Gold is trading above $1,800 an ounce, close to its highest level for six months, as the precious metal’s strong recovery from early November onwards remains on track.
Gold’s turnaround in fortunes was sparked by a change in viewpoint on how quickly the Federal Reserve will revert to a more dovish monetary policy approach after a year filled with large interest rate hikes.
The fact that gold has been able to keep up its upward momentum following last week’s hikes by the Fed, the Bank of England and the European Central Bank illustrates the strength of support that has built up for gold.
Gold has also been the beneficiary of investors remaining highly cautious towards equities amid mounting fears that 2023 will be marked by a global recession. Furthermore, the ultimate haven asset gained fresh support from the collapse of crypto exchange FTX, which proved a stark reminder of how different gold and cryptocurrencies are and the challenges the asset class needs to address before it can consider itself as a trusted store of value similar to gold.
As we enter the final few trading days of 2022, gold is looking forward to the new year with the number of bullish factors outweighing bearish ones.
However, the overriding cautionary note must be how heavily gold’s price has already risen based on the Fed adopting a more dovish approach in 2023. If this proves wide of the mark then gold could quickly come tumbling back to the lows registered in the previous three months.
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