Gold Price Fell from 9-Month High on Friday

  • Market Overview

The price of gold fell on Friday from a nine-month high reached on 25 January as investors continued to worry about how aggressive developed market central banks could increase their interest rates this week. “The (US Federal Reserve) Fed is expected to scale back the pace of its rate hikes to 25bps next week from 50bps in December, while both the (European Central Bank) ECB and the (Bank of England) BoE are set to stick with a 50bps increase. Gold is highly sensitive to the rates outlook as higher interest rates raise the opportunity cost of holding non-yielding bullion and vice versa,” Trading Economics reported. At 18h40 an ounce of gold traded at $1 929.74 after reaching $1 945 on 25 January this year.

A range of economic data sets kept Wall Street investors on the side lines on Friday, as they tried to determine whether the Fed would continue to hike interest rates at an aggressive pace this year. According to Trading Economics: “The Fed's preferred inflation measure, the US core personal consumption expenditures price index, slowed to an over one-year low of 4.40% in December, cementing expectations that the Federal Reserve could slow its tightening campaign (this) week. However, a different report showed that personal spending declined for a second consecutive month in December, heightening the impact of higher borrowing costs on consumer spending, which accounts for more than two-thirds of US economic activity.”

European markets were mixed on Friday as investors weighed corporate earnings against the possibility of further interest rate hikes by the ECB this Thursday. An increase in the sales of LVMH (EPA: LVMH ) caused its shares to rebound on Friday, supporting indices on the continent.

The local bourse closed up by 0.35% on Friday, supported by industrial and financial counters, while the rand remained range-bound, trading at R17.18 to the US dollar at 18h50.

Most Asian markets closed in the green before the weekend, with the Hang Seng rising by 0.54% “ahead of the reopening of China markets (on) Monday after a week-long Lunar New Year holiday.” Japan’s Nikkei closed up by 0.07% as investors considered data that showed that inflation came in above expectations. However strong gains from Mitsubishi (TYO: 8058 ), Sumitomo Mitsui (TYO: 8316 ), Shin-Etsu Chemical (TYO: 4063 ), Fast Retailing (TYO: 9983 ) and Nippon Steel (TYO: 5401 ) boosted the index.

Brent crude traded at $86.64 a barrel at 18h50 as concerns around supply and demand continued to plague sentiment.

PSG Wealth Daily Investment Update, 30 January 2023

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