Gold consolidating recent gains around the key $2000 level
We are just over a quarter into 2023 and it has already been a very good year for the precious metals complex. But this is likely just the beginning of the sector's best year since the Global Financial Crisis put in a major gold bottom in 2008 when the Fed was forced to recapitalize the U.S. banking system.
Once gold broke out above the key $1000 level on a monthly basis after its fourth try in mid-2009, the price had nearly doubled by late 2011. The recent push towards the all-time high at $2089 reached in August 2020 is the third challenge of the resistance zone of $2000-$2100. According to the CME FedWatch Tool, markets see an 86% chance that the Federal Reserve will raise interest rates by another 25 basis points next month. Yet, markets see a stronger than 80% chance that the Fed will lower its policy rate back to the range of 4.75%-5% by September, even if the central bank opts for a rate hike at the upcoming FOMC meeting.
With the gold price threatening a technical breakout, keep a close eye on the technical picture of the bearish Head & Shoulders top in the U.S. Dollar. The DXY is coming close to critical neckline support level at 100. Unless the greenback can avoid a convincing break below this key level, a close below 100 may be enough to fuel a breakout in Gold Futures above $2100 in the not-too-distant future.
"There is a risk when we use financial sanctions that are linked to the role of the dollar that over time it could undermine the hegemony of the dollar," Yellen said. "Of course, it does create a desire on the part of China, of Russia, of Iran to find an alternative." Each time this index has previously posted a reading this low, the U.S. headed into recession. The last time the Philly Fed Index registered such a deeply negative reading was during the peak of the April/May 2020 global covid lockdowns.
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