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.