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(Kitco News) - The gold market rallied following a weaker-than-expected U.S. jobs report for July, which included downward revisions for May and June and strong wage growth, sending spot gold prices from $1931 to an intraday high of $1946.79
The latest Kitco News Weekly Gold Survey showed that the loss of momentum for the U.S. labor market, even as inflation pressures remain in place, had most market analysts bullish or neutral on gold's prospects for the coming week.
This week, 15 Wall Street analysts participated in the Kitco News Gold Survey. Eight of them, or 53%, said they expect to see higher prices for gold next week, while six analysts, or 40%, had a neutral outlook. Only one analyst predicted lower prices for the precious metal over the next seven days, representing 7% of the total.
Wall Street
"The U.S. jobs market is slowly cooling, and that's exactly what the Fed wants to see," said Adam Button, Chief Currency Analyst at Forexlive.com. "The market is increasingly comfortable that we are at the terminal rate in Fed funds. When that's confirmed, I think the only place for interest rates to go is down, which is bullish for gold."
Button said gold is already at a fairly elevated price despite strong headwinds from the Fed. "The starting spot right now is around $1940, so how high can gold run in a rate cutting cycle?" he asked. "We've seen high real rates, and when you take a step back and look at how gold has performed during this rate hiking cycle, it's extremely encouraging."
He added that while it's still a little bit early in seasonal terms, by the time Q4 rolls around it will be clear that the Fed is done and that rate cuts are coming in 2024. "That's when I expect gold to take off."
Button said he is also bullish on gold in the short term. "I expect next week's CPI report to emphasize that inflation is contained and will slowly subside, and that should help to lift gold," he said.
Marc Chandler, Managing Director at Bannockburn Global Forex, also sees upside potential for the yellow metal.
"I like gold higher next week," said Chandler. "I think the recent pullback, aided by a rise in rates and a stronger dollar, has run its course. A potential key upside reversal is unfolding after the employment data and gold's decline to a nearly four-week low slightly below $1926 in the spot market. A move back above $1950 suggests potential back toward $1965-$1970."
Colin Cieszynski, Chief Market Strategist at SIA Wealth Management, also expects gold to post gains in the coming days. "I am bullish on gold for the coming week," Cieszynski said. "Technically, it looks like the recent rally in USD and correction in gold is ending. If gold holds on to today's gains, we would have a really nice bullish Morning Star candlestick pattern."
And Darin Newsom, senior market strategist at Barchart.com, also saw technical confirmation that gold was poised for short-term gains.
"December gold is in position to complete a bullish key reversal on its daily chart, confirming the short-term trend has turned up," Newsom said. "Thursday's close saw daily stochastics complete a bullish crossover below the oversold level of 20%, a signal the short-term trend was set to change direction. The previous 3-wave downtrend began with a bearish key reversal on Thursday, July 20, with a high that day of $2,028.60."
"All that is needed for December gold to complete its pattern Friday is a close above Thursday's settlement of $1,968.80," he said.
Representing the neutral camp as he did last week, James Stanley, senior market strategist at Forex.com said he expects gold prices to remain in a sideways holding pattern, though he sees next week's inflation data as a key risk event. "Unchanged, but CPI can change that quickly depending on how it hits," he said.
Stanley said this week was another bear trap, and he doesn't see gold ready for a larger breakdown just yet. "USD was really strong and there was an open door for bears, but they didn't walk through it so I have to think the breakdown theme isn't here yet," he said. "The 1980 area is still key, so if we see a lower-high inside of that next week, the bearish case will grow a bit more attractive."
The lone voice of pessimism among market analysts this week was Kitco's own Jim Wyckoff, who said he sees enough evidence to expect gold prices to fall next week.
"Steady-lower as prices are in a fledgling downtrend on the daily bar chart," he said.
Gold prices continued to trade in positive territory on Friday afternoon, but the precious metal was still down 0.25% on the week, with spot gold last trading at $1940.56 at the time of writing.
