(Kitco News) – Gold started the week at high levels as it traded near $2,050 an ounce, supported by safe-haven demand in the conflict in the Middle East and stubborn market sentiment that interest rate cuts will come sooner rather than later.
But as the short holiday week passed, a steady diet of hawkish central bank comments and the absence of any energy boost from geopolitics dampened investors’ appetite for the yellow metal.
The latest Kitco News Weekly Gold Survey shows that institutional experts and retail traders are moving toward near-perfect alignment in their forecasts for gold prices next week, with a majority of them anticipating gains for the precious metal, while the majority now see stagnation or decline.
“I’m bearish on gold next week,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “With Treasury yields rising and the US dollar strengthening, gold continues to face moderate headwinds.”
Marc Lebovit, publisher of VR Metals/Resource Letter, said he couldn’t bet against gold next week in the current environment. “With an intermediate upside target at $2,700, this will give gold the benefit of the doubt, especially since my overall market analysis is negative and the press is ignoring World War III that is clearly underway,” he said.
With the additional struggle bonus not materializing, interest rates and economic news will provide price direction next week, said Mark Chandler, managing director at Bannockburn Global Forex.
“Gold ends the week near the middle of the week’s range,” Chandler said. “Monday’s high was set near $2,058.60 and the mid-week low was recorded just below $2,002. Geopolitics and the breadth of conflict in the Middle East (including Pakistan vs. Iran) appear to have had less of an impact than I thought I imagine.
He noted that two- and ten-year Treasury bond yields rose by about 20 basis points this week. He said: “The dollar rose in the first half of the week, coinciding with heavy trading in gold.” “Giving way to a consolidating market, the yellow metal has stabilized. I do not think the US interest rate adjustment has been completed, but the focus next week will be on the first look at US GDP for the fourth quarter and three central bank meetings (BoJ, ECB and ECB). Canada).”
Gold is losing support at current levels, and he believes a breakout below $2,000 an ounce “could easily happen here,” said Sean Lusk, co-director of trading hedging at Walsh Trading.
While the US economy is expected to face additional headwinds as we head into 2024, there is now no stopping stocks.
“From the economic data we’re seeing so far, there’s nothing here to worry about one way or the other,” Lusk said. “Without something major coming into the market, because of a war or some unease or lack of confidence that things will remain status quo, which we’re not seeing… the market is ignoring a lot of the geopolitical concerns that are impacting the market.” You’d think it would have a bigger presence and be a factor in the prices here, but it’s not really the case.
Lusk said the drivers of gold’s recent gains were fading, and that seasonal supply would soon run its course. “Normally at this time, from mid-December to Valentine’s Day, we see a lot of physical demand, buying of gold by international jewelers and everyone. Physically, this was one of the friendlier times where we saw good reactions and good results.” A rally in mid-February /February, then they get everything back.”
“This year is a little different,” he added. “But no one talks about what’s happening in Eastern Europe, hardly, anymore. Israel and Gaza seem to be under control at the moment, and there are these Iranian proxies who are causing some chaos, closing off the Red Sea and everything else, but does it really matter?”
“I’d be a little worried here if you were a long gold one.”
This week, 14 Wall Street analysts participated in the Kitco News Gold Survey, and showed that last week’s uptrend has diminished considerably. Six experts, or 42%, expected to see gold prices rise next week, while four analysts, representing 29%, expected the price to fall, and another four, 29%, were neutral about gold for the next week.
Meanwhile, 150 votes were cast in Kitco’s online polls, and this week retailers almost exactly mirrored the opinions of experts. 66 individual investors, representing 44%, expected gold to rise next week. Another 44, or 29%, expected it to be lower, while 40 participants, or 27%, were neutral about the near-term outlook for the precious metal.
While investors will be closely watching the simmering conflict in the Middle East that continues to simmer without boiling over, the central bank’s interest rate decisions will take center stage again next week with three major monetary policy decisions on the agenda.
The Bank of Japan is expected to maintain its dovish stance and negative interest rates on Monday, followed by the Bank of Canada’s interest rate decision on Wednesday, which is anyone’s guess. Thursday morning will see the European Central Bank’s interest rate announcement, which could pose the biggest risk to the US dollar and gold next week.
Markets will also receive flash US PMI data on Wednesday, progress on Q4 GDP, durable goods and new home sales on Thursday, and the core personal consumption expenditures, personal income and spending report on Friday.
“It’s going to be interesting, because just technically, we have a mix of signals going on right now,” said Darren Newsom, senior market analyst at Barchart.com. “The trend on the weekly chart is still down. So what does this tell me? We will see some money coming out of the safe haven idea.
This does not mean that everything around the world will suddenly improve, Newsom said, “but it is possible that we will start to see investment money grow more comfortably and move away from commodities, including safe haven markets.”
He noted during the interview that the S&P 500 was on the cusp of hitting a new all-time high, which it did later Friday afternoon, and said this would also pull investment away from precious metals.
“I think we will continue to see money flowing out of commodities, and that includes gold,” he said. “Right now, gold may be one of the last places we see money coming out because there is so much uncertainty in the world. But even so, the weekly chart still looks bearish. If it can’t build a short-term uptrend from this low this… “The week is near $2,000, it will break through it next week.”
“Eventually, we will extend this third wave of the three-part downtrend beyond the previous low of $1,987.90, with the next low target at $1,960.80 in the February contract.”
Newsom said that before we reach the end of January, he expects the April contract to hit new lows as well. “From a purely technical standpoint, if we break above the previous low at $2,007.40, $1,980 will be the next target for the April contract.”
Newsom said that while $2,000 an ounce is a good round number, he doesn’t think the algorithms are actually looking at it. “They watch moving averages, volumes, volatility, things like that,” he said. “Eventually, they’ll look at those other investment opportunities. I feel like there’s more opportunity out there.”
“We are climbing into new areas, new high areas, and gold may have run its course by now,” he said. “Money only changes channels.”
For his part, Adrian Day, President of Adrian Day Asset Management, believes that gold can build on the consolidation witnessed this week to achieve new gains next week. “There has been a bounce, and now gold can rise again,” Dai said.
James Stanley, chief market strategist at Forex.com, has turned from bearish to bullish over the coming week. “I pulled back last week as there was an early build of the bearish structure, and that worked to some extent,” he explained. “But the bears failed to test below $2K in the spot price and a falling wedge formation formed. This is bullish, and combined with no tests below $2K, I think we will see a rally next week.”
The big question is, “Where do the bears show resistance? I have levels at 2059, 2075 and 2082,” Stanley said.
Kitco senior analyst Jim Wyckoff still expects gold prices to rise next week. “It rose as the bulls gained some momentum late this week, indicating a strong follow-through early next week,” he said.
The spot price of gold is currently up 0.31% on the day but has lost 1% over the week, last trading at $2,028.44 per ounce at the time of writing.
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