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Gold and silver markets got off to a strong start in the first couple days of trading this year before running into some selling pressure on Thursday – only to bounce back again on Friday morning.

A superficially strong jobs report has raised expectations for further rate hikes by the Federal Reserve and boosted the U.S. dollar on foreign exchange markets. Metals futures traders reflexively responded by hitting the sell button yesterday only to turn around and buy today.

Investors often look at the first few trading days of a New Year for clues as to market trends that may develop for the rest of the year.

Financial News Report: U.S. stocks fell sharply on Thursday as fresh evidence of a tight labor market deepened fears the Federal Reserve will keep interest rates elevated for longer than expected.

Financial News Reporter: No real indication of what the Fed is thinking of for the next meeting on February 1st, but in December, they saw an economy that was still running too hot in terms of the labor market and inflation that was still unacceptably high. They did face a concern, however, that with most of the credit impulse that they had put into place yet to hit the economy, they had two risks. One, tighten too little and let inflation and expectations go up too much. Tighten too much and risk recession.

The major economic themes of 2022 were rising inflation and rising interest rates. They combined to create miserable conditions for investors in conventional financial markets.

In 2023, interest rates will likely peak as the Fed slows and then ends its hikes. Central bankers are expected to raise rates by a sized-down quarter point at their next meeting in February.

Some observers see the Fed needing to hike further given a low official unemployment rate and still elevated inflation rate. But Wall Street and Washington, D.C. have signaled that they can't take much more interest rate pain.

It could be one and done for the Fed in 2023. There is even a chance Jerome Powell and company could begin cutting rates later in the year if the economy stumbles badly.

As for inflation, it is widely forecast to come down from its double-digit highs of 2022 – in large part because higher borrowing costs for consumers and businesses are expected to depress demand for goods and services.

But the potential for supply-driven upward price pressures also exists. Some energy and commodity market analysts are warning of price spikes to come due to lack of investment in new production combined with geopolitical rifts around Russia.

Stagflation could be a major theme for 2023. In such an environment, both stock and bond markets will likely continue to struggle. Precious metals, meanwhile, will likely continue to outperform. Gold and silver each posted slight gains during 2022 even as financial assets posted deep losses.

Investors should also expect the unexpected. Inherently unpredictable markets have a tendency to defy popular expectations and produce outcomes that leave investors who haven't covered their bases vulnerable.

Central banks around the world acquired gold bullion bars at a record pace last year. Official buying of physical gold should provide something of a floor underneath prices in 2023.

Whether gold gains popularity among ordinary investors this year as a safe haven remains to be seen. The public, unfortunately, may not become interested in a big way until after gold launches into a record-setting run. It’s then that a possible mania phase could ensue.

In the meantime, gold and silver will continue to fill an essential niche in a well-balanced investment portfolio for 2023 and beyond.

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