(Kitco News) – After last week’s price movement was driven by inflation statistics, the gold market was once again dominated by Federal Reserve and interest rate expectations, but trader sentiment appeared to be changing as the day went on. .
Immediately after Wednesday’s FOMC meeting, the market accepted and went along with the Fed’s plans to maintain three rate cuts in 2024, weakening the dollar and pushing the yellow metal further past Thursday in both futures and spot prices. The highest value was updated.
The U.S. dollar then rallied sharply in subsequent trades, leading to a significant retrace for gold that continued into Friday’s trading session.
The latest Kitco News Weekly Gold Survey finds market experts are split and cautious on gold’s direction heading into the final week of the first quarter, while retail traders are very much back on the bullish trend. This has been shown.
Colin Siezynski, chief market strategist at SIA Wealth Management, captured the zeitgeist among market participants at the end of the Fed week. “I’m neutral on next week’s gold,” Cieszynski said. “There has been some big movement recently, but with the US dollar strengthening and next week being a short trading week at the end of the month, prices could consolidate in the next few days.”
Darin Newsome, senior market analyst at BarChart.com, said he maintains a downside bias next week. “We’re going to do this for three weeks in a row,” he said. “Thursday looked a bit questionable with the April contract falling more than $40 off its trading high by the close. Daily stochastic statistics continue to suggest downside room for the market, with the USD index rising Therefore, April gold prices may fall into next week.
“The key is the low of the last four days, which could theoretically be next Monday at $2,150.20, but it depends on how things play out on Friday,” Newsom added.
Lukman Otunuga, senior market analyst at FXTM, said: “Despite Thursday’s new all-time high, gold bulls are feeling tired, with dollar strength weighing on them towards the end of the week. It seems like there is.”
Everett Millman, chief market analyst at Gainesville Coins, said that despite Chairman Powell’s vote of confidence in the overall economy and the employment situation in particular, expectations for a rate cut were driving the optimism expressed at Wednesday’s FOMC meeting. He expressed his opinion that it was.
“I think it goes back to the dot plot, the fact that it hasn’t shifted to a much more dovish stance, at least in anticipation,” he said. “There are certainly reasons to be skeptical of the dot plot itself. The dot plot doesn’t always play out the way the Fed predicted. But it’s actually the main reason why gold prices have risen. I think that’s why Kim seemed to like this news, even though it wasn’t actually that dovish.”
“I’m not saying this was the same type of stance the Fed had earlier this year when they were trying to talk tough about inflation,” he added. “We didn’t really see anything like that.”
Looking beyond the FOMC, Millman said there may just be momentum trading in gold right now. “The fact that it remains close to all-time highs will likely drive many trend-following traders and tactical investors into long gold or short covering,” he said. “I think that’s probably having a bigger impact on the gold price movements that we’re seeing than people’s expectations for the Fed, although obviously that’s always percolating in the background. .”
Millman said technical conditions do not confirm that this significant setback will continue. “From what I see, most of the technical patterns on the gold charts are quite bullish,” he said. “Having said that, I am a strong believer in mean reversion, and the fact that gold was almost certainly a little overbought when it approached that $2,200 level suggests that this is to be expected after that. I think it’s just a routine adjustment.”Gold has had triple-digit gains in some months. So it’s not a surprise to me, but I think we’ll have to see how it plays out in the coming weeks. ”
Millman agreed that now is the best time to sit back and wait for things to calm down a bit. “My vote is certainly neutral or biased,” he said. “I think it would be very encouraging if gold could hold on to most of its gains, given that it has already risen significantly. By the end of the year, Q3, a little bit further into Q4. Given that, I expect gold prices to be higher than they are now. I expect them to hit new all-time highs. But in the short term, the market just needs a breather. I think.”
Fifteen Wall Street analysts participated in the Kitco News Gold Survey this week, and their opinions were spread pretty evenly across the spectrum. Six experts (40%) expected gold prices to rise next week, while four analysts (27%) expected prices to fall. Five experts, representing 33%, predicted sideways trading in precious metals or suggested staying on the sidelines next week.
Meanwhile, with 170 votes cast in Kitco’s online poll, a majority of Main Street investors expect further gains for gold next week. 117 retail traders, representing 69%, expected gold to rise next week. A further 25 (15%) expected gold prices to fall, while 28 (16%) respondents were neutral about the short-term outlook for gold.
Next week, new home sales will be released on Monday, durable goods, consumer confidence and the Richmond Fed survey will be released on Tuesday, and MBA mortgage application numbers will be released on Wednesday. But Thursday will be the busiest day next week due to the Easter long weekend, when final fourth-quarter GDP, unemployment claims, pending home sales and the University of Michigan Consumer Sentiment Survey will be released. .
Sean Lusk, co-director of commercial hedging at Walsh Trading, is surprised by the positive sentiment from both Powell and the market, and doesn’t think the Fed will be able to cut rates by 75 basis points this year.
“I honestly can’t believe what I’m hearing right now,” Lusk said. “I don’t think we should be too surprised. Given the state of the indicators, are they saying the economy isn’t as strong as it’s being perceived? Or are they saying that inflation doesn’t exist, or that the general population at the grocery store? Are they saying that for common people, inflation is not as it seems because it actually exists?”
Rusk said he found this to be an interesting “buy the rumor, sell the fact” event as far as dollars are concerned. “The dollar has skyrocketed for the second day in a row here, which is kind of a strange reaction when you get dovish comments from neutrals,” he said. “But you also have to realize that, at least in the case of gold, the April contract saw volumes increase to 300,000, 400,000 contracts. Now it’s down about 150,000 a day, but on Monday it was There will be an option expiry for the monthly contract, after which it will move to June.”
“I think that’s what it’s all about. Weakness today, or maybe yesterday, rising to an extraordinary high and then falling back. That’s the normal ebb and flow of markets,” he said. “Additionally, we’re nearing the end of the month and quarter, and since the February lows, we’ve had a terrible performance here for the better part of two months.”
He added: “They’re going to exit here and take profits, but it doesn’t look like there’s been any technical damage done to the chart.” “This could go down to $2,125, but we remain bullish. We hit 5% of our target, and that’s where we’re on track, but we’re probably a little below that today. I still think that if June becomes the most actively traded, which will be next week, the contract high will reach and exceed $2,246 and then around $2,270 in that area. , we think it could skyrocket to $2,280. It’s up 10% for the year, so that’s the goal. But if we start to slide below something. [Fibonacci] The number here is $2,125, but after that it could fall by half from its February lows. ”
“Can we wipe this out anytime?” he asked rhetorically. “Yeah, but what’s changed? Why would we do that? We’re not going to go up every day at these levels, but we’re stabilizing in the higher range, and that’s really important here. June. The gold price has mostly been between $2,190 and $2,210, and that’s what I’m looking at here. The market here is still in a pretty deep contango, pretty stable. If this holds, we will see prices rise.”
“Listen, my gut feeling is that seasonally there’s going to be some trough towards the end of the quarter and next weekend will be a three-day weekend, but the wildcard is going to be the same as the wildcard we’ve been to. “There are always black swans of banking crises in the Middle East and Eastern Europe,” he said. “We’ll get the second round of earnings in April, so we’ll see how that goes. Then we start to realize that it’s probably not going to be three rate cuts, or at most one rate cut. There will be a fall in May.”
“Gold has rallied to $2,220 on the back of the FOMC’s initial dovish view on the back of a decline in the dollar and US interest rates,” said Mark Chandler, managing director at Bannockburn Global Forex. Ta. “However, the market changed its mind, rebounding the dollar and stabilizing US interest rates. Gold is back near $2162.”
“We’re looking for a solid dollar over the next few days, which could weigh on the yellow metal,” Chandler added. “Support lies in the $2145-$50 area. Many are focused on central bank gold purchases, but retail investors in China and Turkey are also reportedly buying enthusiastically. Momentum Indicators growth is sluggish, but this could be alleviated by a prolonged period of flat activity.
Mark Leibovit, publisher of VR Metals/Resource Letter, also expects gold to fall due to a stronger US dollar. “As the dollar strengthens, we expect it to pull back,” he said.
James Stanley, senior market strategist at Forex.com, said he expects gold to fall next week.
“The trend is starting to feel bubbly, and even with the Fed turning dovish and holding firm on its three-time outlook downgrade, the bulls still haven’t been able to do much beyond $2,200,” he said. said. “The door was open for a pullback as gold remained in a descending triangle near its highs, but the Fed was surprisingly dovish in its FOMC interest rate decisions, which shocked the U.S. dollar, which had been priced in. Since then. “
And Kitco senior analyst Jim Wyckoff expects gold prices to remain range-bound next week. “That being said, the bulls are running out of gas in the short term,” he said.
Spot gold was trading at $2,165.31 per ounce at the time of writing, down 0.74% on the day but up 0.43% for the week.
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