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(Kitco News) - After treading water for much of the week and taking the Fed's 25-basis-point hike in stride, gold sold off sharply on Thursday morning following better-than-expected U.S. employment and growth data.
But even as the precious metal climbed back above $1960 on Friday, erasing half of its Thursday losses, analysts remain quite evenly divided on gold's direction for the coming week, while retail investors are somewhat more optimistic about its prospects.
The latest Kitco News Weekly Gold Survey shows that retail investors expect gold prices to post gains during the week ending August 4. Meanwhile, market analysts are more cautious as they await definitive direction from economic indicators and technical trends.
Colin Cieszynski, chief market strategist SIA Wealth Management, sees the yellow metal trending downward in the near term despite Friday's positive price action.
"Gold is broadly trending sideways, and while we are getting a bounce today, overall, it appears to be in a downswing within an established trading range," he said. "I am bearish on gold for the coming week."
On the other hand, Adrian Day, President of Adrian Day Asset Management, sees the Fed's recent statements and still-persistent inflation as bullish for gold.
"We are approaching the end of the Federal Reserve's rate hiking cycle, while the inflation rate is likely to reverse and move back up in a few months as the higher oil price works through the economy, affecting transportation and most of the goods in stores," Day said. "Ending hiking before inflation has been quashed will ignite gold."
This week, 14 Wall Street analysts participated in the Kitco News Gold Survey. In a tied vote, both bullish and neutral positions garnered five votes each, or 36%. At the same time, four analysts, or 28%, were bearish on gold for next week.
Meanwhile, 322 votes were cast in online polls. Of these, 158 respondents, or 49%, looked for gold to rise next week. Another 106, or 33%, said it would be lower, while 58 voters, or 18%, were neutral in the near term.
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The latest survey shows that retail investors expect gold prices to trade around $1984 per ounce by the end of next week.
Next Friday's nonfarm payrolls report represents the coming week's most prominent event risk for precious metals, and analysts will be looking to the key U.S. employment indicator for clues as to the Fed's next move.
"I think we're looking at unchanged with a tendency towards down," said James Stanley, senior market strategist at Forex.com. "Durable Goods and GDP both crushed expectations out of the US and this was a day after Powell said that they were data dependent. And while inflation is falling, leading indicators have held fairly strong, so that data dependency may simply lead to another hike in September and possibly another after that, which markets are not expecting at all right now."
Stanley said that with Core PCE still above 4%, the Fed's work is clearly not finished. "For next week, I would simply need to see bears stepping on any attempts at topside breakouts to continue giving clues that this theme may come to fruition."
Much of the technical analysis seemed to point to gold prices trending lower next week as well. The Gold Forecast's Gary Wagner said the technical picture for gold deteriorated significantly this week.
"There was major technical chart damage after gold traded to a high of $1980.70 and then sold off quickly," he said. "$1980 is precisely where the 38.2% Fibonacci retracement is fixed at. Although it opened above the 100-day moving average, it broke below, as well as the shorter-term 50-day moving average, to close at a low not seen for the last 13 trading days."
Wagner said the combination of hawkish statements by the Federal Reserve and gold "breaking through key and critically-important technical levels" mean he sees further downside risks for the precious metal in the days ahead.
Gold prices are continuing to return toward neutral territory to end the week, with spot gold last trading around $1,961.60 an ounce, but the precious metal is still down 0.39 percent on the week at the time of writing.
