Gold analysts and retail investors cautious, divided ahead of next week's Fed rate decision
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The latest Kitco News Weekly Gold Survey shows that last week's pessimism has moderated, with retail investors slightly bullish on gold prices next week, while market analysts returned to their cautious bias.
Mark Leibovit, publisher of the VR Metals/Resource Letter, said he's bullish on gold next week, and he'll be keeping a close eye on the greenback to determine gold's near-term direction. "Waiting for a US DOLLAR confirmation of a top before adding to positions," he said.
Daniel Pavilonis, Senior Commodities Broker at RJO Futures, sees weakness for the yellow metal in the coming days. "I think we're going to see a down week next week," he said. "I still think we're rangebound. We can't break above $2000, we can't break below $1900, and we're literally smack-dab in the middle."
Pavilonis said he's actually surprised that gold is up at all on Friday. "If you look at yields, they're a lot stronger," he said. The 10-year yield I think even made a new high today. Right now it's 4.317 up 3.2. The high was 4.333. The two-year is at 4.911, we're at the highs right now. 30-year yields are inching their way a little bit higher to 4.402, it's sitting right at its high. So I think if you see 10-year yields start breaking above its highs, maybe you see gold start to come off a little bit. Also, in the face of crude oil getting stronger, I think rates move higher, and I think that would push the dollar higher and gold lower."
"If we can break through $1900, I think there's a lot of downside, but it could be another one of those weeks where we shoot lower and end higher towards the end of the week."
This week, 12 Wall Street analysts participated in the Kitco News Gold Survey, and their predictions were evenly distributed, with four experts each, or 33%, expecting gold prices to be bullish, bearish and unchanged during the week ending September 22.
Meanwhile, 415 votes were cast in online polls. Of these, 180 respondents, or 43%, looked for gold to rise next week. Another 156, or 38%, expected it would be lower, while 79 voters, or 19%, were neutral in the near term.
The latest survey shows that retail investors expect gold to trade around $1,924 per ounce next week.
The coming week will see the release of key housing data in the U.S., including MBA mortgage applications, housing starts and building permits, as well as the Philly Fed Manufacturing Survey. But all eyes will be focused on the Federal Reserve's interest rate decisions on Wednesday afternoon, with markets almost fully priced in for a hold.
Marc Chandler, Managing Director at Bannockburn Global Forex, expects to see gold make gains during a week dominated by central bank rate announcements.
"I like gold next week, and the fact that it successfully tested the $1900," he said. "Potential toward $1950. Six of the G10 central banks meet next week. The UK and Sweden are likely to hike. Some think Norway and Switzerland too may hike. I am less convinced."
Chandler agrees the Fed is most likely to stay on the sidelines at next week's meeting, along with the Bank of Japan. "Both may hope for a hawkish hold," he said, adding that the dollar needs to pull back if gold is going to strengthen. "The Dollar Index's nine-week rally stretched the momentum indicators, and a break of 104.40 could help signal that a near-term top is in place."
Adam Button, Chief Currency Analyst at Forexlive.com, sees gold prices trending downward next week. "It's a tough time of year seasonally, and softening risk assets will pull gold lower," he said.
Sean Lusk, Co-Director of Commercial Hedging at Walsh Trading, sees potential upside for the precious metal next week after its post-Labor Day losses. "Maybe we went down a little too far too fast on these breaks," he said. "I think with the uncertainty here, you've got a big union striking, you've got a couple other things happening, I think you're getting some safe-haven buying today, and certainly some short covering post CPI and PPI."
Looking at the technical perspective, Lusk said "we've got to get back over $1954, which was the high on the 11th, and if we can achieve that, then we may have a reversal here, because you spike low down to $1921 yesterday in the Dec contract, at $1952.50 on a high today, $1948 last."
"This is a good reaction if we're bullish, because they threw everything at it from the recent highs of $1980 on Sept. 1, and we sold off $60 almost from that high," he said. "Now you're coming halfway back, essentially up at $1950. So a $60 drop in a short amount of time, first half of the month, and now we're taking half of it back."
Lusk said he thinks the dollar may have gotten a little too overheated on the upside, and metals came down a little too far, a little too fast.
"Nobody's going home short this weekend given the strikes and given the uncertainties," he said. "If we close up here, then I would think I'm bullish on the next week."
"I'm sticking with unchanged to slightly up," said James Stanley, senior market strategist at Forex.com. "This was one of those weeks where bears had ample opportunity to push spot gold below 1900, but they couldn't, even with US data showing considerable strength."
Looking at the candlestick charts, Stanley said "The weekly bar at this point is a doji, and this shows after a big zone of support held the lows in the 1903-1910 zone. I don't think the meatier part of the sell-off is here yet. That could change around the Fed, but I think we'll hear Powell attempt to be balanced and that can further keep the door open for a bounce in gold. There's still a falling wedge there, and the fact that bears keep shying away from the lows shows that it just doesn't seem ready to break down, at least not yet."
And Kitco Senior Analyst Jim Wyckoff sees gold treading water with a downward tilt. "Steady-lower as charts still favor the bears," he said.
Gold prices are currently up 0.26% on the week, with spot gold last trading at $1,924.52 an ounce, up 0.73% on the day at the time of writing.