Gold: Ready to Shine Again? Part II

Since our report (GOLD: READY TO SHINE AGAIN?) on 29 November, gold’s fundamentals have remained constructive. As the monetary transmission mechanism in the US is taking effect following Federal Reserve’s recent salvos of jumbo-sized rate hikes, the consensus is looking for 2023 as a recessionary year in the US (Bloomberg’s Probability of Recession: 60%). On the same token, Personal Consumption Expenditure price index (PCE) in the US is forecasted to soften from 6.3% in 2022 to 3.4% in 2023, which is still above the historical average. Post the latest Federal Open Market Committee’s meeting, Fed Fund Futures’ implied rate for 1Q23 dipped a bit to 4.87% from closer to 5% weeks back – market participants have been referring to this to gauge Fed Funds Rate’s terminal level.