(Kitco News) – Gold started the week on a high, trading around $2,050 an ounce, driven by safe-haven demand from Middle East conflicts and stubborn market sentiment that interest rates will be cut sooner.
However, as the shortened holiday week progressed, hawkish central bank comments steadily declined and a lack of geopolitical energy stimulus dampened investor appetite for the yellow metal.
In the latest Kitco News Weekly Gold Survey, institutional experts and retail traders are in near-perfect agreement in their predictions for next week's gold price, with a plurality of each predicting an increase in the precious metal, while a majority is currently stagnant or declining.
“We're bearish on gold next week,” said Colin Siezynski, chief market strategist at SIA Wealth Management. “Gold continues to face moderate headwinds from rising government bond yields and a strong US dollar.”
Mark Leibovit, publisher of the VR Metals/Resource Letter, said he cannot bet on gold next week given the current environment. “With an interim upside target of $2,700, gold has a questionable profit margin, especially since my overall market analysis is negative and the media is clearly ignoring the ongoing World War III.” ,” he said.
Mark Chandler, managing director at Bannockburn Global Forex, said interest rates and economic news would provide direction for prices next week as additional dispute premiums fail to materialise.
“Gold is ending the week near the middle of its range for the week,” Chandler said. “A high was set on Monday near $2,058.60, and a low was recorded mid-week at just below $2,002. The impact of geopolitics and escalating conflicts in the Middle East (including Pakistan vs. Iran) It seems it was smaller than I had imagined.”
He noted that two-year and 10-year Treasury yields rose about 20 basis points this week. “The dollar appreciated sharply in the first half of the week, consistent with increased activity in gold trading,” he said. “The yellow metal has stabilized as market trends turn to consolidation. While we do not believe the US interest rate adjustment is complete, next week's focus will be on fourth-quarter US GDP and the three central bank meetings (BOJ, ECB, Bank of Canada).
Sean Lusk, co-director of commercial hedging at Walsh Trading, said gold was losing support at current levels and believed a drop below $2,000 an ounce “could very easily happen here.” He said there was.
He expects the U.S. economy to face further headwinds as we move into 2024, but nothing to give stocks pause at this point.
“There is nothing in the economic indicators that we have seen so far that should be a cause for concern,” Rusk said. “Unless something big enters the market because of the outbreak of war or fear or lack of confidence that the status quo will be maintained, which we don't see… You're just ignoring the concerns. I would have thought there would be more of a presence here and it would be a factor in pricing, but that's just not the case.”
Rusk said the recent impetus for gold's rally is fading and seasonal bidding will soon run its course. “Typically during this period from mid-December to Valentine’s Day, we see significant physical demand with gold purchases by jewelers and others around the world. Physically, we are seeing a good response and good results. It was one of the more friendly times. There will be a rally in mid-February and then they will take everything back.”
“This year is a little different,” he said. “But hardly anyone is talking anymore about what's going on in Eastern Europe. Israel-Gaza seems to be contained for now, but they're wreaking havoc by shutting down the Red Sea and everything else. There are Iranian proxies out there, but does it really matter?”
“If I were long gold, I would be a little worried here.”
This week, 14 Wall Street analysts participated in the Kitco News Gold Survey, showing that last week's bullishness has weakened considerably. Six experts, representing 42%, expect gold prices to rise next week, while four analysts, representing 29%, predict a fall in prices, and the remaining four analysts, representing 29%, predict that gold prices will rise next week. I was neutral about next week's gold.
Meanwhile, with 150 votes cast in Kitco's online poll, retail traders this week almost accurately reflected the views of experts. 66 retail investors, representing 44%, expected gold to rise next week. Furthermore, 44 respondents (29%) expected prices to fall further, while 40 respondents (27%) were neutral about the short-term outlook for precious metals.
Investors will be keeping an eye on the escalating Middle East conflict, which has yet to boil over, but central banks' interest rate decisions will return to the spotlight next week, with three major monetary policy decisions appearing on the minutes. That will happen.
The Bank of Japan maintained its dovish stance and negative interest rates on Monday, and the Bank of Canada's interest rate decision is expected on Wednesday, but that's anyone's guess. The European Central Bank's interest rate announcement is expected on Thursday morning, potentially the biggest risk for the US dollar and gold next week.
The market is scheduled to release preliminary US PMI figures on Wednesday, preliminary fourth quarter GDP figures, durable goods and new home sales on Thursday, and core PCE and personal income and expenditure reports on Friday.
“It's going to be interesting from a technical standpoint because there are a lot of mixed signals going on right now,” said Darrin Newsome, senior market analyst at Barchart.com. “The trend on the weekly chart is still down. So what does this tell us? Some of the money will come from the safe haven idea.”
Newsom said this doesn't mean everything will suddenly get better in the world, “but it's possible that investment money will grow a little more comfortably and start to flow out of commodities, including safe-haven markets.” Ta.
In an interview, he noted that the S&P 500 index was about to hit a new all-time high late Friday afternoon, which would also keep investors away from precious metals.
“I think we will continue to see capital outflows from commodities, and that will include gold,” he said. “There is so much uncertainty in the world that gold may be one of the last things to see outflows. But that being said, the weekly chart is still pointing down. Unless we can establish a short-term uptrend from the low around $2,000, we will see a breakout next week.”
“Ultimately, we intend to extend the third wave of this three-part downtrend above the previous low of $1,987.90, with our next target at $1,960.80 for the February contract.”
Newsom said he expects the April contract to hit new lows before reaching the end of January. “From a purely technical perspective, subtracting the previous low of $2,007.40, the next target for the April contract would be $1,980.”
Newsom said that while $2,000 an ounce is a reasonable number, he doesn't believe the algorithm actually takes it into account. “They're looking at moving averages, volume, volatility, things like that,” he said. “Eventually, they'll look at other investment opportunities. I feel like there's more opportunity there.”
“We're climbing into new territory, new heights, and gold may be heading in that direction for now,” he said. “Money just changes the channel.”
Adrian Day, president of Adrian Day Asset Management, believes gold could build on this week's price action and post another rally next week. “There was a retracement, so gold could rally again,” Day said.
James Stanley, senior market strategist at Forex.com, switched from bearish to bullish next week. “Last week there was an early bearish structure building, so I chose to go lower and it worked out to some extent,” he explained. “However, the bears failed to test below $2,000 in the spot, and a descending wedge formation built. I think it will continue to rise.”
The big question, Stanley said, is “where are the bears going to show up to fight back?” My levels are 2059, 2075, and 2082. ”
And Kitco senior analyst Jim Wyckoff still expects gold prices to rise next week. “The rally comes as the bulls gain momentum later this week, suggesting a strong follow-through early next week,” he said.
Spot gold is up 0.31% on the day, but is down 1% this week, with the last traded price at the time of writing being $2,028.44 per ounce.
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