There’s a decline in Chicago PMI and gold’s rally is hindered by high-interest rates
January reduction of CB Consumer Confidence
According to a study from the U.S. on January 31, CB Consumer Confidence fell from 108.3 in December to 107.1 in January, below the 109 consensus expected by analysts.
Though the fall in consumer confidence may indicate that consumers are still concerned about the possibility of a recession, it should be emphasized that there is not a significant difference between the data and the analyst projection.
Traders had the opportunity to review the January Chicago PMI report today. According to the data, the Chicago PMI dropped from 44.9 to 44.3, below the analyst average of 45.
An increase of the U.S. Dollar due to CB Consumer Confidence
Following the publication of the CB Consumer Confidence data, the U.S. Dollar Index increased slightly. Whether the report will materially affect currency dynamics, though, remains to be seen.
Trading today is centered on the Fed meeting. Tomorrow will see the release of the Fed decision, therefore traders should exercise caution before this significant event.
After the report’s release, the S&P 500 increased a little and made session highs. Although there were just minor changes to consumer confidence, it is unclear how stock traders will respond to them. Following yesterday’s decline, it currently appears that some traders are willing to long stocks.
High-interest rates restrict gold’s rally
According to a Reuters survey conducted on Tuesday, analysts and traders now expect gold prices to rise significantly, but they still anticipate that rallies would be restrained by high-interest rates.
In the past year, gold’s price has dropped from above $2,000 an ounce to as low as $1,613.60 due to rising interest rates that increased bond yields and the value of the currency, making non-yielding, dollar-priced gold less appealing.
However, prices have risen above $1,900 after central banks bought gold and yields fell on predictions that rates will soon cease increasing.
She said, “We expect the U.S. dollar to weaken and bond yields to fall, but gold appears to have priced in much of this risk early.” Before easing into the second half of the year, prices may still hit $2,050, she added.
Analysts’ projections
Some analysts are still pessimistic. “We forecast a decline from here as the U.S. Fed extends its rate hike cycle into 2023 and holds its peak to cap inflation,” said Tom Price, analyst at Liberum.
“This policy will underpin long-dated real rates (on bonds), acting as a drag on no-yield gold’s price,” he said.
38 analysts and traders were asked, and the results showed that the median predictions for gold prices were $1,825 per ounce in the first quarter, $1,840 in the second, $1,852.50 for the entire year, and $1,890 in 2024.
The poll anticipated average silver prices of $23 per ounce in 2023 and $24 in 2024, significantly higher than the poll’s previous prediction of $20 for 2023. In 2022, silver averaged $21.77.
According to Capital Economics’ Bradley Saunders, when China’s economy begins to recover and global manufacturing activity rises, silver should start to outperform gold.
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