The gold market is lower in early afternoon action Monday. With two key pieces of economic data set for release this week, the market was comfortable treading water for much of the day. Prices have slipped in recent hours, however, and spot gold is now down by over $11 per ounce.
Fed Chairman Jerome Powell is set to speak before Senate and House Committees tomorrow and Wednesday. His testimony on monetary policy could provide further clues about the Fed’s plans going forward and its economic outlook. Whether the Fed will continue raising interest rates, and if so by how much, is the topic of much debate in financial circles. Any strong clues provided by Powell over the next two days could be market-moving.
In addition to Powell’s testimony, the markets are also awaiting the jobs report set for release Friday. Non-farm payrolls are expected to show a rise of 225,000 jobs following the massive rise of over 500,000 for January. If the data sees a large miss to the downside, it could move markets as the doves start to buy based on hopes for a less-hawkish Fed. If the jobs data is a strong beat, it could have the opposite effect. A stringer-than-expected jobs figure could send the markets lower as worries over an aggressive Fed take hold. A number that is in line with expectations is unlikely to move markets much, if at all, and may give investors reason to stay patient and wait for the Fed’s next meeting on rates.
The gold market appears to be in a bit of a holding pattern right now. Since the bulls lost the $1900 level a few weeks ago, the metal has not made any major moves up or down. If the bulls were to lose the $1800 level, the trajectory of the market could change drastically. For the time being, both the bulls and the bears appear to be somewhat comfortable with prices in the mid-1800s.
With 2023 now well underway, the markets will want to see clear action and intention from the Fed. Recent inflation data has had some ups and downs, and the picture regarding price pressures is not completely clear. Investors will want to see more clarity on inflation and the Fed’s plans before making any big bets. This could happen quickly but will more than likely take some significant time. The gold market could be likely to remain range bound until more clarity is seen. This could leave the metal vulnerable to a sizable sell-off as frustrated bulls leave the party. Any significant sell-offs are likely to be met with aggressive buyers, however, as long-term players look to get their gold on sale.
For the time being, the $1800 level and the $1900 level are key. If the bears can take out the $1800 level on a closing basis, more downside could be in the cards. If the bulls can retake the $1900 level on a closing basis, more upside may follow.