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It’s going to be a ‘lively December’ for gold prices – Pepperstone

It’s going to be a ‘lively December’ for gold prices – Pepperstone

(Kitco News) Gold is looking to break $1,800 and have a great 2023, according to Australia’s Pepperstone.

Gold finally found momentum after seven straight months of losses and bottoming out around $1,620 an ounce.

on tuesday December gold futures reacted positively to the slower US Producer Price Index and renewed geopolitical tensions after reports that a Russian missile had crossed into Poland and killed two people.

“We are seeing signs of consolidation ahead of a potential test of $1,800/04 and beyond. Happy to maintain a positive bias, but would reconsider through $1739 and $1710,” said Chris Weston, head of research at Pepperstone. “It’s been a disappointing year for gold investors, and there’s been an opportunity cost in going long, especially as cash has emerged as a risk-free investment class.”

In the short term, conditions for gold are favorable, and December is expected to be “very intense” according to Weston.

“Looking ahead, we see that implied volatility (price in the options market) is down a bit, with XAU 1-month IV at 15.5%, but that seems to be in line with the recent decline in implied volatility across asset classes,” he said in one. notice tuesday “This measure of expected volatility in gold takes into account the US JOLTS jobs report (Dec 1 AEDT), US non-farm payrolls (Dec 3) and the US CPI inflation report (Dec 14), but does not yet fully incorporate December. FOMC meeting (Dec 15). Either way, as the market tempers volatility expectations, I see some volume given this next level 1 event risk, and expect this to be a very intense period for gold – as will the USD. , rates and NAS100”.

A key watch for markets heading into the end of the year is the US dollar, which has recently given gold prices room to move higher after being heavily weighted in precious metals through 2022.

“Looking at the rise in gold and US real rates, we can see that the USD is the key driver, and with the wild selling activity taking the DXY below 106, the XAU has benefited. A long thesis can be written on the USD, but under. According to the USD smile theory, global growth better sentiment is definitely helping, especially with USDCNH pulling out so aggressively as China pivots on its Covid plans – we may also see the end of the Fed’s hiking cycle, which many believe is March 2023. Its hiking It could be the date we have a long hiatus on the planet,” Weston explained.

A big positive for the gold price is the potential slowdown from the Federal Reserve in December, Weston added. But a lot will depend on the November inflation report that will be released in December.

“The next US CPI print (Dec 14) will be a big hit, not only because we have the FOMC meeting the day after, but it may confirm that the US inflation rate is not exactly falling due to tighter financial conditions through the QT and rate hikes, which is still part of the real economy. But it is believed that while supply chains are easing, high prices are self-feeding, and inflation is falling on more organic factors – high prices being the cure for high prices – a factor that could be confirmed in the November US CPI report, which could lead to a halt in increases. may increase need sharply after seeing 50bp at December FOMC, gold positive,” Weston said.

According to the CME FedWatch Tool, markets value an 85.4% chance of a 50 basis point rate hike in December, which is a slowdown from the 75 bps pace used in the last four meetings.

“The position in gold futures is short, and the options bias is neutral – we enter a strong seasonal period to be long US stocks, and if stocks heat up towards the end of the year, funds will remove USD hedges, which should boost XAU. An open mind pays off, and “Obviously, if the November CPI prints hot, gold could be hit, but that’s a few weeks away,” Weston said.


Note: The opinions expressed in this article are those of the author and may not necessarily reflect his own Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee this accuracy. This article is for informational purposes only. It is not a request to exchange commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no liability for loss and/or damage resulting from the use of this publication.

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