Gold consolidating gains above $1900 into Fed week
The gold price is up over $100 in the first month of 2023, its best start to the year since 2012. After a false breakout to the downside during the final quarter of 2022, gold has zoomed $332 an ounce from its November low at $1618. This now 20% rally over the past three months has technically placed the safe-haven metal in a bull market, suggesting further gains ahead.
The closest spread was from the October 1990 lows, when stocks rose 6.2% to gold's 1.7% in the subsequent three months. Gold's outperformance, relative to stocks, suggests that the expectations of future Fed easing are less than bullish for equities, and that smart money rotation into the gold space has quietly begun.
With policymakers being set to move forward with raising borrowing costs by 25 bps during the FOMC meeting next Wednesday, bond markets have been pricing in the move for weeks and Fed officials have not pushed back. Fed Chair Jerome Powell and his colleagues were also signaling a ¼ point raise in advance to avoid surprises before this week's official"blackout" period.
Over the past few weeks, the gold price has been sniffing an end to rate hikes by gearing up for its third attempt at the all-time high resistance zone as it approaches $2000. The third attempt at a major resistance level is typically not successful. But following a likely pullback from $2000-$2100, gold should make a fourth and successful break to new all-time highs.
Meanwhile, weakness continues to be bought in select quality junior gold stocks, with capital markets improving recently. There have been several bought-deal financings announced in the junior space this week, along with private placement activity heating up since the start of the new year as well.
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