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05.01.202311:34 Forex Analysis & Reviews: Obstacles for precious metals

Long-term review

Exchange Rates 05.01.2023 analysis

The biggest macro hurdle for precious metals in 2022 was the historic tightening by the Federal Reserve, which posted the fastest rate hike since the early 1980s. Overall, rates rose 425 basis points over the year, rising to a range of 4.25% to 4.5%.

Considering the significant headwinds caused by the sharp rate hikes by central banks, particularly the Fed, last year's performance of gold, silver and platinum prices was remarkable.

And the last quarter of the year was so favorable for precious metals because the markets began to orient themselves towards the Fed's reversal.

At its last meeting in 2022, the Fed slowed growth to 50 basis points but remained steadfast in its fight to bring inflation down, warning markets that there will be more rate hikes into the new year as inflation is not at the right level.

Exchange Rates 05.01.2023 analysis

"We've raised 425 basis points this year, and we're into restrictive territory. It's now not so important how fast we go. It's far more important to think about what is the ultimate level. And... how long do we remain restrictive? That will become the most important question," Fed Chairman Jerome Powell told reporters after the December FOMC meeting.

Regarding the possibility of a soft landing, Powell also noted that the longer the Fed needs to keep rates high, the narrower the runway gets. "I don't think anyone knows whether we're going to have a recession or not. And if we do, whether it's going to be a deep one or not, it's just not knowable," he said.

The latest median forecast for next year shows that rates could rise to 5.1%, with the Fed also expecting real GDP to be 0.5% in 2023 and PCE inflation to slow to 3.1%.

Markets have already priced in additional rate hikes for February and March. But many analysts predict a pause after that, followed by a potential rate cut towards the end of the year.

*A análise de mercado aqui postada destina-se a aumentar o seu conhecimento, mas não dar instruções para fazer uma negociação.

Irina Yanina,
Analytical expert of InstaSpot
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