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.

Now that the final trading day of 2022 has come and is nearly gone, investors are likely to focus their attention on what the new year ahead may bring for the yellow metal. The gold market has had some solid momentum in the fourth quarter of 2022 that could very well find its way into the market as 2023 gets rolling. Some analysts have already suggested gold will push above $1900 in the coming year, while others feel the metal could even return to previous all-time highs or beyond. Whatever the case may be, the metal is likely to see some renewed volatility in the year ahead as the Fed remains stubbornly behind the inflation curve.

 

The Fed has already suggested that rates may need to remain higher for longer. Although this may not be what the markets want to hear, it is also not an entirely negative outlook. The Fed may have already laid the groundwork for a pause in its rate hikes in 2023, and the next signal it gives could be one for a reversal on rates. Once the Fed signals that rate cuts are imminent, the gold and stock markets could potentially take off to the upside. That signal may not arrive for some time yet, however, and may not be seen until the second half of the year ahead.

 

The trajectory of gold prices next year will largely depend on the Fed and what its actions or lack thereof do to the dollar. The stronger Dollar Index has been a major roadblock to higher gold prices in the past year. If the dollar remains elevated it is likely to keep any upside in gold very limited. Should the Fed signal a reversal at some point this year, however, the dollar could see significant weakness enter the market and a major reversal in the currency could get underway. Should the dollar begin to see some weakness come into the market, it could propel the gold market sharply higher in short order.

 

Not only will the Fed, the dollar and the outlook for policy affect gold in the year ahead, but the market may also be boosted by central bank buying in the metal. This past year saw some major purchases by global central banks and that trend could continue as global market uncertainty remains robust. Countries may look to move away from the U.S. Dollar as a major component of their reserves and could look to add gold as the dollar loses more ground as the global reserve currency of choice. This could be what really sets the gold market on fire and boosts prices into new all-time high territory. Such a move could occur quickly too, leaving slower investors chasing the metal higher and higher.

 

The first several months of the new year may be lacking in any fresh, pertinent information. As the year gets going, however, the Fed will likely provide numerous clues about its intentions and could fuel a significant rally in gold or have a very bearish impact on the market.

The gold market is sharply higher Tuesday as investors return from the Christmas Holiday. The idea of China scrapping its quarantine rule for inbound travelers is a major step for the globe’s second-largest economy to reopen its borders. The Chinese news is not only providing a major boost to gold and commodity markets, but is also lifting stocks today. Tuesday’s gains have pushed the gold market back above the key $1800 level. Whether the bulls are able to hold this level is another question, however, as they have already failed to do so on multiple occasions. The next several days as well as the first days of 2023 may provide a significant test for the gold bulls. If they are able to hold the $1800 level, the market could gear up for an extended move higher.

 

The markets are likely to remain relatively quiet until the new year gets underway. The biggest question on the mind of investors may be what the Fed will do in the year ahead. The Fed has already slowed the pace of its rate hikes, raising rates by 50 rather than 75 points in December, while also alluding to a slower pace of rate hikes overall in the year ahead. The Fed does not appear to be done fighting inflation, however, as it also suggested rates may need to remain higher for longer. Exactly what that means is anyone’s guess, but the central bank does appear intent on finishing the job against inflation that it began a year ago. That could mean a terminal rate being reached in 2023 of as high as 5.5%, possibly even higher.

 

The Fed has made it clear that it does not want to begin cutting rates right away. A more likely scenario is the Fed will keep raising rates by 50 or even 25 points at a time, until it reaches the desired level. The Fed may then take a wait-and-see approach to determine how its previous rate hikes are affecting the economy and price pressures. Once the Fed feels rates have gone high enough, it may leave them there for some time before even suggesting any cuts may be imminent. This could mean that rates remain elevated until 2025, at which point they are likely to come back down significantly.

 

The Fed must get inflation under control to achieve any sort of economic balance. If the Fed fails to do so, any growth is likely to stop and the economy may find itself on very fragile footing, possibly even heading into recession. The Fed seems to understand the risks involved and appears intent on doing what needs to be done to solve the problem. Even if the Fed leaves rates higher for longer, it does not mean that gold cannot rise on a sustainable basis. Markets and investors know that rate cuts are coming. The only question about rate cuts is when they are coming, not “if.” The hope for lower rates may keep gold buyers involved in the months ahead and could keep the yellow metal from seeing any significant declines in the year ahead.

The gold market was quiet on Wednesday as it seems most investors have now taken off for the upcoming weekend holidays. The gold market did see some earlier small gains, as the market may still be digesting large gains seen earlier this week. The surprise move Tuesday by the Bank of Japan sent some shockwaves through financial markets yesterday and investors may still be trying to figure out the central bank’s intentions. While gold is rising due to some chart-based buying and increasing risk aversion, rising bond yields this week may keep any upside limited.

 

As the BOJ move yesterday is considered, some Fed watchers believe the move by the bank underscores the notion that global inflation remains problematic and that the Fed will find itself unable to pivot away from its rate hiking any time soon. As grading volumes dry up this week due to the holidays and end of the year, investors will have significant time to think about what could happen next year regarding interest rates and policy.

 

In the meantime, the gold bulls have done a good job of putting some distance between the market and the key $1800 level. Spot gold is sitting around $1817 as of this post, and the bulls may be feeling a bit more comfortable. Should the bulls be able to hold the market above the $1800 level, more buyers are likely to enter the market to try to take advantage of upside momentum. Any dips within the market are likely to be aggressively bought for the time being, as long as the market remains above the $1800 level. The more the bulls can stretch price above this key technical area, the more likely the market could see additional upside. A move back below the $1800 level, on a closing basis, could signal the bulls lack the muster to take the market higher and could encourage the bears to step in and drive prices lower. A move below the breakout point of $1700 could find little in the way of support until prices hit the $1500 area.

 

The gold market may now find itself moving little and mostly sideways until trading volumes return after the holidays. With central bank activities now done until the new year, investors may be fine taking a wait-and-see approach to the markets. While short-term traders may find this frustrating, the long-term market investors will not be bothered by it at all.

 

As 2023 gets started, the markets will have a few areas of focus. Obviously, central bank activity will be at the forefront of investor attention. Inflation data will also be closely monitored as it could change central bank thinking and plans regarding rates. Any major hits or misses in inflation data could be market-moving. While recent U.S. data has suggested inflation is slowing, it still remains stubbornly high and problematic. Gold could find itself in a position to benefit whether inflation increases or decreases from here.