(Kitco News) – The most dramatic moves in the gold market were made early this week, as spot prices kicked off Sunday night trading above $2,041 per ounce before falling to their weekly low of $2,016 by 9 am EST Monday morning.
Afterwards, gold prices largely traded within that range, though the spot market did set its weekly high of $2,042.53 on Wednesday morning, and tested support near the $2,021 level on both Thursday and Friday.
The latest Kitco News Weekly Gold Survey showed Wall Street and Main Street back in the same neighborhood as far as price expectations, with both seeing very little chance of a significant selloff in the coming days as the market arrived at a consensus forecast of ‘steady with a chance for gains’ next week.
Adrian Day, President of Adrian Day Asset Management, sees gold’s continued sideways price action in a positive light. “Gold has already pulled back after Federal Reserve chairman Jerome Powell dashed expectations of a near-term rate cut,” he said. “Now gold can find its base again and start to move back up. The start of the bull market has been postponed but not cancelled.”
James Stanley, senior market strategist at Forex.com, is back in the bull’s camp after doubting gold’s near-term potential last week.
“Bulls have held 2k well so far and even when the U.S. Dollar put in its largest two-day rally in a year, gold held higher-low support,” he said. “So bullish structure remains and there’s been defense of that structure so far.”
That said, Stanley believes the next price trend will be driven by the CPI report. “If we see Core CPI print over 4% annualized that could cause some pandemonium to risk trends, and I think that could negatively impact gold,” he said. “But I’m expecting CPI to come in soft and I think that could give bulls a shot in the arm.”
Bob Haberkorn, Senior Commodities Broker at RJO Futures, said that Friday’s gold price weakness was markets reacting to Chinese data while betting on next week’s U.S. data.
“I think it’s anticipation into next week’s numbers here,” he said. “Maybe some traders getting out ahead of that, but also the big thing was the Chinese inflation data yesterday showed a cooling over there. That is what started the trigger on this thing.”
Haberkorn also pointed to rising equities taking the wind out of gold’s sails. “You have a pretty hot U.S. stock market right now, and it’s been risk-on back into the market,” he said. “We’re trading on the S&P above 5000, and NASDAQ’s making highs as we speak, so gold loses a little bit of its luster here when the equities are as strong as they are.”
He said prices are stuck in a range between $2,000 and $2,075 right now. “We need a move above $2,075 from a technical standpoint to signal anything new on a breakout, which could come next week with the data that’s coming out,” he said. “But this week with a strong U.S. stock market, weaker-than-expected Chinese inflation data, it’s just an environment where it’s hard for gold to manage any rally.”
“It seems to be a cautious trade right now for this week,” he said. “And next week, I think we’re going to be just data-dependent on where this thing goes in the market. As of right now, I’ve got to say I’m neutral on it. But it depends on how the data comes out.”
Haberkorn sees risks to the downside next week as well. “If we break through $2,000 here, gold realistically could have a move all the way back to $1,950, and maybe even further than that, because it would wash a lot of the longs out, and you would see some bears come back in and reestablish for a push lower.”
He emphasized that gold’s near-term direction would really be contingent on the inflation data. “If it comes out better than expected here, cooling, it will probably rally because it’ll signal to the Fed that they’re more in a position to cut rates,” Haberkorn said. “If it comes out higher than expected, then gold probably will take out $2,000 because the rate cuts might be later than sooner. It’s upside down, but given the environment, right?”
Haberkorn agreed that the Biden administration’s retaliatory strikes against Iran-allied groups were already priced in before they happened, and markets are now waiting for the next geopolitical trigger.
“Really no new geopolitical news, I know the Red Sea situation they’re saying is deteriorating, the Israel situation is still ongoing, as well as Ukraine. There’s still been continuing attacks by Iranian proxies,” he said. “But I think what would be a catalyst for gold to go higher is if there was a direct strike in Iran, or there is something with the Iranian Revolutionary Guard actually being front and center on an attack in Iraq.”
“If Iran got more directly into the…
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