The technical scenario for gold remains supportive, as the price of bullion is holding above $1,800. Moreover, a clear breakthrough of the resistance zone at $1,825 could open space for new recoveries, but gold investors are carefully monitoring the macroeconomic calendar ahead of this week’s extremely busy agenda.
In particular, the markets will discover the latest inflation data coming from the UK, the EU and the US. But the main focus is once again on central banks with the last meetings of 2022 for the Federal Reserve, the European Central Bank and the Bank of England, with investors betting on a 0.5% rate increase from both of them.
In the US, the official rates could therefore jump from 4% to 4.5% while the end of the tightening process seems to be drawing near now that inflation has shown slowdown signals. In the EU, rates are still much lower and are expected to increase from 2% to 2.5% while the Bank of England is expected to raise its rate from 3% to 3.5%. Investors are also well aware that the process of rising rates should curb inflation but also increase the chance of a recession.
What are the consequences for the gold price? In the last few weeks, we have seen a solid rebound of gold, in conjunction with a bullish phase for stock markets while investors are expecting relatively dovish decisions from central banks in 2023.
Moreover, bullion was also supported by the temporary weakness of the US Dollar. Any news which increases these expectations (such as dovish statements from central bankers or CPI data below expectation) could give additional fuel to the recent rally. Vice versa, new inflation rallies and hawkish statements from central banks could represent a negative catalyst for both gold and stocks.
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