(Kitco News) – The gold market is treading water, but at least the precious metal is keeping its head above $1,800 an ounce. The question is, will this last.
Two equal opposing forces are pulling the gold market. Inflation continues to rise unabated; however, rising consumers prices are being met with the expectations that the Federal Reserve will take aggressive steps to cool down the overheating economy.
Friday’s nonfarm payrolls report was the perfect example of these two forces in the marketplace, which is keeping gold prices stuck in neutral. In its report, the Bureau of Labor Statistics said 467,000 jobs were created in January. This was a solid report considering that some economists expected job losses.
At the same time, wages increased 0.7% last month and increased 5.7% annually.
The latest labor market data is helping to strengthen market expectations for a 50 basis-point hike in March. The good news is that these expectations are not having a significant impact on gold, with prices holding the $1,800 level.
Investors might want to get used to the $1,800 an ounce level as it could be stuck here for a while. This week the London Bullion Market Association released the results of its annual precious metal survey.
Among the 34 analysts who participated in this year’s survey, expectations are for gold prices to remain relatively stable, averaging 2022 around $1,801.90 an ounce, essentially unchanged from last year’s average price of $1,798.60 an ounce.
There is still one wild card in the market and that is the rising volatility in the market. Thursday, a more than 20% drop in Facebook’s parent company Meta, spooked some investors and is the latest turmoil for the tech sector. While off its lows, the Nasdaq is still down nearly 11% so far this year.
According to one trade, the FANG (Facebook, Amazon, Netflix and Google) are not as sharp as they once were, and this could provide some support for the precious metal.
Of course, another negative for gold is that it isn’t just the Fed that is looking to shift its monetary policy. This week the Bank of England raised interest rates for the second time in three months. On the same day, the ECB said that it wouldn’t be rushed into making any policy decision but kept the door open for a possible rate hike before the end of the year.
Before I go, I just wanted to mention that I have launched a new podcast with Kitco. Every Monday, I will be talking to guests about gold, silver and all commodities. This week I spoke to Nitesh Shah, director of commodity research at WisdomTree.