In the first week of December, it looked like gold was set for a bit of a reality check after the rally above $2,100 fizzled rather quickly. That saw price dip back below $2,000 but gold bugs have definitely salvaged the situation in a push to a record high close this week. Thinner liquidity conditions may still cast some doubts over the latest move higher but there are points to argue for gold to chase a further move higher heading into next year.

And the seasonal tailwind in January is arguably one of the strongest points there could be in advocating for an extension higher.

Amid lighter trading this week, gold is now at $2,077 and posted a record daily close in trading yesterday. It might be tough to look too much into the moves at the moment but there is definitely a feeling that gold bugs are getting a little too anxious in trying to drag the precious metal past the $2,100 mark and to new heights at this point.

The way I see it, gold is poised for one of two things now. It is either we go off to the races to start the new year i.e. fresh record highs, or we get a notable squeeze lower before buyers reload on long positions. It would really surprise me if we got a quiet and slow January, all things considered.

As for the hesitancy to say which is more likely, it is to do with the fact that I heavily detest reading too much into year-end and thin liquidity moves such as what we’re seeing this week. As such, I still do hold some reservations about the high points for gold on the week currently.

This article was written by Justin Low at www.forexlive.com.

• Monetary policy normalisation is showing impact on slowing inflation
• But it is premature to think about rate cuts at this stage
• Even with the unprecedented streak of rate hikes, there is no guarantee for rate cuts in 2024

It’s all just more pushback by the ECB as they are not quite ready to pivot just yet. But we all know that rate cuts might be coming sooner rather than later if things stay on trend in the months ahead.

This article was written by Justin Low at www.forexlive.com.

The dollar’s own vulnerabilities this week is also contributing to the drop in the pair but so far in trading today, it is more about the Japanese yen. The pair is now down to 140.87 with the yen up 0.7% against the dollar. Other major currencies are not doing a whole lot in comparison for the most part.

The drop here sees USD/JPY now at its lowest since the end of July and may look towards a test of 140.00 as sellers exert further control.

As for the outlook going into next year, I shared some thoughts earlier this week: The Japanese yen is an early contender for the most interesting major currency in 2024

This article was written by Justin Low at www.forexlive.com.

• BOJ Governor Ueda said the chance of moving rates out of negative in 2024 is „not zero“
• Japan November Industrial production (preliminary) -0.9% m/m (expected -1.6%)
• China’s ’state planner‘ on measures to expand domestic demand, promote stable growth

AUD/USD
and NZD/USD rallied during morning Asia trade but have each shown
retracements. AUD/USD is almost back where it began while NZD/USD has
held a little higher. As with other major-traded forex rates, the
swings were not large.

USD/JPY
dropped to lows just under 141.20 and has retraced to just above
141.40 as I update.

The news flow for the session was negligible. On the data front, we had not as
bad as expected industrial output from Japan for November, and better
than expected retail sales.

This article was written by Eamonn Sheridan at www.forexlive.com.

His remarks didn’t contain any surprises:

• said he was in no hurry to unwind ultra-loose monetary policy
• cited the risk of inflation running well above 2% and accelerating was only small

Ueda is looking forward to the Bank’s regional branch managers‘ meeting in the middle of next month, saying it would deliver „quite a lot of information“. On the prospect of a policy shift at the January 22 – 23 meeting:

• „For now, I don’t think the chance of this happening is large“

More:

• desirable for wages to rise next year at around the same pace as this year „or somewhat faster“
• BOJ will be assessing to what extent firms pass on higher labour costs to services customers
• not quite convinced yet that Japan can foresee inflation sustainably achieving the BOJ’s 2% target
• the chance of moving short-term interest rates out of negative territory next year „was not zero“
• key factor would be whether wage hikes will broaden to smaller firms in 2024’s annual spring wage negotiations, but the BOJ could decide even before the smaller firms‘ wage talk outcome becomes available, if their profits turn out to be very strong

USD/JPY update:

This article was written by Eamonn Sheridan at www.forexlive.com.