Gold has started a new trading week with a small dip as markets experience a slight reappraisal of where true value lies after a promising start to the year.
The key question that traders and investors are trying to work out is how soon the Federal Reserve, and other central banks around the world, will be able to let the pressure off on their interest rate hikes now that inflation finally looks to be falling. Gold has enjoyed a great run since early November to climb above $1,900 an ounce and reach levels last seen in April last year. The main catalyst of those gains has been the belief in markets that the Fed is nearing the end of its rate hikes and that 2023 will only see a few more small increments.
This belief has come despite the Fed continuing to raise rates in December and is likely to do so again at its next meeting while a series of Fed officials have stated the need for rates to keep rising for a while yet to ensure that inflation is well and truly curbed. The fact that gold has been able to make such considerable gains despite this potentially bearish macroeconomic backdrop does leave it exposed, with the odd price dip like today to be expected.
Where does gold’s true value lie? That’s the question that is being considered today. Given the strength of support that has clearly built up for gold in the last couple of months, further gains can’t be ruled out. Yet the concern remains that the price has climbed too high and too fast to be sustainable. Therefore gold could have reached its natural level of around $1,900 already but is a few months ahead of the curve and now needs positive data in the interim to ensure the price doesn’t start falling.
Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience in writing about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News.
As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewable energy and the challenges of avoiding greenwash while investing sustainably.
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