(Kitco News) - Gold traded in an elevated and narrow range this week, frequently testing the $2,000 psychological price barrier without ever managing to break decisively above it.
The precious metal continues to be trapped between evenly balanced opposing forces, as declining bond yields and optimism that the Fed funds rate has truly peaked compete with the pullback in the safe-haven bid as the conflict in the Middle East continues without escalating beyond Israel's borders and the surprising strength of equity markets and other risk-on assets.
The latest Kitco News Weekly Gold Survey sees retail investors presenting a mirror-image of their bullish sentiment from last week for the week ending Nov. 10, while the yellow metal's performance has eliminated nearly all bearish projections among market analysts, who are now positioned between neutral and bullish.
Adam Button, chief currency strategist at Forexlive.com, said he believes Friday's soft non-farm payrolls report ensures that the Fed's rate hiking cycle is over, and the fact that gold remains near $2,000 even as the safe-haven trade wanes is very bullish.
"I think it's pretty clear that gold hasn't been supported by further heightening tensions. It's been steady," he said. "And if you look at oil in comparison, oil's come down four or five bucks this week. We had the ground offensive and nothing happened, but gold's hung in there. The geopolitical premium is out of gold and it's still right at $2,000."
Button said that the conversation in markets will now move to Fed rate cuts, with the only questions being when, and by how much.
"If you look over the last two weeks, we've gone from pricing in 50 basis points in cuts next year to almost 100. We're at 97 right now," he said. "The gold market can see Fed rate cuts on the distant horizon."
He said the catalyst for a multi-year rally in gold will be lower U.S. rates and a lower U. S. dollar, and the elements of that are beginning to fall into place.
"I think the message from the market this week is that the Federal Reserve is done," Button said. "And that's great news for gold."
Adrian Day, President of Adrian Day Asset Management, also sees gold prices rising next week. "The ongoing Israel war as well as difficulties in the bond market and a hesitant Fed are likely to see higher gold prices," he said. "The potential fly in the ointment: if central banks, who stepped up buying again in the third quarter, supporting the gold price again, stepped away for even a short period, leading to short-term weakness."
This week, 15 Wall Street analysts participated in the Kitco News Gold Survey. Nine experts, or 60%, expected to see higher gold prices next week, while only one analyst, or 7%, predicted a drop in price. The remaining five, or 33%, were neutral on gold for the coming week.
Meanwhile, 701 votes were cast in Kitco's online polls, and sentiment was virtually identical to that of last week's survey. 446 retail investors, or 64%, looked for gold to rise next week. Another 157, or 22%, expected it would be lower, while 98 respondents, or 14%, were neutral on the near-term prospects for the precious metal.
Wall Street
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64%22%Following a major news week dominated by the Federal Reserve's interest rate decision and the nonfarm payrolls report, next week will be one of the least eventful of the year for data, with the University of Michigan's preliminary consumer sentiment survey the only major economic report scheduled for release.
Darin Newsom, Senior Market Analyst at Barchart.com, sees additional gains for gold in the coming week. "Newsom's Rule #1: Don't get crossways with the trend," he said. "The trend is still up on Dec gold's daily chart, though it needs a move beyond its recent high of $2,019.70 to keep from turning sideways."
Daniel Pavilonis, Senior Commodities Broker at RJO Futures, noted that gold prices are continuing to make consecutively higher lows as they sit right around that $2,000 level. "I think we're bouncing back and forth because there's this thought that gold is going up because of inflation, gold is going up because of geopolitics, the Middle East, and gold can also be going up because of the inverse correlation with interest rates, which have fallen significantly."
"But then, rates have fallen significantly because inflation is starting to die out a little bit," he said. "Also, the stock market is starting to move higher, so the influx into the precious metals might be subdued to some extent."
Pavilonis said some of the interest in buying gold might be getting diverted into Bitcoin, because it's also functioning as an alternative to gold. "We've seen that before when Bitcoin was going up to $65,000 under the same circumstance," he said. "Gold should have been way over $2,000, and that didn't happen. So I do think that takes a little bit of momentum away from gold."
He added that there are many different factors that should have pushed gold over $2,100 at least by now, but it has yet to happen. "The chart looks good, the monthly looks good, the weekly looks good, daily is pretty good," he said. "But you look at some of these other markets that should have been up because of geopolitics like crude oil, for instance, and it's not. It was actually higher before the Israeli situation. So I think some of the things that were driving the gold market have dissipated, but that dissipation was also offset by lower interest rates. What's the theme that's going to drive this thing higher next? I think that's what it's waiting for."
Pavilonis said the current market reminds him of a two-year pattern during Janet Yellen's first two years at the Fed. "The S&P went nowhere, it couldn't break out to the upside," he said. "It was making higher lows, but it just didn't go anywhere. And then eventually it broke out and that was the new support, that long term resistance line of resistance."
"I think that could be what gold is trying to build into now, this $2000 level," he said. "Once we cross that, and close above it and confirm it, that might be the new major historical support going forward. But right now, over next week, I'm just neutral on it. Neutral, maybe a little bit lower."
"I am bullish on gold for the coming week," said Colin Cieszynski, Chief Market Strategist at SIA Wealth Management. "It looks like the rally in treasury yields and the USD may be done for now, and them pulling back removes a headwind from gold. Meanwhile, two wars continue and the economic impact of higher interest rates in general may combine to create enough uncertainty out there to keep support for gold as a safe haven play going."
Marc Chandler, Managing Director at Bannockburn Global Forex, has switched from neutral to bullish on the precious metal, and he believes the break above $2,000 could come next week.
"A weaker dollar and lower interest rates, within the context of heightened geopolitical tensions, will likely be supportive of gold," Chandler said. "The consolidation we anticipated is being resolved to the upside and the gold reclaims the $2000 in the spot market. My next target is near $2050."
"I'm going with up for next week," said James Stanley, senior market strategist at Forex.com. "We pulled back like I had expected for this week but there was a really strong response to a support level during FOMC, [it] was 1971 in spot, which is a Fibonacci level of note. Bulls jumped on the bid around the first 20 minutes of the press conference, and they haven't relented yet."
"I think we'll get some additional testing above $2k next week, and how bulls react there should give us more of a picture for EOY price action," Stanley said.
Mark Leibovit, publisher of the VR Metals/Resource Letter, is strongly bullish on the yellow metal. "With U.S. Dollar sliding and gold stocks participating, it is encouraging for the entire sector."
Michael Moor, creator of Moor Analytics, said the technical picture remains bullish, though most of the gains he predicted were captured.
"I warned on 10/6 of strength and we left a moderate bullish reversal below—we have traded $174.5 higher from the 18452 10/6 close," he said. "The trade above 19409 (-.5 of a tic per/hour) projects this upward $22 minimum, $123 (+) maximum—we have attained $78.8 so far. These are ON HOLD. The trade below 20062 (+3 tics per/hour) projected this downward $27 minimum—we attained $28. Decent trade above 20064 (+2 tics per/hour starting at 6:00am) will warn of decent strength and a resumption of bull calls from below. We are currently in a lower timeframe bullish correction against the move down from 20197, with areas of possible exhaustion at 20027-38 and 20108. Today has a good likelihood of seeing range expansion."
And Kitco Senior Analyst Jim Wyckoff believes gold prices can still set new highs. "Higher as near-term technical posture still bullish and geopolitics still in play," Wyckoff said.
Spot gold is currently down 0.68% on the week, but up 0.34% on the day as it remains trapped in a narrow range within $10 of the $2,000 level. The precious metal last traded at $1,992.57 per ounce at the time of writing.
