Gold’s steady decline continues with it now trading near $1,820 an ounce at its lowest level this year as the precious metal struggles against the prospect of more interest rate hikes.
Later today brings US consumer spending figures, including the personal consumption expenditures index, which is the Federal Reserve’s favoured measure for inflation. These figures will help paint a fuller picture of how the US economy is faring and show how much more room for manoeuvre the Fed will have to ensure inflation remains on a downward trend when it next decides on its interest rates.
Having now dropped well over $100 an ounce since the start of February, the bulk of gold’s punishment from the interest rate reality check has now been meted out. While the metal may continue to drift slightly downward in the near-term, the medium-term prospects look more promising, particularly given the view that the US dollar has now peaked. As gold enjoys an inverse correlation with the US dollar, the likelihood of a weaker greenback in 2023 as the other currencies play catch up should be supportive for gold.
How far gold is able to climb over the coming months will largely be determined by the strength of central bank buying which was a significant factor in gold’s recovery in the final two months of last year. If China, Turkey and India continue to add to their holdings in similar levels to 2022, then gold could once again start to challenge the upper end of the $1,950-$2,000 range.
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