(Kitco News) - The gold market is poised to end the week with another all-time high. While there are risks of a near-term correction, some analysts believe this could still be the beginning of a broader rally.
Both gold and silver are experiencing another breakout after a brief consolidation period. Through August, gold prices were capped just below $2,550 an ounce, but that resistance has been broken. December gold futures are currently trading at $2,606.90 an ounce, up 3.2% from last Friday.
Silver has seen an even more impressive rally, with prices pushing back above $31 an ounce. December silver futures last traded at $31.13 an ounce, up nearly 10.5% from last week.
In a comment to Kitco News, Ole Hansen, Head of Commodity Strategy at Saxo Bank, described the rally as a coiled spring that has finally popped. He added that the economic data supports lower interest rates, not just from the Federal Reserve, but globally.
Many analysts have noted that falling global real yields, as central banks cut interest rates, will provide significant tailwinds for both gold and silver.
Hansen also said that gold’s breakout is being supported by silver’s breakout.
Colin Cieszynski, Portfolio Manager and Chief Market Strategist at SIA Wealth Management, expects higher gold prices in the coming months. However, he cautioned that the market must first navigate through volatility next week.
“This is just the start of a global easing cycle, and we could see gold rising against all major currencies,” he said. “I don’t think we’re in a race to the bottom yet, but that is coming, and it will drive gold prices higher.”
However, looking ahead to next week, Cieszynski said he is not ready to chase this breakout. He explained that there is still too much uncertainty surrounding the Federal Reserve’s upcoming monetary policy decision.
Currently, markets see a 43% chance of a 50-basis point rate cut next week. Cieszynski noted that if the Fed opts for a 25-basis point cut, there is a risk that gold prices could experience some selling pressure. Economists are calling the impending decision a “coin flip.”
“Regardless of next week’s outcome, gold prices will rise in the coming months,” he said.
Phillip Strieble, Chief Market Strategist at Blue Line Futures, expects some selling pressure in gold and silver next week, as he believes markets are too optimistic about aggressive Fed rate cuts.
“I just don’t see how the Federal Reserve could justify a 50-basis point cut right now and use up all its ammunition,” he said.
Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, said that investors should expect volatility next week.
“If the Fed goes dovish, gold could soar as markets start pricing in further cuts. But if the Fed throws a curveball with a hawkish stance, expect gold to nosedive,” he said. “Either way, it’s going to be a rollercoaster—fasten your seatbelts and stay sharp!”
James Stanley, Senior Market Analyst at Forex.com, is also bullish on gold, but he does not recommend chasing the market at current levels.
While the Federal Reserve’s decision will be the main focus next week, other key economic data could also trigger some volatility. Markets will receive regional manufacturing data, housing market data, and retail sales numbers.
Following the Fed’s monetary policy meeting, the Bank of England and the Bank of Japan will also announce their monetary policy decisions.
Economic data to watch next week:
Monday: Empire State Manufacturing Survey
Tuesday: U.S. Retail Sales
Wednesday: U.S. housing starts and building permits; FOMC monetary policy decision
Thursday: Bank of England monetary policy decision; U.S. weekly jobless claims; Philly Fed Manufacturing Survey; Existing Home Sales; Bank of Japan monetary policy decision
