If you were in any doubt as to gold’s intentions for this coming year, the solid show of strength seen this week should be more than enough to confirm that a new high is on the horizon.
The precious metal kicked off January by easily peaking with a six-month price high very close to £1,601 ($1,900) thanks to a surge in safe-haven demand. The rush to safety came on Wednesday with investors waking up to the fact that a recession is now very much a reality.
OANDA’s senior market analyst, Edward Moya says that a job market tightening is on the cards in the very near future, which would be supportive of further gold gains.
“The labour market will show signs of weakening going forward now that corporate America appears to be steadily announcing layoffs and cost-saving measures,” he said. “For now, the Fed needs to stick to the script and say rates will stay higher for longer. We will probably start seeing jobless claims climb much higher starting next week.”
The American multinational bank, Wells Fargo agrees with Moya’s analysis of the job market, saying that it also expects signs to emerge of a market slowdown within the next few days.
“The buoyancy of nonfarm payroll growth has seemed at odds with other signs that the jobs market is beginning to sour,” the bank said. “We look for nonfarm payroll growth to downshift more noticeably in the months ahead, beginning with December’s employment report showing hiring slowing to 205,000.”
Metals strategist Nicky Shiels says that this kind of environment is supportive of gold prices, noting “A combination of slower global growth, niggling (but not red hot) inflation and deglobalization ensures gold will return as a safe diversifier in times of escalating uncertainty.”
Buy gold now.
