After starting the day a little stronger, the gold market has gained momentum. Gold is now higher by nearly $10 per ounce as markets await a speech by Fed Chairman Jerome Powell at mid-day. The Powell speech is taking place today at an economic club in Washington, D.C., and could provide some clarity on the Fed’s thoughts following a much stronger-than-expected jobs report last week. That jobs data could force the Fed to remain hawkish even as markets are now expecting more dovishness from the central bank. Markets may have misread Powell last week, focusing their attention on his disinflation remarks and not his talk of more work needing to be done.
Regardless of what Powell may say today; the markets will remain focused on the Fed for the months ahead. The Fed has toned down its pace of rate hikes, raising rates by just 25 basis points last week rather than 50 or 75. The Fed could pick up the pace of rate hikes if it feels it to be necessary, however, while it could also elect to pause or even stop hiking rates altogether if it thinks the job has been completed. Recent inflation data has pointed to a slowdown in price pressures. Whether that slowdown is enough to modify the Fed’s thinking is another matter entirely and may be debated as 2023 gets rolling. The Fed has previously suggested rates may need to remain higher for longer, and for the time being there has been nothing to suggest it has changed its mind about that.
The gold bulls have done a good job thus far of keeping prices elevated. The bulls did lose the $1900 level recently, however, but the bears have been unable to follow through so far. With spot gold at $1876 today, the bulls remain well within striking distance of the $1900 level. The bears have their work cut out for them. The bears first must produce a close below the $1800 level. If able to do so, the bears would then likely look for a challenge of the $1700 area or the original upside breakout point from several weeks ago. The bears have a lot of room to cover to get anything significant going to the downside, and if they are unable to do so the bulls are likely to remain in firm control of the market.
The gold market may also find itself maintaining a trading range again, albeit a higher range. The bulls seemingly have reason to take the market higher, but they could take their time doing so. A significant pullback, in fact, may not only be necessary for the market to sustain higher levels but also healthy. Any sharp declines in gold are likely to be bought aggressively. For the time being; the bulls remain in control of the market and the trend is still higher.