USD weakness continued and is coinciding with the expectations of the recession of the world economy during the year 2023. It helped the price of gold XAU/USD to continue in the upward range with gains above the resistance level of $1954 per ounce, the highest price of the yellow metal in nine months.
The announcement of the American central bank came as expected, raising the American interest rate lower, an additional pressure factor on the price of the American dollar, which declined against all international currencies after the announcement.
Will the price of gold rise towards the historical peak of $2000 per ounce?
The answer depends on the path of the gold price and the improvement of the global economic outlook, as the yellow metal is historically a hedging tool against risks.
Yesterday, the Federal Reserve Bank announced a 25 basis point increase in the US interest rate, adding that US inflation has eased somewhat but is still present and that interest rate hikes may continue. For his part, Federal Reserve Chairman Jerome Powell said: "We can now say, I think for the first time, that the process of reducing inflation has begun."
Gold is very sensitive to rising American interest rates, because that increases the opportunity cost of holding the bullion that does not yield a return.
The European Central Bank and the Bank of England will hold monetary policy meetings. On the economic side, the ADP National Employment Report showed the tight labor market despite the low rise in private jobs, and attributed the low rise to bad weather.
The amount of global demand for gold:
- Global gold demand rose to an 11-year high in 2022 on the back of "massive purchases by global central banks, aided by active buying by retail investors," according to the World Gold Council.
- Annual gold demand jumped 18% to 4,741 tonnes (excluding OTC or OTC) over the year, the largest annual figure since 2011, supported by record demand in the last quarter of 1,337 tonnes.
The industry-backed group revealed that the key to the rise was a 55-year high at 1,136 tonnes bought by central banks over the year, noting that the majority of these purchases were "unreported". This represents a 152% increase from 2021, when central banks purchased just 450 tons of gold, and the World Gold Council attributed the rise to geopolitical uncertainty and high inflation.
The net purchases of the Central Bank in the fourth quarter reached 417 tons, bringing the total purchases of the second half to 862 tons. Repeating the third quarter, the data for the last quarter of the year was again a mix of reported purchases and a large estimate of unreported purchases,” the WGC Gold Council reported.
Investment demand for gold rose 10% to 1.107 tonnes, while gold ETF (exchange-traded funds) holdings saw fewer outflows in 2022 compared to the previous year. Jewelry consumption fell 3% in 2022 to 2086 tonnes, with much of the weakness concentrated in the fourth quarter as gold prices rose. Total annual gold supply rose 2% in 2022 to 4755 tonnes, with mine output hitting a four-year high of 3612 tonnes.
Today's XAU/USD Gold Price Predictions:
- According to the performance on today's chart, the price of gold XAU/USD is in an upward direction and is stable above the $1950 resistance.
- It is moving the technical indicators towards buy saturation levels, but the continued strength of the gold market will support the expectations towards the historical psychological peak of $2000 in the coming days.
- This will depend on the price of the US dollar after the announcement of the US Federal Reserve yesterday and after the US jobs numbers tomorrow, Friday.
On the other hand, according to the performance on the graph for today's time frame above, the return of gold prices towards the support levels of 1929 and 1890 dollars respectively will support the downward correction. Today the price of gold XAU/USD will interact with the level of the US dollar and the reaction to the announcements of the European Central Bank and the Bank of England.
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