Gold prices slid lower once again this week, but even a jeopardized rate cut cycle and conciliatory U.S.-China trade talks couldn’t push the yellow metal much below $3,900 per ounce.
Spot gold kicked off the week trading at $4,104.84, and after a quick jump up to the weekly high of $4,110 per ounce, it was all downhill from there. By the North American open, spot gold had already tested $4,020 per ounce, and traders quickly took the yellow metal through the $4,000 barrier and all the way down to $3,978 per ounce by 11:00 a.m. Monday morning.
This low held until a failed attempt to break above $4,018 at 9:00 p.m., whereupon gold saw its second precipitous slide in as many days, this time dropping all the way down to the weekly low of $3,886 per ounce just before 5:00 a.m. EDT.
Gold did see a substantial rebound off these lows, however, reaching a high of $3,969 at 1:00 p.m. on Tuesday afternoon, and pushing all the way up to $4,026 per ounce by 6:30 a.m. Wednesday morning. But a double top just below $4,030 precipitated another sell-off, and after Fed chair Powell warned that a December rate cut was by no means a given, spot gold dropped all the way back down to $3,929 by 3:30 p.m. Eastern.
After a retest of $3,920 during the overnight session, gold finally began to make steady moves higher. By the North American open on Thursday, the spot price was trading at $3,975 per ounce, and traders quickly pushed it back over $4,000, and ultimately as high as $4,037 per ounce just before 7:00 p.m.
From here, gold got comfortable bouncing around in a $60 range on either side of $4,000, and the yellow metal was trading within a dollar of that threshold heading into the weekend.
The latest Kitco News Weekly Gold Survey showed industry experts as neutral and evenly balanced as they’ve ever been, while retail traders grew more bullish after gold’s resilient performance.
“I remain Neutral on Gold for the coming week,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “I think it still has more consolidation to do.”
“Down,” said Rich Checkan, president and COO of Asset Strategies International. “While there is no doubt in my mind that the longer-term trend is much higher, in the short-term, gold does not seem to possess the fire it needs to climb to new highs. Some suggest that is due to an easing of tensions with China. Others suggest it is the result of a slightly more hawkish Fed Chairman Powell… putting December’s rate cut into question. Still others suggest either profit-taking or a coordinated paper trader effort to bring down the gold price.”
“Whatever the cause, it will be short-lived… but I do not think it is over yet,” Checkan cautioned. “Expect another test below $4,000.”
“Up,” said James Stanley, senior market strategist at Forex.com. “As of mid-day on Friday spot gold is back above the $4k level, which considering the sell-off that held through the weekly open is a very positive sign. The move was parabolic for two months and a double top led to a sizable pullback, but support at 3895 has so far held the lows and bulls are trying to claw their way back.”
“I think the sell-off was positioning related and the fundamental case for gold is still strong,” Stanley added.
Daniel Pavilonis, senior commodities broker at RJO Futures, was deciphering the implications of the Fed’s forward guidance on gold and the other precious metals on Friday.
“I think the most impactful thing was obviously saying that December is not set in stone,” he said. “We saw the FedWatch go from 93% down to 60% or so rate cut odds. Yesterday it bounced back into the high seventies, and then the rate cut odds just sold off into this morning. Currently it’s at 62%, so it’s just evaporating.”
“It’s still early, we just had the Fed meeting, but I think they may be okay with where things are right now.”
Pavilonis cautioned, however, that many hurdles remain for the economy this year.
“We have earnings coming out now,” he pointed out. “The government’s shut down. Tariffs are ever-changing. So I think the Fed is caught in this catch-22 where it’s a lose-lose situation. If they lower rates to support the labor market, that could in turn have collateral damage and turn into an inflationary situation, which I think we’re still in. And even though the Fed mentioned that we’re still in restrictive territory, the economy seems to be humming along, although there’s some maybe AI-centric job loss, white collar job loss in some sectors.”
“The government shutdown, I think, is key to this whole puzzle, and seeing what comes out of it.”
Pavilonis said that despite the Fed and all the trade and tariff talk, the picture remains essentially the same for gold and the precious metals complex.
“We’re not in a different situation than we were when gold was hitting its highs,” he said. “The only way [for governments] to get out of trillions of dollars of debt, historically, is to devalue their currency, and the market knows that.”
“Long term, I think gold still goes up,”Pavilonis said. “I think silver goes up. You saw silver, platinum, palladium really take off when China announced that they’re going to restrict rare earths. All of a sudden, every other country starts to look at that and says, ‘Hey, we’re not producing anything… Why not?’ Then you start to see demand for physical [metals] start to move higher. Also you saw the markets move higher.”
“I don’t think we’re done going up,” Pavilonis said. “We’re pausing here and just trading around, but I think silver’s going higher, palladium, platinum… gold too.”
“From January to April, we were sideways in gold for four months,” he added. “We can go through another period like that.”
This week, 14 analysts participated in the Kitco News Gold Survey, with Wall Street coalescing on the fence after the precious metal’s volatility narrowed. Three experts, or 21%, still expect to see gold prices rise during the week ahead, while three others, representing 21%, predicted a price decline. Meanwhile, eight analysts, or 57%, saw the yellow metal’s price continuing to trade in a sideways range next week.
Meanwhile, 282 votes were cast in Kitco’s online poll, with Main Street investors strengthening their bullish majority opinion. 180retail traders, or 64%, looked for gold prices to rise next week, while 51, or 18%, expected the yellow metal to post a decline, and an identical 51 investors, or 18%, saw prices continuing to consolidate during the week ahead.
Though the U.S. federal government shutdown is still continuing after a month, next week will still feature some meaningful data releases.
On Monday, the Institute for Supply Management (ISM) will release its Manufacturing PMI, with the Services PMI to follow on Wednesday, along with private-sector employment data from payroll processor ADP.
Thursday morning will bring the Bank of England’s monetary policy decision, and the week wraps up with the University of Michigan’s preliminary Consumer Sentiment survey on Friday.
“Gold extended its pullback into the early part of this past week, with spot falling to about $3886,” said Marc Chandler, managing director at Bannockburn Global Forex. “Although it has stabilized in recent days, despite the rise in US rates and a stronger dollar, it has failed to regain its earlier luster. I suspect a move above $4075 would help bring in new buying. On the other hand, a break of the recent lows could see further liquidation that could extend toward $3750.”
Adam Button, head of currency strategy at Forexlive.com, said the headlines have been going against gold all week, but it’s held its own.
“It’s been a terrible week in terms of news for gold,” Button said. “Between the U.S.-China deal and Powell, you couldn’t have written a worse script for gold, and it stabilized right around $4,000.”
Despite two weeks of declines, Button doesn’t see any point in betting against gold, especially at this time of year. “Gold’s got a pretty strong seasonal backdrop,” he said. “November through January is the time of year when gold shines most brightly. The temptation is to ignore that, given that it’s rallied 50% this year. But the seasonal strength in gold is one of the strongest seasonal trends out there, it’s worked 10 or 15 years in a row.”
He added that investors hoping for a deeper dip may be disappointed.
“Everyone out there would love to buy gold down at $3,500,” he added. “On the fundamental side, it’s tougher to buy gold here with the U.S. and China playing nice. But I’m reminded that every U.S.-China makeup is only months away from another breakup. You know that eventually it will fall apart with China and the U.S. again, so you see that as upside risk now.”
“I think you’ve got to see another good test of $3,870 before we range,” Button said. “It’s a good base case to range. It’s the healthiest thing to range, $3,800 to $4,300, even if you spent a year there, it would be healthy.”
“I think you’re going to need a heck of a catalyst to get new highs before the end of the seasonal run.”
Alex Kuptsikevich, senior market analyst at FxPro, says the gold price correction is not over yet.
“The strengthening of the US dollar and higher Treasury yields have brought the gold price back below $4000,” he said. “Yellow metal is gradually losing its wild cards. It managed to reach a record high thanks to devaluation trading, expectations of aggressive monetary expansion by the Fed, Donald Trump’s threats of 100% tariffs against China, geopolitics, pessimistic forecasts for the global economy, and active purchases of bullion by central banks.”
“However, the White House is no longer attacking the Fed as aggressively as before,” Kuptsikevich noted. “The US and China have found common ground. The Middle East conflict has been resolved, and the global economy is proving resilient in the face of tariffs. The Fed is cautious about lowering rates, and central bank activity in the bullion market is declining.”
Kuptsikevich pointed to 1979 and 2011 as the other two examples when gold rose with similar velocity. “The experience of those years shows that the surge and collapse were followed by long periods of consolidation,” he said. “In other words, after a period of retreat from the top, the precious metal will find its trading range and settle within it. But for the weeks ahead, we continue to see more risks of further decline.”
“No strong opinion here, but slightly bullish short term within bearishness from the highs,” said Michael Moor, founder of Moor Analytics. “In a Higher time frame: I cautioned on 8/16/18 the break above $1,179.7-$1,183. warned of renewed strength. We have seen $3,214.3. On a Medium time frame: The break above 31482 warned of strength for days—we rallied $1,249.8. The trade above 32214 projects this upward $100 (+)—we rallied $1,176.6. The trade above 32236 warned of renewed strength—we rallied $1,174.4. The trade above 32392 projected this up 115 (+)—we attained $1,158.8. These are ON HOLD.”
“On a Lower time frame: The trade above 33411 has brought in $1,056.9 of strength,” Moor said. “The trade above 33850 has brought in $1,013.0 of strength. The trade above 34186 has brought in $979.4 of strength. The break back above 35640 has brought in $834.0 of strength. The trade above 36658 has brought in $732.2 of strength. The trade above 37143 has brought in $683.7 of strength. The break above 37725 has brought in $625.5 of strength. The trade back above 38828 brought in $515.2 of strength. These are ON HOLD. I warned the trade back below 43896-920 would likely bring in pressure—we have come off $488.3. The trade below 41960 warned of pressure (for $200(+)?)—we have attained $294.7. The trade below 41234 (+8 per/hour) has brought in $222.1 of pressure. The trade below 40763 (+6.4 per/hour) projects this down $90 minimum, $220 (+) maximum—we attained $175. These are ON HOLD. Decent trade below 39518 (+3.5 tics per/hour) will project this down $110 minimum, $520 (+) maximum, but I will stop short of suggesting leaning against it as a short.”
“CAUTION: We may also be in the last stretch from the highs, with possible exhaustion at 38702-585,” he warned.
At the time of writing, spot gold last traded at $3,998.62 per ounce for a loss of 3.09% on the week and 0.64% on the day.
Source: Ernest Hoffman Kitco
