Gold is at the forefront of investors in light of high levels of inflation
Spot gold prices jumped in trading yesterday, Wednesday, to 2032 dollars an ounce, to approach the peak of its historical prices that it achieved in 2020 at 2073 dollars, before retreating slightly in trading today, Thursday, amid expectations that the precious metal will retain its attractiveness.
What are the reasons for this rise? How will the situation be during the current year 2023?
Gold is taking center stage at a time when global inflation problems are causing investors to worry about placing their money in asset classes that experience uncertain volatility, in addition to the hopes for good returns on investments are bleak.
A report by the American Forbes magazine said that after the Federal Reserve (US Central Bank) announced an interest rate hike for the ninth time in a row, gold prices witnessed a remarkable global rise throughout March 2023. Prices are currently witnessing a wave of successive rises.
Why does the price of gold rise?
The report indicated that gold is known as one of the best hedges against inflation, and central banks around the world are actively seeking it, as well as investors looking for safer havens than stocks, bonds and currencies to trade in.
The writer pointed out that the rise in gold prices came as a catalyst for many global events during the last period, including political tensions due to the Russian war on Ukraine, high inflation rates and the spread of uncertainty in the stock markets.
What are the expectations for gold performance in 2023?
Analysts believe that gold will continue this performance and will even outperform other asset classes in 2023 in light of the ongoing inflation problems.
The report quoted analysts as saying that gold is moving in an upward trend in general, and that gold prices could re-test their all-time highs at about $2070 an ounce, while gold prices are expected to rise in the medium and long term to a range between $2040 and $2080, per ounce.
According to the report, other analysts believe – unlike before – that gold prices will decline, and that the risk-reward ratio is not favorable for gold at the present time, and they also believe that the rise in gold prices came with the support of two short-term events, namely the collapse of the Silicon Valley bank.
and the unexpected sale of Credit Suisse to UBS.
Should investors buy gold during 2023?
The report stated that there are many ways in which gold can be bought and invested in, and this depends on the investment goals and the individual’s willingness to take risks.
Buying actual gold may not be the best option, due to its high price, but on the other hand, this rise may be a wonderful opportunity to trade the precious metal through gold funds traded on the stock exchange, for example, and it is similar to the mutual funds that are traded in stock markets.
Overall, the report showed that it is difficult to predict whether investors should buy now to achieve returns.
Chances of gold are present, and the rise of spot contracts to the 2098 needs one thing.
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The yellow metal has fallen from the record high levels seen earlier in the week in signs that the Federal Reserve may rise again in June.
It is easy to understand gold’s decline in the event of higher interest rates. As higher interest rates help lift the dollar (although this was not the case this week) the dollar and treasury yields are the main enemies of gold. But sometimes gold has special circumstances.
Apart from the expected inflation data this week, which may change the price map and the Fed’s expectations in a strong way. Markets are also concerned that the US banking crisis that has surfaced this week will resurface in March. In addition, there were concerns about a US debt default, first ever and weaker readings for Factory Orders and Durable Goods. As a safe haven, gold is a hedge against these concerns.
Ed Moya, an analyst at online trading platform OANDA, said that gold “still has a good chance of returning to the all-time highs”. Moya noted that US banking concerns do not appear to be about to disappear anytime soon due to the exposure of regional banks to commercial mortgages.
“Regulators are scrambling and don’t have a clear plan to tackle the regional banking crisis,” Moya said, adding that asking big banks to come up with money to refill the deposit insurance fund hole left by smaller, failing banks was “just another scope-aid solution.”
Gold futures contracts ended Friday’s trading at $2024.60 an ounce, down by 1.51%. The lowest level for gold was also on Friday when futures contracts recorded $2007 before rebounding. The highest level of gold in the past week was on Thursday when gold traded at 2082.80, which is the highest level ever. .
Spot gold contracts closed at $2017.56, down by 1.59%. Gold contracts breached the $2000 level, and gold touched Friday’s lowest level at $1,999.66. As for the highest level, it was recorded on Thursday, when spot gold traded at a record high of $2,080.72.
Gold, technical forecasts for spot prices
Dixit of SKCharting said that spot gold needs to recover the $2028 and $2032 zones to resume the upside move, which will target $2050 and $2080. “The initial resistance on the upside will be $2,098,” he said. On the other hand, Dixit added that a sustained break below the 50-day moving average of $1,998 and below $1,993 will extend the downside for gold to $1,977 and $1,968.