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.
Read more: Kitco
