Gold finds support from global growth concerns

طلا finished 2022 virtually flat after a tumultuous year, seeing its price surge to all time highs around the start of the Russian invasion in Ukraine, but as the Fed rushed to tame rogue inflation by aggressively hiking rates its prices quickly fell to multi-year lows. So far this year, the precious managed to kick start in the greens and capitalized on the greenback’s weakness, hitting a 6-month high in today’s session, supported by global recession worries. In this report we aim to shed light on the catalysts driving the precious metal’s price, assess its outlook and conclude with a technical analysis.

Fed’s meeting minutes and NFP report incoming

Tomorrow, the market will be awaiting in anticipation for the release of the     which may hold valuable clues in regards to the views and opinions of FOMC policy makers. Analysts will be sifting through the data, looking for any sign of divergence in the narrative as well as the views of the committee, since a deviation could possibly foretell that the bank’s unanimous commitment may be fracturing, posing a threat to its credibility in the eyes of the market. At the last meeting the central bank delivered a 50-basis points rate hike, effectively slowing down the pace of its aggressive rate hike path, after four consecutive jumbo 75 basis points increases, as the cumulative effect of its tightening efforts was taken into consideration. The bank highlighted the importance of moving on with more hikes, since the risk of inflationary pressures becoming entrenched in the US economy currently far outweigh the scenario for a possible pivot by the bank. The renewed dot plot also pointed out that the Fed sees its terminal rate peaking at 5% at the end of its forecasted tightening cycle and more details into the projections of FOMC members will also be of critical importance. Validating the central bank’s take on curbing inflation were the encouraging results in regards to the tightness of the labour market as shown in the latest employment report. This Friday, the committee will have to grapple with a fresh round of employment data and revise accordingly their projections, as the Non-Farm Payrolls, unemployment rate and average earnings will provide a status update on the health of the US labour market. More specifically the NFP figure is according to estimates expected to ease to 200k when compared to the 263k of the previous month, the unemployment rate is expected to stay still at 3.7% and average earnings are also to slow to 5% versus the 5.1% rate of the past month. Overall, the estimates point out that the US employment market remains resilient amid a challenging environment despite intensified concerns for a possible recession. In the scenario where we see an upside surprise of the unemployment rate and a larger than expected drop of the NFP figure we would expect the dollar to face headwinds and the shiny metal to continue advancing higher due to their inherent negative correlation

IMF’s stark outlook for 2023

The head of the International Monetary Fund Kristalina Georgieva delivered a grim global outlook for 2023, in a recent interview on New Year’s Eve. The fund’s managing director stated that the new year is to be “tougher than the year we leave behind” and foresees that one third of the countries of the global economy will fall victim to recessions. The rationale behind the gloomy outlook is predicated upon, the deterioration and slowdown of economic activity stemming from the world’s three largest powerhouses namely the US, China و Europe, as persistent inflationary pressures, high interest rates, the ongoing war in Ukraine and the uncertainty surrounding China’s exit from zero covid policy, are the main catalysts weighing on the global growth outlook. As a result, the stark comments combined with the dollar’s recent shortcomings, helped put a floor under gold’s price which has managed to climb higher and hit 6 months highs in today’s trading session.

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