ANZ: Fed Rate Hikes Hang Over Gold

ANZ note that “a persistently hawkish Fed is likely to keep gold prices in check.”

• “Softening U.S. inflation raised hopes for an end to the aggressive rate hike cycle. This would raise the risks of a weaker USD and subsequently raise support for gold. That was scuttled after the FOMC meeting, with Fed suggesting rates are likely to continue to rise at upcoming meetings.”
• “Data suggests that gold can still outperform against real rates. With intensifying recessionary and geopolitical risks going into 2023, this will be an ongoing issue. Central bank purchases are at record highs. Physical offtake in the emerging markets remains strong. This should reduce the burden for investment demand to clear the supply overhang. This is important, considering ETF liquidation is likely to continue in the short-term. Nevertheless, retail investment is holding up well. Lower refined gold output could also tighten the physical market amid the energy crisis in Europe”
• "Technically, the downtrend has broken following recent sell - off in the U.S. dollar, but failed to break the resistance of $1,800/oz. We expect gold to resume its downtrend and fall below $1,700/oz in the short-term. Prices could still test the downside of $1,620, which is a key support level in the near-term.”