Gold prices seen building on biggest weekly gain since 2008
Just before 11 a.m. EDT on Friday, Comex April gold was trading at $1618.10 an ounce. Even though that was down $33.10 for the day, the metal had still posted a gain of 9% for the week so far. Analysts pointed out that the metal posted its biggest weekly gain since 2008, with the biggest impetus an early-week announcement of open-ended quantitative easing and other programs from the Federal Reserve to prop up the economy and markets amid the COVID-19 outbreak.
The U.S. Senate approved a stimulus package and the House of Representatives was expected to do likewise, perhaps as early as Friday.
Fourteen market professionals took part in the Wall Street survey. There were 10 votes, or 71%, for higher prices next week. One respondent, or 7%, was bearish, while three, or 21%, were neutral or called for sideways prices.
Meanwhile, 1,595 votes were cast in an online Main Street poll. A total of 1,138 voters, or 71%, looked for gold to rise in the next week. Another 244, or 15%, said lower, while 213, or 13%, were neutral.
“I think we are going to be up next week after we see if the vote [on stimulus in the U.S. House of Representatives] is passed and after we see if the stimulus that is promised by the G20 [Group of 20 nations] is in effect also, said George Gero, managing director with RBC Wealth Management.
Charlie Nedoss, senior market strategist with LaSalle Futures Group, looks for gold to rise some more now that the June dollar index has fallen enough to test the 20-day moving average near 98.95. The dollar has bounced from its low, and some late-week profit-taking has occurred in gold, he said.
“But longer term, I think gold is going to continue to push higher,” Nedoss said. Technically, he added, the area around $1,600 an ounce should offer good support for gold as both a psychological level and since it’s also the area around the 20- and 50-day moving averages.
Kevin Grady, president of Phoenix Futures and Options LLC, also described himself as bullish for next week despite Friday’s pullback.
“I believe the sell-off today is attributed to the both the options expiration last night and the fact that the April contract will be rolling into June by Monday,” Grady said. “At this time, longs have to decide whether to roll their existing position or to liquidate. I think that we are seeing April liquidation today. Gold margins were raised from $7,000 to $8,350 on March 25th. This could be a big factor in their decision.”
Jim Wyckoff, senior technical analyst with Kitco, also said higher.
“Charts are friendly and investors/traders are now confident about buying markets, as opposed to standing on the sidelines and hoarding cash amid recent higher anxiety,” Wyckoff said.
Adam Button, managing director of ForexLive, also looks for gains in gold now that investors aren’t having to sell to raise cash instead, as was the case earlier this month when equities were in a free fall.
“The liquidation phase of this crisis is over, and the focus is shifting to monetary debasement and economic uncertainty,” Button said.
Richard Baker, editor of the Eureka Miner’s Report, looks for gold to rise since a number of obstacles to higher prices were cleared this week. These include the U.S. dollar coming down from its highs and perhaps facing increasing pressure from the multi-trillion-dollar relief package from Congress; an abatement of the liquidations that previously depressed precious metals, even though Friday morning’s sharp equity decline may signal a smaller round is underway; and a bullish low interest-rate environment.
“With the U.S. quickly becoming the new epicenter of this horrific pandemic, the uncertainty facing the economies and markets will propel gold to $1,800 per ounce, perhaps higher,” Baker said. “I believe it likely that Comex gold will see at least $1,680 per ounce next week, with embattled silver following to $14.80 per ounce.”
Meanwhile, Mark Leibovit, publisher of VR Metals/Resource Letter, said in an email that gold “looks toppy to me. Called the pullback to the mid $1,400s when everyone else was bullish. Cycles down to summer.”
The neutral votes included Colin Cieszynski, chief market strategist at SIA Wealth Management, and Phillip Streible, chief market strategist with Blue Line Futures.
“Gold appears to be settling into a $1,600-$1,640 trading range but...the potential exists for large swings in both directions,” Cieszynski said. “What happens with the U.S. dollar may continue to drive short-term trading swings, while the ongoing dovishness of central banks provides longer-term support.”
Added Streible: “Gold futures are fighting heavy resistance at $1,704 and will need more clarity on the stimulus and weaker equity prices in order to attract further buying.”
The April futures peaked at $1,704.30 on March 9 and stopped just shy of $1,700 two days this week.