January is typically the best month for gold as prices tend to rise in the lead up to the Lunar New Year. That has been the case in 7 of the last 8 years but gold is off to a rough start this time in 2022. I noted previously in December as to why this time around, things could be different for gold:
“Amid Fed rate hike prospects and the relative uncertainty related to the omicron variant, it isn’t going to make things easy to traverse in the weeks ahead.
Typically, the seasonal tailwind for gold kicks in around the middle of the month through to January – the case being demand ahead of the Lunar New Year holidays.
You’d have to go back to December 2013 and January 2014 to find a period where gold failed to post a gain when you put both months together.
As much as this may be one of the more favoured trades to start off the new year in recent times, I fear that this time around may be a little different considering the factors at play as noted above. The Fed may move to increase the pace of tapering in January and that could spook gold bugs and the technicals itself don’t look too encouraging.”
There was already a bit of a price fakeout early on at the turn of the year and after a bounce off $1,800 on Tuesday, we are seeing price tumble again after the more hawkish Fed tone yesterday.
And the drop back below $1,800 is certainly demoralising for buyers, though they are hanging on at the 100-day moving average @ $1,792.60 for the time being.
That will be a key level to watch before further support is only seen around $1,753-60 next.
I love me a good ol’ easy gold seasonal trade to start the new year. But this time around, I’m not as convinced and the market doesn’t seem so either.