Gold Higher On Weaker Data
The gold bulls are getting a slight reprieve from the recent selling pressure today as spot gold is up by several dollars per ounce. Spot prices are higher by over $5 per ounce at just under $1655 in early afternoon trade. The day’s upside may prove fleeting, however, as prices could continue to cave in the days ahead.
Today, markets got the latest reading of the consumer confidence index. The report pointed towards slumping confidence in the economy and potentially tough times ahead. The report pushed the dollar substantially lower while also fueling a decline in treasury yields. Although a decline in both the dollar and yields is a positive for gold, the bigger picture says investors may now consider whether the Fed will keep its foot on the gas and continue hiking interest rates aggressively.
The question of what the Fed will do early next year is likely to remain a key market focal point as 2022 comes to a close. The central bank has said, time and time again, that it intends to keep raising rates until inflation is under control. If the Fed plans on inflation getting to its 2% annual target rate, it has a long way to go. Price pressures remain stubbornly high and are still near 40-year highs.
Investors are also watching what is happening in other parts of the world. The war in Ukraine continues on, and the small nation appears to be holding its own against Russia. The lack of progress by Russia has fueled some fears of what President Putin could do next. The threat of nuclear weapons remains real and the globe will continue to monitor this situation closely.
Chinese President Xi Jinping recently consolidated his power at the communist party meeting. The power grab by Xi may be a cause for concern for the west and the rest of the world. Some Asian investors feel he will try to pull the globe’s second-largest economy further from the west while continuing to implement Covid lockdowns in parts of the country. These lockdowns have already had a major impact on the economy and would continue to do so if they are continued.
The gold market bears remain in firm control of the daily charts. The $1700 level is a must-have for the market bulls. The bears will target the $1600 level to potentially fuel a fresh and significant leg lower.
As the gold market awaits more information and possibly action from the Federal Reserve, it may also be impacted by other asset classes. Bitcoin has been quiet in recent months but remains a market of interest. The correlation between gold and Bitcoin has risen, and that may point to investors viewing the digital currency as a store of value or safe haven. That could lead to competition for gold in the months and years ahead and is a situation worth taking note of for gold investors.