(Kitco News) - Gold is off to the races as safe-haven demand dominates the marketplace and drives prices to record highs; many analysts are now keeping an eye on $3,000 an ounce.
Although gold prices are looking a little overstretched, some analysts have said that investors can’t ignore the bullish momentum in the marketplace. After holding critical initial support at $2,800 an ounce on Monday, the market managed to hit intraday all-time highs throughout the week.
Disappointing economic data on Friday, which showed a significant drop in consumer optimism and rising inflation fears, briefly pushed gold prices above $2,900 an ounce. While gold is off its session highs, it is still looking to end the week with solid gains. As of 1:43 p.m. ET, April gold futures were trading at $2,884.70 an ounce, up nearly 2% from last week.
Alex Kuptsikevich, Chief Market Analyst at FxPro, said that gold’s rally has just started and a push to $3,000 is the beginning.
“From a technical perspective, gold is starting a Fibonacci extension pattern. The global rally commenced in October 2023 following initial signals from the Federal Reserve indicating an easing of monetary policy and a subsequent slowdown in the pace of rate hikes. Between October and November 2024, after appreciating by 55% to reach the $2,790 level, gold experienced significant profit-taking, resulting in a pullback to $2,550, which represents 76.4% of the initial rally. This was followed by several weeks of intense trading between bullish and bearish market participants,” he said in a note on Friday. “By the end of December, steady buying momentum had returned to the gold market. A move above $2,800 in late January has led to discussions about the potential onset of a new global growth wave. If this trend continues, the price of gold may potentially reach the $3,400 per troy ounce area between August and October of this year.”
In a comment to Kitco News, Jesse Colombo, an independent precious metals analyst and founder of the BubbleBubble Report, said the recent rally shows gold has plenty of potential.
“In a bull market, asset prices often remain overbought for a long period of time, and that's when the best gains are to be made. If anything, it's a sign of strength rather than weakness. The risk is solidly to the upside at the moment,” he said. “I do want to see a solid close above $2,900 in COMEX futures to confirm the rally and, after that, a close above $3,000. It's basically the ratcheting effect. If gold can't close above $2,900 just yet, in the worst case, I see it going sideways for another week or so in the range between $2,800 and $2,900 and then making another push higher.”
Ole Hansen, Head of Commodity Strategy at Saxo Bank, said he also sees solid momentum in gold.
“It seems like most roads lead to Rome ($3,000) these days, something that obviously makes me a bit nervous for fear of having missed something,” he said. “But for now, momentum and the general level of uncertainty will likely continue to support and underpin prices.”
Although geopolitical and global economic uncertainties are supporting gold as a safe-haven asset, some analysts are also warning investors that the market could see some renewed volatility as prices trade in record territory, even as the Federal Reserve is expected to maintain current interest rates through at least the first half of the year.
Employment data published on Friday showed that the U.S. economy created 143,000 jobs last month. While the report missed expectations, it also showed that wages increased more than expected and the unemployment rate actually fell to 4.0%.
Some analysts note that despite the headline miss, the U.S. labor market remains fairly healthy even as momentum slows.
At the same time, preliminary data from the University of Michigan showed a sharp drop in consumer sentiment, while one-year inflation expectations rose a full percentage point to 4.3%.
In its first monetary policy meeting of the year last month, the Federal Reserve said it was in no rush to cut interest rates as the inflation threat remains elevated and the labor market remains healthy.
Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, expects gold prices to continue to rally as inflation fears continue to rise.
“The fact is that wage growth shows that the Fed’s war on inflation is not over, and the yellow metal serves as the perfect hedge against inflation. This very fact is highly supporting the price of the shining metal,” he said. “In addition to this, President Trump’s tariff threats are still very much on the table as many believe that one month's time is not close enough to be close to having any kind of solution in place. So, for now, the momentum is strong, and it is likely to continue to push prices higher.”
Next week, markets will be listening closely to Fed Chair Jerome Powell for any potential forward guidance as he testifies before Congress.
Lukman Otunuga, Manager of Market Analysis at FXTM, said that gold investors should brace for some volatility next week.
“How Trump responds to China’s retaliatory tariffs, Jerome Powell’s testimony, and the latest U.S. inflation report may shape gold’s outlook. Mounting U.S.-China trade war fears and bets around lower U.S. rates could push gold to fresh all-time highs. However, easing concerns over Trump’s tariff threats and a hawkish Powell may trigger a correction in gold prices,” he said. “Looking at the charts, a weekly close above $2,880 may open the doors to the next psychological level at $2,900 and $2,950. Should prices end the week below $2,850, this may signal a decline back to $2,815 and $2,800.”
Economic data to watch next week:
Tuesday: Fed Chair Jerome Powell testifies before the Senate Banking Committee
Wednesday: US CPI, Fed Chair Jerome Powell testifies before the House Financial Services Committee
Thursday: US PPI, US weekly jobless claims
Friday: US retail sales
