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With markets in the third week of 2023, gold is already up 4,5 percent and trading above the critical US$1 900 an ounce level. But for the rally to continue, the precious metal needs to keep settling above this psychologically-important level, warned Australia and New Zealand Banking Group (ANZ).
After lagging last year, gold has finally made its move, with many analysts even looking for new record highs this year on the expectations of cooling inflation and a Federal Reserve pivot.
Gold is a hedge against a 2023 slowdown, wrote ANZ in its report released Monday. “We expect gold to remain in favour as inflation retreats and interest rates near their peak. Prices have rebounded strongly after the past year’s correction, amidst the Federal Reserve’s most aggressive monetary tightening since 1980,” said ANZ.
Drivers supporting gold as an asset in 2023 include a pause in the Fed’s interest rate cycle, recession risks, a weaker US dollar, high geopolitical risks, and strong physical demand, the bank said.
However, in the short-term, gold looks at risk of a correction due to the technical set-up, noted the bank’s strategists Daniel Hynes and Soni Kumari.
“The recent rally looks vulnerable to a price correction as it was largely driven by expectations that the Fed will turn dovish. Any disappointment on the monetary policy front could see prices correcting in the short term. We keep our 12-month price target unchanged at US$1 900/oz,” they wrote.
With gold surging to US$1 918 an ounce after breaking above US$1 900, the yellow metal is trading well above its 200-day moving average.
“Prices need to continue settling above US$1 900/oz to maintain this momentum. — Kitco News.
Peter Tanyanyiwa
Online Reporter