(Kitco News) - Renewed market volatility and the Federal Reserve’s tone following its first monetary policy meeting of the year should help to push gold prices higher next week, this according to market analysts.
Although Comex February gold futures were unable to hold earlier gains, settling Friday’s session at $1,096.30 an ounce, the precious metal is ending the week with a slight gain of 0.64%.
Silver also eked out modest gains for the week with Comex March silver futures settling Friday’s session at $14.057 an ounce, up almost 1% on the week.
However, it has been the market’s price action that has impressed analysts and retail investors; gold futures continue to camp around the $1,100 area despite a positive rebound in equity markets. Market sentiment among retail investors and market professionals is significantly positive heading into next week, according to the latest weekly Kitco News Wall Street vs. Main Street Gold Survey.
Kitco’s online survey hit a milestone this week as a record 1,051 people participated in the vote. Of those who voted, 848, or 81%, said they are bullish on gold next week; at the same time, 142 people, or 14%, said they are bearish and 61 people, or 6%, say they were neutral.
Kitco’s survey of market participants showed similar results, albeit with a smaller majority. Out of 34 market experts contacted, 17 responded, of which 11, or 65%, said they expect to see higher prices next week; five professionals, or 29%, said they see lower prices; and one, or 6%, is neutral on gold. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.
For many analyst, the Federal Open Market Committee (FOMC) meeting will have the biggest impact on gold prices next week with many expecting to see gold get a boost as the central bank strikes a dovish tone.
Weaker than expected U.S. economic data has caused markets to pare back their expectations for the new rate hike cycle that the Fed embarked on last month when they raise rates by 25 basis points, the first rate hike in almost a decade.
George Gero, vice president & precious metals strategist for RBC Capital Markets, said that he can’t see the Federal Reserve being too aggressive next week as all the other major central banks continue to loosen their monetary policy.
“Gold is going to catch up to the realities of geopolitics and all the other problems in the world,” he said. “You are going to see stimulus in Western Europe, in China and Japan.”
Gero added that there was some backwardation in the futures market as February futures were briefly higher than April futures, which he noted is a bullish sign because people are willing to pay a premium to have their gold now.
Bill Baruch, senior commodity broker at iiTrader, also said that gold should benefit next week as he is not expecting to see an aggressive statement from the Federal Reserve, which has been limiting U.S. dollar gains.
He added that gold should continue to post gains above $1,100 an ounce as long as the U.S. Dollar Index struggles around the 99 to 100 area.
He added that he is watching the 100-day and 200-day moving averages at $1,107.30 and $1,136.50 an ounce, respectively.
Along with the Federal Reserve, markets will also be watching outside equity markets to determine gold’s near-term trend.
Sean Lusk, director commercial hedging division at Walsh Trading, said there is a lot of general uneasiness in the marketplace and investors could end up turning to gold as a safe-haven play.
“Nobody wants to be too short gold in these market conditions,” he said.
However, while most analysts are bullish on gold in the near-term. Others see the potential for a pullback in prices, especially if there is relative calm in the marketplace.
Ken Morrison, editor of the newsletter Morrison on the Markets, said that he could see gold falling to around $1,080 an ounce.
“It stalled this week at the downtrend line at $1110, measured off the October high. So, gold is losing some of the 'safe-haven' status; a modest pullback is now in order until the next bout of anxiety in the global markets, and there will be at least one more,” he said.
Although the Federal Reserve’s monetary policy meeting will be the main highlight of the week, other economic data that could add to the market volatility include U.S. consumer confidence, home sales data, core durable goods orders and the first print of fourth quarter gross domestic product.
By Neils Christensen of Kitco News; nchristensen@kitco.com
Follow Neils Christensen @neils_C
