(Kitco News) – Last week, traders experienced one of the least eventful weeks for precious metals markets in months, but drama returned to the gold market this week, with big moves following important data and comments from the Federal Reserve. .
Gold prices opened near $2,024 per ounce in the spot market on Sunday, moving slowly but steadily through the first half of the week until Wednesday afternoon’s FOMC statement and Fed Chairman Powell’s press conference dashed hopes of a spring rate cut. It was on an upward trend. Gold has fallen sharply.
On Thursday morning, gold reversed and soared to a weekly high of $2,064.28, with prices hovering in the 2050s until Friday morning’s jobs report nearly double the consensus and gold rebounded to $2,030 an ounce. continued.
The latest Kitco News Weekly Gold Survey shows a clear disconnect between institutional and retail traders, with two-thirds of professionals losing confidence in precious metals, while most retail investors We still expect prices to rise next week.
Frank McGee, head of precious metals dealers at Alliance Financial, is among those who believe gold prices will continue to fall. “The market is significantly mispriced given the continued strength of the U.S. labor market and the election year calendar,” he said.
Naeem Aslam, chief investment officer at Zai Capital Markets, said this week’s data and statements were a wake-up call for the gold market and further downside risks remained.
“The Bulls had a lot of reality checks this week,” he said. “First, it was the Fed that confronted speculators with reality and told them they shouldn’t consider cutting interest rates in March, which accelerated the rise in gold prices.And today, the US jobs report explodes. We put the final nail in the coffin because of the negative results.”
“All these are pushing up the dollar index and weighing on gold prices,” Aslam said. “The key level to watch now is the 2K price mark, below which there will be further panic.”
James Stanley, senior market strategist at Forex.com, switched from bullish to bearish after the price failed to break through resistance. “The bulls had an opportunity this week, but were again unable to sustainably break out of the $2,050-$2,082 resistance zone,” he said. “No rate cut in March, and a strong NFP report could provide enough incentive for the bears to take on the challenge, potentially leading to an eventual first test below $2,000 in 2024. ”
Mark Leibovit, publisher of VR Metals/Resource Letter, said he expects a near-term correction below $2,000 before gold rises again. “The closer we get to the area above 1980, the more bullish we get,” he said.
“I think we responded to the data that we received from Wednesday to today,” said John Weyer, director of commercial hedging at Walsh Trading. “This jobs report was a bigger number than anyone expected that I’ve ever seen. It was kind of a surprise. We’re going to hang around here and we’re going to test the $2,000 level, but the new My intuition is that we’re going to hang around in this area for a while until we get some data points or changes. The Fed speaks up.”
Weyer said he believes the gold market has effectively repriced the interest rate path at this point.
“I think they’re digesting the news and the data. I don’t want to say ‘stable,’ but gold has found where it should be in relation to the latest Fed outlook.” “That’s how I feel. I think it’s going to be a little bit in the range.”
“The big X factor is global events,” he added. “Things seem to be calming down a little bit, but if there’s world news or something reactivated in Gaza or something like that, there could be a flight to quality or a trade in the fear factor. ”
Weyer said gold will continue to be focused on the general $2,000 area. “I don’t think you want to get too far away from it,” he said. “There are still enough inflation concerns to support this. But I think the upside is $2,150 to $2,200. We’ll test that again if news of world events continues.”
“If the data changes, it could go above $2,200,” he added. “But right now it’s in the $2,000 to $2,200 range, and I think it’s actually trading around $2,000 to $2,120.”
Wall Street sentiment appears to have turned decidedly bearish on the precious metal’s near-term outlook, with 12 analysts participating in the Kitco News Gold Survey this week. Only two experts, or 17%, expected gold prices to rise next week, while eight analysts, or 66%, expected gold prices to fall. Two other experts, accounting for 17%, expected gold prices to remain flat next week.
Meanwhile, a majority of Main Street remained bullish with 123 votes cast in Kitco’s online poll. 66 retail investors, representing 54%, expected gold to rise next week. Furthermore, 27 respondents (22%) expected prices to fall further, while 30 respondents (24%) were neutral about the short-term outlook for precious metals.
The Middle East will be the gold market’s biggest focus next week, as the only major data scheduled to be released will be Monday’s ISM Services Sector PMI, but the market will look forward to Thursday’s week for insight into today’s NFP numbers. The number of unemployment insurance claims will also be closely watched.
Adrian Day, president of Adrian Day Asset Management, believes gold needs to shed more of its recent gains to align with economic realities. “Fed Chair Jerome Powell’s recent hawkish comments and recent employment data suggest the Fed may not cut rates in March at its next meeting,” Day said. “Given the optimism built into gold prices for near-term upside, this suggests that gold could be correcting.”
“We’re bearish on gold next week,” said Colin Szycinski, chief market strategist at SIA Wealth Management. “As has often been the case lately, I see the USD movement as the main driver. In this case, the not-so-dovish Fed is pushing up Treasury yields and the USD. will probably require external events, such as politics or war-related matters, or new issues in the banking sector.”
“Given the Fed’s statement and Chairman Powell’s press conference, gold and many other markets needed to adjust their outlook,” said Everett Millman, chief market analyst at Gainesville Coins. . “I think it’s clear that the FOMC intends to wait longer to cut rates, and most markets don’t like that news, but there’s a very reasonable argument that if that’s really going to happen, they should keep rates lower for longer. The economy is good, as most data shows. ”
However, Millman said the big headline numbers in the nonfarm payrolls report masked weakness in business employment.
“If you look a little deeper into the data, you’ll see that almost all of the gains come from public-sector employment, not private-sector employment,” he said. “I think that’s been the theme of the unemployment numbers for most of this past year. The underlying reason why so many people, especially in the U.S., feel like the labor market isn’t really responding to rosy conditions. I think that’s one of the “unemployed and employed numbers.” If you don’t work in government, there are all these headlines about layoffs, and there’s just a bit of a disconnect there. ”
Another thing Millman sees looming over the U.S. economy is the threat of another regional banking crisis. “We had New York Community Bank Corp., and now this kind of thing is back in the headlines like it was last spring,” he said. “I think this is a little below the gold price. One of the most direct reactions to this event last March, when we saw several banks go into distress and be acquired by competitors. The main reason for this was that the gold price skyrocketed and interest in gold went through the roof.If this problem were resolved, I think it would be reasonable for the gold price to remain flat or sell off a little. , it’s still not completely clear to me.”
“If the economy is actually doing well, as most data suggests, we would expect gold prices to fall below $2,000 an ounce,” he said. “Still, it has remained above that level for over two months. So I think this suggests that the market is still a bit cautious before they go back to a risk-on attitude. We are still waiting for further confirmation from economic data.”
Millman said geopolitical conflicts will be the main driver of gold price movements going forward, following this week’s jobs report and further clarity from the FOMC.
“Above all, I would say geopolitical conflicts, including the economic situation, are the most consistent driver of gold,” he said. “In many cases, that’s the most correlated thing. I think it’s certainly a wait-and-see situation. Hopefully there’s some good news that tensions subside or some kind of agreement is reached between the Israelis and the Palestinians. And what’s going on in the Red Sea is going to blow the money away soon.”
Millman said the opposite is also true. “If we get some bad headlines that things are getting worse, gold will definitely move above the $2,050 level. That seems to be the ceiling that gold is hitting right now,” he said. “There was certainly a geopolitical premium in the price of gold. There’s no doubt about that in my mind.”
He added: “For lack of a better term, gold needs to continue to have some kind of war premium.” “But I don’t think the price is wrong at the moment. I think it’s priced in. That may be one of the reasons why gold has remained so high for so long.” I’m just waiting for some change in the situation. ”
“It’s down,” said Darrin Newsome, senior market analyst at Barchart.com. “Why? Because Punxsutawney Phil didn’t see his shadow this morning.”
“I’m only half-joking,” he said, “because money doesn’t give you much from a technical standpoint.” “Almost every day, it seems like a bullish day is followed by a bearish dip and vice versa. If we zoom out to the weekly chart for April, we see a medium-term decline that at least tests the previous low of $2.007.40. The trend is still visible. Additionally, the USD index is on a medium-term uptrend, hitting a four-week high early Friday.”
Mark Chandler, managing director at Bannockburn Global Forex, said: “Gold prices have fallen on the back of better-than-expected employment data, higher interest rates and a stronger dollar.” “In the hour after the jobs report, gold fell from around $2,057.70 in the spot market to $2,028. I wonder if it could move back toward $2,000, especially if it closes below $2,030. .”
And Kitco senior analyst Jim Wyckoff expects gold prices to trend sideways next week. “It’s static and volatile as bullish aspects such as heightened geopolitics and risk aversion offset bearish factors from strong employment numbers and a hawkish Fed,” he said.
Since plummeting below $2,030 an ounce on Friday morning, spot gold has been trending steadily higher, with the last traded price at the time of writing at $2,039.75, down 0.75% on the day but still up for the week. It rose by 1.05%.
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