The gold bulls have taken the metal higher yet again Friday as the spot price exceeded the $1900 level and then some. The bulls are taking advantage of a few key factors to take the market higher. These factors include a continuing cooling of inflation data as well as an improving the University of Michigan consumer sentiment survey. The survey did beat expectations handily on the headline number. More importantly for gold investors, however, the report also showed a decline in inflation expectations. Although inflation expectations remain well above the Fed’s desired 2% annual target, any declines in the data may be met with buying interest in gold as it could give the Fed more wiggle room on slowing the pace of further interest rate hikes.

 

The path of interest rates may be a focal point for investors in 2023. The Fed recently lifted interest rates again but by 50 rather 75 basis points. It is widely expected the next FOMC meeting in a couple of weeks will see another rate lift but by just 25 points this time around. The Fed has made it clear it wants to slow the pace of rate hikes in the months ahead. The Fed also suggested that rates may need to remain higher for longer, so it may not be in as much of a hurry to hike. The big question for gold investors and the financial marketplace, in general, is not really how much the Fed will end up hiking, but rather when it will start cutting rates again. It is currently expected the Fed will start easing again in late 2023 or early 2024.

 

Once the Fed signals easing is on the horizon, it could fuel a powerful rally in stocks and gold. The question becomes then whether the Fed will be able to avoid putting the economy into a recession. There have already been some troubling signs of recession, such as the yield curve inversion, but they do not necessarily mean that a recession is imminent. If the Fed elects to start easing sooner rather than later, a recession may be avoided altogether.

 

In the meantime, the gold bulls will continue to try to take the market higher. If able to hold the $1900 level on a closing basis, the bulls may have set up a path to higher prices that could even see a challenge of previous all-time highs in the months ahead. If the Fed switches to a dovish approach to policy, look out. The yellow metal could take off and enter fresh all-time high territory rapidly and could greatly exceed previous highs. Numerous bullish factors may keep gold elevated outside of interest rates. U.S. and global debt, inflation, dollar weakness, and a general mistrust of governments may all keep investors turning to the yellow metal.

 

The gold bulls must hold the $1900 level now on a closing basis. Doing so may attract further buying interest that could stretch the metal’s upside in the days ahead. The bears have their work cut out for them. They need to produce a close below $1800 to get the bearish camp excited.

 

The gold market is higher in action on Tuesday as the bulls look to continue the recent ascent in price. The metal is higher by a few bucks per ounce today, currently sitting just above the $1875 level. The bulls are well within striking distance of key resistance at the $1900 level and could look to test this area this week or next. A close above $1900 could give the bulls needed ammunition to mount a sustained rally higher that could eventually see the market test previous all-time highs. A failure at this level could prove equally bearish, however, and could give the bears reason to sell more aggressively.

 

Famed economics professor Nouriel Roubini today said that he is expecting a rate of return in gold of 10% per year for the next five years. Roubini cited several factors for this outlook, including wars, inflation, a demographic “time bomb,” debt crises and more. He referred to ten mega threats that are hurtling towards the world and that could send the price of gold significantly higher. Roubini did mention inflation, stagflation and de-dollarization as being the primary drivers of higher gold in the years ahead. He cited the dollar as being weaponized and suggested that the only asset that could not be used by the U.S. or West for sanctions is gold.

 

The world is full of tensions already, and these tensions could mount in the year or years ahead. A Chinese invasion of Taiwan, for example, could greatly heighten tensions between the U.S. and China. The ongoing war in Ukraine may also keep inflation floating around and could also increase global tensions. China, Russia, Iran and others may challenge the U.S. and Europe for global dominance in the coming years. As they do, the importance of gold is likely to become all too clear-especially for those that do not own any of it.

 

There is also, of course, the Fed and what it decides to do this year regarding monetary policy. The Fed recently raised rates by 50, rather than 75, basis points. The central bank may continue to hike rates, albeit at a smaller clip, as it has suggested rates may need to remain higher for longer. To get the job done on inflation, however, Roubini feels rates would need to exceed six percent. The Fed is extremely unlikely to approach this level, however, as a six percent interest rate would basically ensure a severe recession in the U.S, and possibly elsewhere. The Fed is far more likely to raise rates a couple more times in small increments before announcing it will take a pause or even reverse course.

 

Should the Fed bail out early on its rate hiking game plan, gold and other assets could skyrocket higher. The next several months will provide markets with more clues about the Fed’s intentions. Until then, the path of least resistance for gold remains higher.

The gold market is sharply higher Friday as the bulls attempt to continue climbing a wall of worry. The yellow metal is higher after the key data point of the month, the jobs figures for December, were released. December saw a rise of 223,000 jobs while estimates were calling for a rise of 200,000 jobs. The data is upbeat, but not overly strong, and may fall into the camp of the policy doves. The figure is lower than that of November, in which the market saw a gain of 263,000 jobs. Markets seem to be breathing a sigh of relief that the non-farm payrolls were not stronger than they were or beating expectations by even more. The jobs data is unlikely to have much if any, effect on the Fed and its plans for interest rates in the months ahead. The ADP jobs report, released Thursday, handily beat expectations and may have had some market participants worried the non-farm payrolls would do the same. As is often the case, however, the two reports did not match up very well.

 

The goldilocks jobs data Friday may keep markets guessing about the Fed’s intentions for the months ahead. After raising rates by only 50 points last month instead of 75, the Fed has already signaled it intends to slow the pace of rate hikes in the months ahead. The Fed also suggested, however, that rates may need to remain higher for longer. The seemingly mixed message may keep investors and volatility awake as the new year gets rolling. While the terminal rate is likely to keep moving higher, possibly topping out around 5.25%, data such as that seen today may keep markets guessing. Until the Fed provides more clarity about its intentions, the market may be influenced by inflation data and the war in Ukraine. If the inflation data continues to show signs of some easing, markets could head higher on the hopes of a more dovish Federal Reserve. If the inflation data comes in hotter than expected, however, markets could see significant selling and volatility as worries over a hawkish Fed may take center stage.

 

The gold bulls have done a good job of putting some distance between the market and the $1800 level. Today’s $30 per ounce gain puts the market within striking distance of the $1900 level which may be the next major obstacle for the bulls. The bears will look to produce a close below the $1800 level and then target the $1700 breakout level. A close below $1700 would put the market in significant jeopardy of declining to the $1500 level before finding willing buyers.

 

For the time being, the trend for gold remains higher and that is the path of least resistance. Any dips toward the $1800 level will likely be bought aggressively and the market may remain in a trading range until more is known about the Fed’s intentions for 2023.

The gold market is higher again today and hit a new six-month high earlier in the session. The yellow metal is being bid up as risk aversion remains robust. Investors are concerned about a variety of issues, including the risk of recession this year and the prospect of even higher inflation. The war in Ukraine is not helping either and may continue to fuel rampant inflation that remains not far from multi-decade highs. Traders are awaiting the latest Fed meeting minutes set for release today which could provide further insight into what the Fed has planned for the year ahead.

 

In addition to the potentially slowing economies of key global leaders, the Chinese economy is also of special concern as Covid infections are again on the rise. The nation recently put an end to some of its closure policies, but those policies may have kept the infection from becoming even more widespread and problematic. As an increasing number of people get sick and are unable to work, the globe’s second-largest economy may again see a dramatic slowdown due to the virus. The timing could not be worse, either, as many powerful nations including the U.S. are already flirting with an economic recession. Worries over a recession may keep a bid going in the yellow metal and could keep any stock upside limited for the time being.

 

The jobs report due for release Friday could provide more clues about the Fed’s intentions. The report is expected to show a rise in jobs of 200,000, compared to the November rise of 263,000 jobs. If the report comes in as expected, it may not have much, if any, effect on markets. A large beat or a large miss, however, could send markets sharply higher or tumbling lower. The jobs data is one of the, if not the largest, economic reports of the month. Strength may allow the Fed to keep tightening as it has for months now, while weakness could give the Fed reason to consider a pause. The Fed has already suggested that rates may need to remain higher for longer, and anything that backs that notion up may give investors cause for concern.

 

The gold market is now above the $1850 level as of this post. The bulls have done a good job, thus far, of holding the market above the key $1800 level. The $1900 level is the next major target on the upside and that level could be challenged in the days ahead. The bears will look to produce a close below the $1800 level and then possibly challenge the breakout point at $1700. A breakdown below the $1700 level would be very bearish for gold at this point, and may find nothing to stop a decline in price until the $1500 level is reached.

 

Gold’s price direction in the year ahead may depend greatly on the Fed and its plans regarding monetary policy. Any clues concerning the Fed’s plans may be market-moving and could give the market reason to continue its current uptrend or to reverse course.