Investment Idea

A golden opportunity for Valentine’s Day

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17/01/2023 | 2 min read
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The US CPI data came in as expected, with inflation slowing down to 6.5 % in December. Following this, expectations have now moved toward the Fed slowing down the rate hikes, a 25-basis point increase being probable.

A downshift to 25-basis points would indicate a belief that inflation peaked during the summer. Despite this however, market uncertainty might remain high owing to the U.S. debt limit rapidly approaching. This uncertainty, timed with the annual Valentine’s Day boost, might push the gold price past the $ 1920 barrier.

Even with the much-appreciated slowdown in inflation to 6.5 % in December many incoming reports might rock the boat. In the coming week retail sales, producer price inflation, housing indicators and several earnings reports for major US companies will serve as indicators for the health of the US economy. Should these indicators beat expectations, the data might boost uncertainties originating from the US house of representatives. The deadlock in the house near guarantees that negotiations regarding the debt ceiling will get complicated, raising fears of the US defaulting on its obligations.

Gold (USD per troy ounce), daily 60-day price chart

Source: Kitco.

Gold has again managed to push past the $ 1900 resistance level most previously reached in the spring of 2022. The very weak period from September to December 2022 went against the typical seasonality seen in gold, as prices tend to increase in tandem with the Indian wedding season. Most certainly dampened by the hawkish Fed, market uncertainty and more gentle interest rate expectations broke the negative trend. Besides the above, another typical seasonal boom for gold is coming in February, namely Valentine’s Day. Even though predominantly chocolate producers might look forward to this day, US gold prices have historically tended to get boosted in tandem with the increase in jewellery sales. With the coming retail sales report from the US commerce department expected to show choppy consumer spending data it is also possible for jewellery sales to experience a lipstick-effect. Considering all the above, gold might be poised to push past the $ 1920 resistance level and remain strong until the historically usual break off in March or April.

Gold (USD per troy ounce), one-year daily chart

Source: Infront and Carlsquare. Performance (left) is indexed from 15.01.2022. Note: Past performance is not a reliable indicator of future results.

Gold (USD per troy ounce), five-year weekly chart

Source: Infront and Carlsquare. Performance (left) is indexed from 13.01.2018. Note: Past performance is not a reliable indicator of future results.

The full name for abbreviations used in the previous text:

EMA 9: 9-day exponential moving average

Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence of numbers in which each successive number is the sum of the two previous numbers.

MA20: 20-day moving average

MA50: 50-day moving average

MA100: 100-day moving average

MA200: 200-day moving average

MACD: Moving average convergence divergence