(Kitco News) – After one of the strongest and steadiest price climbs of the year this past week on its way to fresh record-setting highs, and with domestic and international tensions supporting uncertainty, it's no surprise that market participants see nothing but blue skies ahead for gold.
Spot gold kicked off the week trading in the low $2,650s, spiking as high as $2,665 per ounce in the early morning and starting the North American trading session at $2,659 per ounce on Monday. After a relatively uneventful day, the last the yellow metal would see this week, it slid to the weekly low below $2,640 per ounce just after 1:00 a.m. on Tuesday before recovering to trade at $2,651 by the North American open.
After that, the yellow metal began its relentless march higher, setting a fresh weekly high of $2,668 per ounce at noon on Tuesday before breaking through the $2,670 level just before 2 a.m., and setting a fresh high of $2,684 at the North American open on Wednesday.
Spot gold then spent most of Wednesday trading in a narrow range between $2,674 and $2,684 before rising to $2,687 ahead of the Thursday open. By 10:45 a.m. it was hovering just $3 below $2,700 per ounce, and shortly after 9:00 p.m. eastern, it broke definitively through that level, topping out just below $2,713 per ounce at 1:30 a.m. EDT overnight.
The show was not over, however. Following a brief retracement to retest the $2,700 level, it was off to the races once again, with spot gold setting a succession of session and all-time highs of $2,714 per ounce by 8:15 a.m. $2,719 by 10:30 a.m., and the current all-time high of $2,722.13 just after 4:15 p.m. Eastern.
The latest Kitco News Weekly Gold Survey showed industry experts nearly unanimous in their bullish outlook for gold, while a strong majority of retail sentiment also moved back into optimistic territory after three straight weeks of diminishing belief in the yellow metal’s momentum.
“I am bullish on Gold for the coming week,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “The current rally appears unrelenting and with the price breaking out to new highs and nothing notable on the calendar, Gold’s positive momentum. What remains most important for Gold is that this rally is being driven by a general appreciation against all currencies and not just the USD. In the case of this week, a surge was sparked by the ECB rate cut.”
“Up,” said Adrian Day, president of Adrian Day Asset Management. “The macroeconomic environment that normally favors gold – lower interest rates, stubborn inflation, a weaker economy, and declining dollar – is slowly coming into focus. This is leading to Western investors, particularly in the U.S., beginning to turn to gold.”
Marc Chandler, managing director at Bannockburn Global Forex, said that on balance, gold still has upward momentum.
“Gold reached new highs before the weekend near $2717. The last leg up has taken place alongside a stronger US dollar and higher US rates,” he said. “Middle East tensions remain elevated and the upcoming BRICS summit highlights the central bank demand for the yellow metal.”
“While the momentum indicators are constructive, spot gold is above its upper Bollinger Band,” he added. “Meanwhile, the US election is coming into focus, and although it still appears to be a close contest, the implications of possible Trump victory are significant and likely supportive for gold.”
“Up,” said Darin Newsom, senior market analyst at Barchart.com. “Global investors should continue to hedge against uncertainty and potential chaos ahead of the next US presidential election. Again, there are global players growing more desperate to create political change.”
“Higher, said Adam Button, head of currency strategy at Forexlive.com. “The momentum is impressive. There’s no need to fight it.”
“Up,” agreed James Stanley, senior market strategist at Forex.com. “There’s little reason to question the trend now especially after a continually impressive showing from bulls to press forward, even with extreme strength in the USD.”
“Staying with the trend, especially with the upcoming BRICS meeting,” said Mark Leibovit, publisher of the VR Metals/Resource Letter.
Sean Lusk, co-director of commercial hedging at Walsh Trading, was looking at the market setting fresh all-time highs on Friday, and wondered aloud what could possibly stop gold’s momentum.
“You get a breakdown in energies this week, it doesn't matter,” he said. “You’ve got the recent uptick in the dollar, that hasn't mattered, has it? I mean, nothing. Equities, doesn't matter, whatever the bond market does or doesn't do, it doesn't matter either.”
“Your traditional safe havens are higher bond yields, which would cause metals to suffer,” he added. “Higher dollar causes metals to suffer, and it does not matter. It just tells you this thing is so strong. Everyone's got it pegged technically till about $2,770, $2,780 and then we'll see where we go.”
“It's just unrelenting,” he marveled. “And these recent dips, even the corrections are $50, $60 in size, shape, and scope. Hardly anything. That's why I keep saying the integrity of the market is really in question here, because good, bad, or indifferent, we continue to churn higher and outside of something else entering the market, providing some uncertainties where everyone goes home and takes profit, that's all we're really getting.”
“Nothing goes up forever, right? Or down forever,” Lusk said. “But in this case, it just keeps going up forever. This market's due for a sizable chop here, but we'll see. We might be up another $40, $50 higher before that happens.”
This week, 16 analysts participated in the Kitco News Gold Survey, and weeks of Wall Street pessimism have given way to a near-total bullish consensus. 15 out of 16 experts, 94% of those surveyed, believe gold prices will rise even higher during the week ahead, while the lone remaining analyst, representing 6%, was neutral on gold’s near-term prospects. None thought it wise to predict a price decline for the precious metal.
Meanwhile, 159 votes were cast in Kitco’s online poll, with a strong majority of Main Street investors rejoining the bull run. 115 retail traders, or 72%, looked for gold prices to rise next week, while only 27, or 17%, expected the yellow metal to trade lower. The remaining 17, representing 11% of the total, though prices would trend sideways during the week ahead.
Next week’s news will likely be dominated by high-level economic meetings in the United States and abroad, with the International Monetary Fund (IMF) holding its biannual meeting in Washington, D.C. starting Monday, while the BRICS+ nations will meet in Russia for their annual summit beginning Tuesday. The trading bloc is expected to announce new members and new payment systems, both of which have the potential to impact the U.S. dollar and gold prices going forward.
Along with the ongoing geopolitical uncertainty in the Middle East and the approaching election in the United States, markets will be watching for the Bank of Canada’s monetary policy announcement and U.S. existing home sales on Wednesday, the Flash S&P Global manufacturing and service sector PMI surveys, weekly jobless claims, and U.S. new home sales on Thursday, and the Friday morning release of U.S. durable goods orders.
Ricardo Evangelista, Senior Analyst at ActivTrades, sees a broadly supportive environment for the yellow metal. “While it’s difficult to pinpoint a single driver behind this week’s 2% rise in the precious metal, it's clear that several factors are at play,” he said. “Geopolitical instability, sluggish economic growth in key regions, a shift in central bank policies towards lower interest rates, and most recently, uncertainty surrounding the U.S. presidential election have all contributed.”
“Rumours that Donald Trump may be on the verge of winning the election have further fuelled demand for gold, driving it to historical highs,” Evangelista added. “Faced with the possibility of a second term for the Republican candidate, markets are turning to gold, the ultimate safe-haven asset.”
Kevin Grady, president of Phoenix Futures and Options, said that what gold is doing is consistent with the overall supportive environment that’s been forming in recent months.
“I think that the rates are going to be coming off, and I think gold's primed for higher numbers,” he said. “I just think that people are buying dips and you're seeing higher lows, which is trend-friendly. People just like to be in the trade as rates come off. I think you're going to see higher prices and a test of $3,000 in the first quarter or so.”
Grady also expects next week’s BRICS summit to serve as a near-term driver for gold prices, as their announcements are likely to hurt the dollar and boost precious metals. “Absolutely, that's what's happening,” he said. “This is the reality of what's going on here, why they're trying to get away from the U. S. dollar.”
Grady said the key to understanding whether or not gold’s move is sustainable, even at these unprecedented levels, is knowing who is driving the price action.
“As a trader, when the markets are moving and we see open interest increasing, we view it in two terms: Strong hands and weak hands,” he said. “Are they strong hands or weak hands? Because if you think they're just speculators in the market, or maybe some funds just got into the market, if the markets are selling off, they're going to liquidate, they're going to cut those positions.
“But if you see index buying, if there's a rebalance, if it's central banks, they're strong hands, they're not getting out if the market dips. In fact, it’s the opposite, they're going to buy more.”
“There's obviously speculators in the market, there are people that are trend followers are following this market,” he said. “But the underlying buyer, I think, is the central bank, and I think that's not going to change.”
Grady said the price action confirms that the sellers are speculative. “That's exactly what's happening, because the people that are selling the market, when it goes down, $20, $30, those are the weak hands,” he said. “Those are the people, when the market goes against them, they're stopped close to the market, and they liquidate. Those are the weak ones getting out.”
“But the strong hands, they're not selling. They're not getting out,” he said. “And as a trader, that's a very important thing to understand. Who's buying, where is this rally coming from, what are their intentions?”
“I look at that and say, ‘Central banks are the market.’ And that's why we're bullish for so long.”
Alex Kuptsikevich, Senior Market Analyst at FxPro, was looking at the week’s performance in the context of gold’s broader rally.
“This is an extension of the bullish momentum from October 10th after weak weekly US employment data,” he said. “Technically, this is a classic return to growth after a small shake-out of positions in the early days of the month. Further movement in the Fibonacci pattern suggests that the $2,820 area is the next target to the upside.”
Kuptsikevich noted that markets are now experiencing the “very unusual combination” of simultaneous rallies in the dollar and gold. “It is more common for them to move in opposite directions and for them to move together only during periods of heightened demand for defensive assets, for example, because of geopolitics,” he said.
Michael Moor, Founder of Moor Analytics, said gold looks to have further upside momentum. “The solid trade above 21475-84 projects this upward $151 minimum, $954 (+) maximum. We have attained $580.9.”
And Kitco Senior Analyst Jim Wyckoff expects gold prices to post further gains next week. “Higher amid geopolitical tensions and bullish technicals,” he said.
At the time of writing, spot gold last traded at $2,720.90 per ounce for a gain of 1.04% on the day and 2.73% on the week.
