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Gold is trading marginally lower on Monday following a wild ride on Friday.
Price action
-
Gold futures
GCZ22,
-0.29% GC00,
-0.29%
for December delivery fell $3.10, or 0.2%, to $1,653.20 per ounce on Comex. -
December silver futures
SIZ22,
+0.36%
were up 2.9 cents, or 0.2%, to $19.095 an ounce, adding to last week’s 5.5% gain. -
December palladium
PAZ22,
-1.15%
was down $12, or 0.6%, to $1,993.50 per ounce, while January platinum
PLF23,
-0.76%
fell $4, or 0.4%, at $929.90 per ounce. -
Copper futures for December
HGZ22,
-1.25%
were down 3 cents, or 0.9%, to $3.445 per pound.
What’s happening
Gold “isn’t on stable grounds to begin the week, as the bears have been able to pull the rope a little more on their side” at the start of the week, said Naeem Aslam, chief market analyst at AvaTrade, in a market note. “The big question which is very much influencing the price of the precious metal is if the [Federal Reserve] is going to slow down the pace of its interest rate hikes.”
The market expects the central bank to increase interest rates by 75 basis points during their next meeting — pushing the U.S. Dollar index higher, he said. “The strength of the U.S. Dollar index is keeping checks on the yellow metal’s price.”
The ICE Dollar Index
DXY,
is trading modestly higher on Monday, while Treasury yields are mixed. Each is impacting precious metals prices, along with shifting expectations about where the Fed funds target rate will be at the end of the year, analysts said.
There has been an “inverse correlation” between the gold price and U.S. 10-year bond yield since the COVID pandemic began, said Chintan Karnani, director of research at Insignia Consultants. “This inverse correlation will continue in 2023 as well.”
Insignia Consultants expect the 10-year bond yield to form a long-term top anytime from now and before Valentine’s Day in 2023, said Karnani. “Gold has bottomed out or is nearing a bottom.”
The gold price has also fallen less than rise in the U.S. Dollar index, he said. “This is a positive sign for 2023.”
Meanwhile, the fact that traders are now contemplating a 50 basis point hike by the Fed in December is giving some gold analysts hope that the bottom — at least for now — might be in.
For gold, the trend is still lower for now, but “once we can actually say we have reached peak hawkishness, the outlook for gold will very likely shift to neutral (if not bullish) from bearish,” said analysts at Sevens Report Research, in Monday’s newsletter.
