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Precious Metals talking points 012023: Weekly market analysis, a view on today's strength

By: Rhona O'Connell, Head of Market Analysis

Precious Metals Talking Points: Gold up 18% in nine weeks; correction necessary but foundations solid
 20th january 2023
Rhona O'Connell
Head of Market Analysis, EMEA & Asia; 
 
+44 203 580 6115; mobile +44 7384 833 897
rhona.oconnell@stonex.com
 
Front Desk presentation slides plus an introduction on gold's current position

 Much of gold's recent move, with a 20% gain in dollar terms from the early-November intraday low of $1,617 to $1930 today (20th January)   has been prompted by shifting sentiment with respect to the Fed’s rate cycle and the desire to mitigate risk from factors such as inflationary forces, how the central banks are managing them, and mixed views over the outlook for equities against an uncertain economic backdrop.  Gold is also  benefiting from much-improved technical chart constructions, which themselves of course stem from the earlier stage of this bull phase. The Gold Colden Cross of last week is particularly supportive, as is, peripherally, the Death Cross on the DXY.  Prices are higher in other currencies also, demonstrating that this is not merely a dollar play.  In Swiss franc terms, for example gold has posted a 9% gain since the end of October, while euro prices are up 7% since mid-December.

Unsettling U.S. numbers, notably the 1.1% month-on-month fall in retail sales (the second consecutive decline) following on from weaker CPI and PPI, are raising increasing suggestions that the FOMC may take its foot off the gas in the near future.  For now it makes no difference as to whether they do (which we doubt), it’s much more a question of perception.

Gold is overbought and needs to correct.  The Chinese New Year may help to prompt this as China is on holiday for a week as of tomorrow. The $2,000 mark is on the relatively distant horizon but if it were to be attained in the near future then it would almost certainly be a case of “blink and you miss it”.   A gradual rise would be much more sustainable.

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