Gold is holding around $1,930 an ounce as the surge that started back in early November and has pushed the price up to levels last seen in April looks to have finally reached its peak.
Gold’s great run was sparked by a change in sentiment in how quickly the Federal Reserve will pause its interest rate hikes and further fuelled by the collapse of crypto exchange FTX and then further supported by a weakening of the US dollar. With these three factors now priced in, gold will need a fresh catalyst to push it higher than the elevated level it is already trading at.
It is worth remembering that gold has been able to make these substantial gains, totaling $300, even though the Fed implemented another rate hike in December and is likely to do so again when it meets at the end of this month. Gold therefore is already trading at a level reflective of the Fed having stopped hiking rates rather than the current environment where the US central bank has yet to reach the interest rate it feels is required to ensure stubbornly high inflation returns back towards its 2% target.
For holders of gold, the concern will be that the price has climbed too high and is at risk of a sudden downward shock if the data fails to meet expectations. But for now at least, the US economy looks to be holding up well and inflation also looks to have peaked both in the US and in Europe, ensuring that gold can hold near its 9-month high.
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