Gold has been trading within a narrow range around the psychological price barrier of $2,000 this week. Despite frequently testing this level, the precious metal has been unable to break decisively above it due to opposing forces in the market. These include declining bond yields and optimism that the Fed funds rate has peaked, competing with the safe-haven bid pullback as the conflict in the Middle East remains contained and equity markets show surprising strength.
Market experts are divided as to the future of gold. Some retail investors remain bullish, presenting a mirror image of last week’s sentiment, while market analysts, who previously had bearish projections, are now almost evenly split between neutral and bullish projections for gold.
Adam Button, Chief Currency Strategist at Forexlive.com, believes that recent soft non-farm payrolls report proves the end of the Fed’s rate hiking cycle. Furthermore, the fact that gold remains steady around the $2,000 mark, even as the safe-haven trade subsides, indicates strong bullish sentiment. Button explains that if we compare it to the recent drop in oil prices, gold has kept a steady course. He also adds that the conversation in the markets now is firmly directed towards Fed rate cuts, with analysts giving various predictions of how much and when.
Adrian Day, the president of Adrian Day Asset Management, also predicts gold prices to rise in the coming week. Day points out that the ongoing Israel conflict, together with difficulties in the bond market and a hesitant Fed, is likely to result in higher gold prices, though he also warns that gold might experience short-term weakness if central banks revive buying again in the third quarter.
The Kitco News Gold Survey reveals that around 60% of the market experts, especially analysts, expects gold prices to rise, while only 7% predict a drop. The remaining 33% were neutral in their outlook. Retail investors also appear to be optimistic, with about 64% anticipating a rise in gold prices and only 22% predicting a fall in the near-term perspective.
Next week is predicted to be a slow week for the economic calendar, as the only major report scheduled is the University of Michigan’s preliminary consumer sentiment survey. However, Darin Newsom, Senior Market Analyst at Barchart.com predicts additional gains for gold in the coming week, as the trend is still up on Dec gold’s daily chart. Meanwhile, Daniel Pavilonis, Senior Commodities Broker at RJO Futures, has noted that gold prices have been making consecutively higher lows, sitting around the $2,000 level. Pavilonis believes gold’s rise is due to inflation, geopolitics, and the inverse correlation with interest rates, which have fallen significantly. However, some of the interest in buying gold might be getting diverted to Bitcoin as an alternative.
Marc Chandler, Managing Director at Bannockburn Global Forex, believes that a weaker dollar and lower interest rates, within heightened geopolitical tensions, will likely support gold and that the break above $2,000 could come next week. Similarly, James Stanley, senior market strategist at Forex.com predicts gold will continue to rise with additional testing above $2,000.
While spot gold is currently down on the week, the analysts are bullish on near-term gold prices, citing the technical picture, geopolitics, and uncertainty around the economic impact of higher interest rates as potential factors supporting the yellow metal.
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