empty
 
 
01.02.2023 11:51 AM
Gold could potentially hit a record high

And who says that gold does not protect against high inflation? Yes, in 2022, the precious metal was unimpressive, to say the least, as consumer prices in the U.S. and Europe spiked to their highest levels in decades. But it has outperformed both stocks and bonds. And the devaluation of the lira on the back of CPI growth of more than 80% made the Central Bank of Turkey the largest buyer of gold. Its reserves rose by 148 tonnes to 542 tonnes over the year. At the same time, the demand for jewelry in the country jumped 32% in the fourth quarter.

According to the World Gold Council, interest in the precious metal in 2022 increased by 18% to 4,741 tonnes, the highest level since 2011. The main contribution was made by central banks, which bought 412 tonnes in October–December, 12 times more than during the same period in 2021. The annual figure was 1,136 tonnes, more than doubling from the previous year. We are talking about the highest level in the last 55 years!

Dynamics of gold purchases by central banks

This image is no longer relevant

Demand from central banks will support gold in 2023, even if it slows down. However, there is something to replace it. It is hardly worth counting on the continued outflow of capital from specialized exchange-traded funds, which took place in 2022. All this creates a solid foundation for an upward trend in XAUUSD. Moreover, the macro environment also contributes to the continuation of the upward rally.

If in 2021–2022, the main source of higher inflation was the United States and the eurozone, in 2023, it will be China. The country came out of the lockdowns, and looking at the experience of North America and Europe, we can assume that it will face abnormally high rates of GDP and price growth. At the same time, the U.S. could plunge into recession, which would increase demand for the precious metal as a safe haven asset amid a weakening U.S. dollar. Add to that the high risks of a dovish Fed reversal this year, and monetary policy-sensitive gold will spread its wings even more. The issue of its growth above $2,000 per ounce can be considered resolved. There is another topic on the agenda. Will the XAUUSD make a new record high of 2020?

This image is no longer relevant

The fall of the precious metal to $1,900 on the eve of the Fed meeting looks logical. Markets are worried about Jerome Powell's intention to hurt them the same way he did in 2022. Back then, investors' excessive optimism forced the Fed to take up the whip so as not to loosen financial conditions ahead of time. However, the slowdown in U.S. wages to 4% in the fourth quarter became the catalyst for the dollar's decline and put the bulls on XAUUSD back in the game. Signs of weakness in the labor market suggest that the Fed should not go overboard with tightening monetary policy.

Technically, the formation of a pin bar with a long lower shadow on the gold daily chart is a powerful bullish signal. A successful assault on its high near $1,931 an ounce is usually used to open long positions. Or to build up previously formed longs on a pulback to $1,907, as mentioned in the previous article.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2023
EURUSD
Euro vs US Dollar
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Start trade
Start trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST
  • Chancy Deposit
    Deposit your account with $3,000 and get $8000 more!
    In March we raffle $8000 within the Chancy Deposit campaign!
    Get a chance to win by depositing $3,000 to a trading account. Having fulfilled this condition, you become a campaign participant.
    JOIN CONTEST
  • Trade Wise, Win Device
    Top up your account with at least $500, sign up for the contest, and get a chance to win mobile devices.
    JOIN CONTEST
  • 100% Bonus
    Your unique opportunity to get a 100% bonus on your deposit
    GET BONUS
  • 55% Bonus
    Apply for a 55% bonus on your every deposit
    GET BONUS
  • 30% Bonus
    Receive a 30% bonus every time you top up your account
    GET BONUS

Recommended Stories

GBP/USD. Overview for March 31. The British Chancellor and the head of the Bank of England are too optimistic.

The GBP/USD currency pair quietly continued to rise on Thursday, although there was no significant event to explain it. However, a significant inflation report was released in Germany during

Paolo Greco 09:59 2023-03-31 UTC+2

EUR/USD. Overview for March 31. The euro waited for an opportunity to show new growth

On Thursday, the EUR/USD currency pair continued to move upward. The pair has been growing almost recoilless since the beginning of the week, resulting in such a hazy formulation

Paolo Greco 09:37 2023-03-31 UTC+2

Heavy oil prices will rise

According to Bloomberg, PetroChina is launching a new refinery. Until recently, heavy crude oil traded at a significant discount compared to lighter grades. Now, producers of heavy grades

Irina Yanina 04:29 2023-03-31 UTC+2

EUR/USD. Germany's inflation growth caused a strong reaction

The release of statistics on Germany's inflation growth caused a strong reaction in the EUR/USD pair today. The fact that the report was published in the "green zone" makes

Irina Manzenko 17:42 2023-03-30 UTC+2

ECB monetary policy report

As I have had the opportunity to state more than once, a lot now depends on inflation and the monetary policy of central banks for both pairs. These

Chin Zhao 17:19 2023-03-30 UTC+2

XAU/USD: Strong bullish momentum remains

After yesterday's minor correction, the dollar index (DXY) is falling again today. As of writing, DXY futures were trading near 102.15, 60 pips below last week's close. The price

Jurij Tolin 15:05 2023-03-30 UTC+2

Gold at $2,000 an ounce

According to forecasts by the Dutch bank ING, in the fourth quarter of this year, gold could cost an average of $2,000 an ounce. They base their forecasts

Irina Yanina 14:38 2023-03-30 UTC+2

Markets may see a correction ahead of fresh US data

Risk appetite is increasing as authorities are trying their best to cushion the crisis that is happening to the US banking system. This led to the decrease of dollar demand

Pati Gani 14:15 2023-03-30 UTC+2

USD/CAD: Downward trend in full swing

USD/CAD is in a strong downward trend and has dropped almost 400 pips in less than a week. Last Friday, the loonie was in the area of the 38th figure

Irina Manzenko 14:00 2023-03-30 UTC+2

Bank of England says the UK banking system is in good shape

Pound is ready to storm the March highs, all thanks to the recent statements of Bank of England Governor Andrew Bailey. He said the central bank is going

Jakub Novak 13:23 2023-03-30 UTC+2
Can't speak right now?
Ask your question in the chat.