On Tuesday (January 17), the international gold price fell slightly, technically there is a need for a correction, but the expectation of a slowdown in the Fed’s interest rate hike is expected to limit the downside of the gold price. Investors appear confident the Fed will soften its hawkish stance after signs of easing inflationary pressures and the risk of a potential recession.
At 15:14 Beijing time, spot gold fell 0.54% to $1,908.95 an ounce; the main COMEX gold futures contract fell 0.54% to $1,911.4 an ounce; the U.S. dollar index rose 0.07% to 102.438.
Ajay Kedia, director of Mumbai-based Kedia Commodities, said: “Gold has been supported by expectations of a slower pace of Fed rate hikes. Right now, we’re seeing a technical pullback as prices move into overbought territory.”
The Fed slowed the pace of rate hikes to 50 basis points in December after four consecutive hikes of 75 basis points. The Federal Reserve will announce a new deal on February 1, and the market expects the rate hike to further slow down to 25 basis points.
Gold prices are expected to show a strengthening trend after the U.S. producer price index (PPI) data is released on Wednesday (January 18). Investors should brace for lower prices for goods and services leaving factories. The decline in PPI data will please the Fed, which is pulling out all the stops to stabilize US price pressures.
Tom Bailey, director of research at HANetf, said in a report: “The situation now may be that a lot of negative sentiment in the gold market has passed. Many analysts now see the Fed slowing down the pace of rate hikes, while the dollar strength does not seem to be returning. Provide some relief to gold prices and could lead to a pick-up in investment demand.”
Last November, analysts at HANetf surveyed 100 European and UK wealth fund managers and found that 89% of respondents said they intended to increase their exposure to gold in 2023.
V Hareesh, head of commodities research at Geojit Financial Services, said: “Signs of a global recession and expectations of a slowdown in Fed rate hikes, as well as a weaker dollar, sparked a rally in gold that was under pressure late last year, with the U.S. dollar index falling from around 114 about three months ago. to around 102.” He estimated that the international gold price may break through $2,000 an ounce, but be lower than the historical peak of $2,075 unless there are some serious geopolitical events.