(Kitco News) – There was a lot to digest in the gold market this week, including manufacturing and service sector data, non-farm payrolls, and the FOMC interest rate decision, but precious metal prices are The increase was due to the hike and virtually eliminating the possibility of a rate hike. While there was room for cuts in the second quarter, the overall trajectory was downward as demand in Asia cooled slightly and tensions in the Middle East faded from the surface.
After starting the week above $2,335 per ounce on Monday, spot gold failed to break above $2,340 on Monday and began a steady decline by the afternoon, dropping to a weekly low of $2,283 just before noon Wednesday. I added.
Positive momentum then returned to the market, with gold prices above $2,325 per ounce following the Fed’s interest rate announcement in the afternoon and Fed Chairman Powell’s press conference announcement.
However, after a second attempt to break out of that level, the bullish momentum dissipated again and the market saw gold prices fall to support around $2,300 per ounce, with occasional tests of $2,290. Aside from the scene, gold prices remained sluggish for the rest of the week.
In the latest Kitco News Weekly Gold Survey, experts are as pessimistic as ever about gold’s near-term outlook, but most retail traders still see gold prices falling or flat.
Lukman Otunuga, senior research analyst at FXTM, said this is a bearish signal for bullion in the coming days. “Gold prices are flashing red, abandoning initial gains from lackluster US jobs numbers,” he noted.
Adrian Day, president of Adrian Day Asset Management, is among those who still believe in gold next week.
“Gold’s resilience remains strong and convincing, primarily in the face of delays in rate cuts by the Federal Reserve and some other central banks,” Day said. “We know that whoever is buying gold is primarily the world’s central banks and Chinese savers, but there are reasons apart from traditional macroeconomic factors that lead to higher gold prices. This buying is largely price-independent and is likely to continue.”
Mark Chandler, managing director at Bannockburn Global Forex, expects the balance of short-term trading to be tilted to the downside next week as he expects Asian demand to recover.
“Gold has strengthened over the past few days, but the key question is whether this is a consolidation pattern or a bottom formation,” he said. “I think the yellow metal could take another leg down towards $2,250-$60.”
Chandler said improved support for the yuan could further slow retail demand for Chinese gold. He also noted that Hong Kong stocks and mainland stocks traded in Hong Kong have soared over the past week and a half, reducing the urgency for some investors to seek the safety of gold. It’s possible,” he added. “A recovery in the yen could also slow local demand.”
Adam Button, head of currency strategy at Forexlive.com, expects Chinese demand to pick up once domestic traders return home.
“China will return from vacation next week and will likely resume buying,” he said.
This week, 15 Wall Street analysts participated in the Kitco News Gold Survey, and after a two-week bear market, most believe gold will fall further in the short term. Only four experts, or 27%, expected the price of gold to rise next week, while five analysts, or 33%, expected the price to fall. Six experts, representing 40% of respondents, see gold continuing to trade sideways.
Meanwhile, a small number of Main Street investors expected prices to rise in the short term, with 217 votes cast in Kitco’s online poll. 102 retail traders (47%) expected gold to rise next week. Furthermore, 61 (28%) respondents expect a decline, while 54 (25%) respondents expect precious metals prices to trend sideways over the coming week.
Next week will be the week with the fewest economic indicators released this year. Key highlights will be Wednesday’s 10-year bond auction, Thursday’s Bank of England monetary policy decision and Treasury 30-year bond auction, and Friday’s release of the University of Michigan Consumer Sentiment Report.
Mr. Chandler noted the absence of major indicators from next week’s minutes and said he would be watching the Treasury market closely for clues about the market’s potential direction. “Next week looks quiet following the FOMC and jobs report, but we expect a large supply with bills and quarterly refunds,” he said.
Darin Newsome, senior market analyst at Barchart.com, reflected on this week’s bumper crop of economic data.
“I don’t think I learned anything that I didn’t already know about the American economy,” Newsom said. “The important point for me this week is that the monthly jobs report is strictly for entertainment purposes, not information. It’s very funny to see people deviate by hundreds of thousands of points.”
“It’s a very high-profile game of pining the donkey’s tail, but no one plays it well.”
Newsom said other things reveal the true state of the economy. “Cracks in the U.S. economy that have not existed for a long time are finally starting to appear,” he said. “We’ve seen Starbucks’ profits come in, but what’s interesting about Starbucks is that given the recent spike in coffee prices, sales aren’t just down because the price of the product itself has gone up. That was a real sale, and the people in the door were down. American consumers were actually starting to change some of their habits and stop drinking $6 to $8 coffee every morning. It may have started.”
Another sign that U.S. consumers may be weakening was the sharp decline in demand for boxed beef last month. “We saw a sharp decline at a time when these markets typically rise as retailers buy ahead of the summer grilling season, which is the biggest demand period of the year,” Newsom said. “Are American consumers finally starting to tighten up after years of everyone telling them how bad the situation is? They’re finally starting to cut back on their daily cup of coffee and cut down on expensive cuts of meat. Have they started tightening their belts to avoid buying them?”
“For me, those were the two key things that I saw this week,” he said. “Everything else is exactly in line with what we already knew: Inflation is still there, both sides of the aisle are going to argue, bullish or bearish, whatever. But , I think it’s more important now that we’ve read what some of these major consumer markets are doing.”
As for what this means for the gold market, Newsom believes some of the bulls are exhausted, which is to be expected given the recent rally in gold prices.
“June gold is nearing the end of its short-term downtrend at midday on Friday,” he said. “This means a bullish technical reversal is possible either today or Monday. The market is technically oversold in the short term as well.”
“The short-term downside target remains $2,268, with June near $2,300 on Friday.”
Newsom likened gold’s current status to another popular commodity. “Of course, it doesn’t make a hot cup, but for me it reminds me of cocoa,” he said. “Cocoa’s price soared too fast due to fundamental factors, so there were no buyers and it collapsed.”
“Gold is at a new all-time high,” Newsom said. “And while there will always be tensions in the Middle East, there will always be some currency issues around the world, and inflation hasn’t gone away, there just aren’t any buyers. There’s a vacuum underneath the market. , which is why it certainly appears to have played out that way when it finally gave some bearish short-term technical signals [earlier this week]”
However, he stressed that there are still many medium- to long-term factors supporting gold demand.
“Inflation is still going on,” he said. “We are likely to see at least one interest rate cut this year, which should weaken the US dollar and further increase the inflation environment. And the Middle East is not going away. As I have been saying for quite some time, the US is next As we get closer to the election, we will continue to see more turmoil around the world in hopes of swaying the election in some way.Therefore, gold will continue to find buyers here. I think the algorithm will go back to normal.”
Considering all of this, Newsom said the long-term outlook for gold remains unchanged. “It’s probably the best hedge against everything that’s going on right now,” he said. “We just needed to take a breather and get into a vacuum where there wasn’t a lot of buying intent.”
Also, Kitco senior analyst Jim Wyckoff said the technical situation still supports a high for gold prices next week. “The chart remains bullish across the board, so we’re seeing a steady rise,” he said.
Spot gold was trading at $2,301.56 per ounce at the time of writing, down 0.10% on the day and down 1.56% for the week.
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