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After treading water for much of the week and taking the Fed’s 25 basis point growth in stride, gold sold sharply Thursday morning following better-than-expected U.S. employment and growth data.
But even though the precious metal climbed back above $ 1960 on Friday, erasing half of its Thursday losses, analysts remain fairly evenly divided on gold’s direction for next week, while retail investors are somewhat more optimistic about its prospects.
The latest weekly Kitco Neombs Gold Survey shows that retail investors expect gold prices to post gains during the week ending August 4. Meanwhile, market analysts are more cautious as they await final direction from economic indicators and technical trends.
Colin Cieszynski, chief market strategist at SIA Zimbealth Management, sees the yellow metal declining in the near term despite Friday’s positive price action.
“Gold is broadly trending sideways, and while we’re getting a jump today, overall, it appears to be at a low within an established trading range,” he said. “I’m bearish on gold for next week.”
On the other hand, Adrian Day, President of Adrian Day Asset Management, sees the Fed’s recent statements and still-ongoing inflation as bullish for gold.
“We are approaching the end of the Federal Reserve’s rate-hiking cycle, while the inflation rate is likely to bounce back and bounce back in a matter of months as the higher price of oil works through the economy, affecting transportation and most goods at stores,” Day said. “The end of the walk before inflation is extinguished will ignite gold.”
This week, 14 analysts of Vancall Street participated in the Kitco News Gold Survey. In an even vote, both bullish and neutral positions won five votes each, or 36%. At the same time, four analysts, or 28%, were bearish on gold for the following week.
Meanwhile, 322 votes were cast in online polls. Of these, 158 respondents, or 49%, asked for gold to rise next week. Another 106, or 33%, said it would be lower, while 58 voters, or 18%, were neutral in the near term.
The latest survey shows that retail investors expect gold prices to trade around $ 1984 per ounce by the end of next week.
Next Friday’s nonfarm payrolls report represents the most prominent risk of next week’s events for precious metals, and analysts will look to the leading U.S. employment indicator for clues to the Fed’s next move.
“I think we’re looking unchanged with a downward trend,” said James Stanley, senior market strategist at Forex.com ” Durable Goods and GDP both crushed expectations from the U.S. and that was a day after Yes. And while inflation is falling, the main indicators have held quite strong, so the dependence on data could simply lead to another surge in September and possibly another after that, which markets do not expect at all now.”
Stanley said that with Core PCE still above 4%, the Fed’s work is clearly not finished. “For the next week, I’ll just have to see the Bears stepping into any attempt at topside breakouts to continue giving clues that this topic might come to fruition.”
Much of the technical analysis seemed to point to gold prices trending lower next week as well. The Gold Forecast’s garysibagner said the technical picture for gold deteriorated sharply this week.
“There was heavy technical damage as gold traded at a maximum of $ 1980.70 and then sold quickly,” he said. “$1980 is exactly where 38.2% fibonacci retracement is fixed at. Although it opened above the 100-day moving average, it broke down, as well as the shorter 50-day moving average, to close at a low not seen for the last 13 trading days.”
The combination of tough statements from the Federal Reserve and gold “breaking key and critically important technical levels” means he sees further negative risks for the precious metal in the days ahead.
Gold prices are continuing to turn towards neutral territory to end the week, with spot gold last trading around $ 1,961.60 per ounce, but the precious metal is still down 0.39 per cent on the week at the time of writing.
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