Kitco News

Time to Buy Gold and Silver

Strand said that he sees gold prices gaining 20% in 2023.

Along with gold, Strand expects the precious metal mining sector, which has underperformed compared to the commodity, will attract new momentum in the new year.

By Neils Christensen

For Kitco News

David

With gold ending the week above $1,900, analysts turn their focus to $2,000

The gold market is ending the week at a nine-month high as renewed safe-haven demand pushed prices above $1,920 an ounce, which some analysts highlighted as an important resistance level.

Analysts have said that rising economic uncertainty and shifting market fundamentals could help push prices back to $2,000 sooner than expected.

February gold futures are looking to close the week with roughly 1% gain, with prices last trading at $1,922.80 an ounce.

"There is a gravitational pull to $2,000 and it will only build as prices continue to move higher," said Phillip Streible, chief market strategist at Blue Line Futures.

Gold's late afternoon rally came after U.S. Treasury Secretary Janet Yellen sent a letter to Congress warning lawmakers that the government could hit its debt limit on Jan. 19.

picGrowing fears that the U.S. could potentially default on its debt obligations have increased recently as the Republican Party's slim majority in the U.S. House of Representatives is expected to complicate negotiations. Some Republican politicians have already said that any rise in the debt limit needs to be accompanied by deep spending cuts.

"We knew the debt issue was going to be a problem in 2023, but we weren't expecting it to rise to prominence so soon," said Edward Moya, senior North American market analyst at OANDA. "The short-term reaction in gold is warranted, giving how much uncertainty there currently is."

However, Moya added that while near-term safe-haven demand should continue to support gold prices, there are much bigger factors impacting the gold market.

"It's just too early to see how this will play out. In the short-term, it's positive for gold, but if there is any major chaos, that would support the dollar and weigh on gold," he said.

Moya said that for gold, he sees some resistance at $1,950 an ounce, and if that breaks, there is not much to stop the market from rallying back to $2,000 an ounce.

"There is lots of momentum in the market right now and I think $2,000 is a target is just a question of when we get there," he said.

This is why you will see high premiums on American Eagle silver coins in 2023

Federal Reserve's monetary policy remains the critical driver for gold

Looking past the near-term volatility, analysts have said that the most significant influence on gold remains shifting expectations regarding the Federal Reserve and the impact easing inflation is having on bond yields and the U.S. dollar.

Consumer inflation data this past week showed that price pressures are cooling in line with expectations, which some analysts have said gives the Federal Reserve room to slow the pace of its aggressive monetary policy stance.

According to the CME's FedWatch Tool, markets see a more than 90% chance that the U.S. central bank will raise the Fed Funds rate by 25 basis points next month.

Investors anticipating that the Federal Reserve is closer to the end of its tightening cycle have pushed bond yields lower and weighed heavily on the U.S. dollar.

The U.S. dollar index is looking to end the week at its lowest level in seven months as it tests support at 102 points.

Kevin Grady, president of Phoenix Futures and Options, said that investors are seeing a fundamental change in financial markets, supporting gold prices, even if market momentum looks technically overstretched.

"I have been waiting for a fundamental change in the marketplace and I think we are starting to see that," Grady said. "The bond market is signaling that interest rates will be lower than what the Fed is saying and that is bullish for gold."

Pay attention to the U.S. dollar; it looks oversold

Although gold prices have room to move higher next week, some analysts have said that investors should use some caution at these levels and not chase the market.

While many analysts are solidly bullish on gold in the near term, they have said that investors should look to buy the precious metal on dips.

Darin Newsom, senior market analyst at Barchart, said that he sees higher gold prices as both the short-term and medium-term trends are decidedly up.

However, he added that bullish investors might have to be agile as gold could rapidly correct. He said that the key to gold's short-term momentum will be the U.S. dollar, which he said is sharply oversold. He noted that 102.17 is an important retracement level from last year's historic rally.

"When [gold] decides to turn, and it could be some point next week, it could fall fast," he said. "Markets take the stairs up and the elevator down."

Marc Chandler, managing director at Bannockburn Global Forex, said he also sees the U.S. dollar as oversold. He noted that although inflation is cooling, the Federal Reserve is still expected to raise interest rates, which could help stall the greenback's downward momentum.

Davos and economic data to watch

Although the U.S. will see a shortened trading week with markets closed Monday for Martin Luther King Jr. Day, there will be plenty of economic data to digest throughout the week.

Analysts have said the market could be sensitive to comments made during the annual World Economic Forum, which kicks off in Davos next week. The WEF has already raised concerns about rising geopolitical uncertainty and the continuous threat of inflation. Analysts have said that any grim outlook could further boost gold's safe-haven appeal.

The markets will also receive more retail sales numbers, inflation data and regional manufacturing numbers from the New York Federal Reserve and the Philadelphia Federal Reserve.

Economists have also said that investors need to keep an eye on the Bank of Japan's monetary policy decision as that could provide some bullish momentum for the U.S. dollar, which in turn would weigh on gold.

Tuesday: Empire State manufacturing index, Bank of Japan monetary policy decision

Wednesday: PPI, Retail sales

Thursday: Philly Fed Survey, weekly jobless claims, housing starts and building permits

Friday: Existing home sales

By Neils Christensen

For Kitco News

Time to Buy Gold and Silver

David

Gold, silver kick off 2023 in style

After a well-earned break, we are back in action… and what a time to be covering precious metals! Gold and silver are starting the year off on the front foot, with gold ending the first full trading week of the year at a nine-month high above $1,920 an ounce and silver prices solidly back above $24 an ounce

Gold prices are actually up nearly 5% since the start of the year, and while the year has only just started, the bullish sentiment in the marketplace is almost palpable. We have only just broken above $1,900 an ounce, but some investors and analysts have already set their sights on the $2,000 target.

Some heavyweight market players are jumping on the gold bandwagon as prices have risen $300 from November's two-year lows.

In an exclusive interview with Kitco News' Michelle Makori, Nouriel Roubini, CEO of Roubini Macro Associates and Professor Emeritus at NYU Stern School of Business, said that investors will flock to gold as 10 "megathreats" threaten the global economy.

Roubini said that he sees gold prices rising to $3000 an ounce by 2028.

"Over the next few years, I would expect that gold could have high single-digits into low double-digits rates of return," said the renowned economist, also known as "Dr. Doom," in the interview. "I expect… rates of return around 10 percent per year over the next five years."

Along with Roubini, billionaire "bond king" Jeffrey Gundlach said he turned bullish on gold when prices pushed above $1,800 an ounce.

In a webcast Tuesday, the Doubleline CEO said that gold was one of his recommendations for 2023. "It's a reasonably good time to buy gold and own gold," Gundlach said.

Many investors stayed away from gold in 2022 as the Federal Reserve's aggressive monetary policy stance pushed bond yields to a 12-year high and the U.S. dollar to a 20-year high; however, analysts have said that that trend could be reversing in 2023 as the Federal Reserve is nearing the end of its tightening cycle.

Analysts have noted that U.S. bond yields are pricing in a terminal Fed Funds rate below 5%, which in turn has caused the U.S. dollar to fall to a seven-month low this week.

Many analysts have said that both bond yields and the U.S. dollar have peaked, supporting gold's rally.

But gold is more than just the sum of investment demand. Global geopolitical uncertainty continues to support the precious metal as a critical element in global currency markets.

This week, the People's Bank of China announced that it bought 30 tonnes of gold in December. This follows November's purchase of 32 tonnes of gold, the first officially-recorded purchase since September 2019.

BNP Paribas market analyst Chi Lo said in a recent report that gold will be a crucial element in China's plan to strengthen the yuan's international credibility and challenge the U.S. dollar's status as the world's reserve currency.

"Making the renminbi convertible into gold effectively turns the currency into a global investable asset for foreign renminbi owners, boosting their confidence in and demand for the Chinese currency," Lo said in his report. "A gold-backed petro-yuan does not require full renminbi convertibility to function, so it allows China to simultaneously retain control of its capital account and boost the internationalization of the renminbi."

By Neils Christensen

For Kitco News

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