(Kitco News) – After the first chaotic weeks of Trump's second term drove precious metals prices to wild swings, this week saw a more orderly and data-driven performance from the yellow metal.
Spot gold kicked off the week trading at $2,882.48 per ounce, and after breaking through the $2,900 barrier once again, it posted one of its least dramatic performances in weeks on Monday with U.S. markets closed for the President's Day holiday.
Gold prices caught a bid during the Asian session, and by the time the North American market opened on Tuesday, spot gold was already trading at $2,924 per ounce, a level that would provide support for the gold price throughout the week.
Gold prices hit another weekly high of $2,946 per ounce during the overnight session, but this time, North American markets drove the price lower, with the yellow metal dropping below $2,920 per ounce by 1:15 p.m. Eastern on Wednesday.
This level proved to be a near-term floor, however, as the 2:00 p.m. release of the Federal Reserve's minutes from last month's FOMC meeting sent gold prices rocketing higher once again, topping out at what ultimately proved to be the weekly high of $2,955 per ounce shortly before 4:00 a.m. Eastern.
This peak was also short-lived, however, as the 8:30 a.m. release of weekly jobless claims and the Philadelphia Fed manufacturing index helped drive gold from $2,944 per ounce all the way down to $2,925 just half an hour later. By the North American open, gold was once again trading near $2,940 per ounce, and it topped out at $2,946 around 8:00 p.m. Eastern.
Now it was Asian and European traders’ turn to lose faith in the yellow metal, with gold declining steadily overnight to a low of $2,919 per ounce by 3:15 a.m. Eastern, before recovering back to $2,930 by the North American open.
After a last-gasp effort to test the weekly highs ran out of steam at $2,941 per ounce just before 2:00 p.m., the market settled into a narrow trading range between $2,933 and $2,938 into the weekend.
The latest Kitco News Weekly Gold Survey showed industry experts even more cautious about the yellow metal’s near-term prospects, while retail traders went the other way with renewed optimism about price gains for gold.
“I remain Neutral on Gold for this week,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “I think it is still digesting the gains of recent weeks.”
“Up,” said James Stanley, senior market strategist at Forex.com. “Bulls haven’t shown any signs of letting up yet and this week has been another strong weekly bar, so far. I think there’s a very decent chance we touch 3k at some point soon in spot, but that’s where I think some turbulence could appear.”
“Down,” said Adrian Day, president of Adrian Day Asset Management. “Gold is certainly due for a pause, the run in the last two months has been well above trend. So we may see a pullback, but I suspect it will be only brief and shallow. The reasons that people have been buying gold have not gone away, while North Americans have yet to join the party in any meaningful way.”
“There are still net withdrawals from ETFs and net sales to coin dealers, though the balance between purchasers and sellers is slowing turning,” Day warned. “When they do, gold will see another spurt up.”
“Up,” said Rich Checkan, president and COO of Asset Strategies International. “Gold is finding its way into the news cycle more frequently lately. That, coupled with the continued uncertainty in markets and geopolitically, suggests gold will start testing $3,000 sooner than later. I believe we take another step in that direction next week.”
Marc Chandler, managing director at Bannockburn Global Forex, thinks gold prices are due for a correction in the near term.
“Gold reached a record high near $2955 on February 20. However, it is beginning to look technically vulnerable to a setback,” he said. “Its more than 13% rally this year (spot) may spur ‘sticker shock’ and slow buying. The momentum indicators have not confirmed the record high, warning a ‘bearish divergence.’”
“Initial support may be around $2875-$2880,” Chandler added. “Still, I expect to see buying on the dip to emerge, especially as the US tariff threat enters a new phase next month.”
“Up,” said Darin Newsom, senior market analyst at Barchart.com. “The global chaos being created by the US administration isn’t going away any time soon, meaning investors will continue to view gold as a safe-haven hedge.”
Commerzbank’s Barbara Lambrecht said they remain bullish on gold for next week. “Gold is profiting from this uncertainty, with prices repeatedly hitting new record highs,” she said. “The USD 3,000 per troy ounce mark is getting closer and closer, and it is likely to be reached soon.”
Lukman Otunuga, manager of market analysis at FXTM, said U.S. dollar weakness could push gold prices to new highs in the coming days. “If the dollar remains in the backfoot in the week ahead, this could fuel the upside – making gold’s $3000 dream close to a reality,” he said.
Kevin Grady, president of Phoenix Futures and Options, said gold prices reflect the broader market’s struggle to calculate the potential impact of Trump’s policies and proposals.
“The market's just really trying to figure it out,” he said. “Everything, the equity market, the metals market, the commodities, everyone's just trying to figure out how the tariffs affect you, and the problem with the tariffs is that they're moving targets. There's nothing set, and even when he institutes them, if somebody comes back and they negotiate it, then he drops them.”
“It's very hard to trade around that,” Grady said, “so you're going to see very choppy markets, they're going to be very news-driven.”
He added that investors need to recognize that the algorithms are reading the data and responding before people do. “It's not like it's traders sitting there saying, ‘Oh, this is what I think I should do right now,’” he said. “It's the algorithms reacting, and they know that's part of the issue.”
Grady said that even though this week was relatively smooth and stable by Trump 2.0 market standards, there’s more volatility ahead. “I think we're going to be jumping around again,” he said, “He's making a big deal about it, that he's one month in and they've listed all the accomplishments he's made. They're going to keep going.”
Grady believes much of gold’s recent strength is a short-term reaction to the tariff threats rather than a continuation of the precious metal’s long-term bullish trend.
“I think you probably have at least a $75 to $100 premium coming in from the [EFP] shortage and the lease rates and everything that you're seeing there,” he said. “I don't think the central banks are sitting in there with a hard bid underneath saying, ‘I'm buying at $2,925.’”
“$3,000 right now, it's a psychological resistance level,” he added. “I equate it to $100,000 in Bitcoin. It's one of those targets that's out there that people are looking at, and they'll get it. I think the first time up, I don't see it blowing through that, I think there's going to be resistance there.”
Grady also thinks market participants need to set seasonal factors aside right now, because this market is so different from any previous year.
“I think it's hard to say, ‘This is typically what we do,’ or ‘This is seasonal for gold,’ because the whole game board just got turned on its head. Maybe someone, seasonally, would say India are big buyers of gold, but maybe at $3,000, you're not going to see the same appetite to buy it, so I think that it's very hard to say that something's going to be seasonal, and you can just go along prior norms.”
He also believes central banks will keep buying gold even as prices set new records, because today’s record could look like a bargain in a few months.
“I don't think any of those central banks, like Turkey, I don't think any of these guys are coming in saying, ‘I want to pay a premium.’ They're all there underneath the market,” he said. “But what was a premium two years ago is now a massive discount. It's very relative.”
This week, 17 analysts participated in the Kitco News Gold Survey, with Wall Street’s bullish sentiment seeing further restraint. Nine experts, or 53%, expect to see gold prices rise during the week ahead, while four analysts, or 24%, predicted a price decline for the precious metal, and another four saw sideways trading for gold next week.
Meanwhile, 204 votes were cast in Kitco’s online poll, with Main Street investors actually growing more bullish from this week’s performance. 144 retail traders, or 71%, looked for gold prices to rise higher next week, while another 34, or 17%, expected the yellow metal to trade lower. The remaining 26 investors, representing 13% of the total, saw gold consolidating in the near term.
The economic news calendar starts a little earlier than usual this week, as market participants will be closely watching the results of the German parliamentary elections on Sunday. Tuesday morning will see the release of the U.S. Consumer Confidence report for February, followed by Wednesday’s New Home Sales for January.
On Thursday, markets will receive preliminary U.S. Q4 GDP, Durable Goods Orders for January, and weekly jobless claims, followed by U.S. Pending Home Sales later in the morning.
But the main event in economic data will be Friday’s U.S. Core PCE Index along with Personal Income and Spending for January, as the Fed’s preferred measure of inflation will give gold traders a good indication of the likely rate path.
Adam Button, head of currency strategy at Forexlive.com, is adopting a neutral stance on gold for the coming week.
“Gold might have one more gasp in a burst to $3000 but the risk-reward isn’t there for new longs now,” he said. “I’m watching the US dollar carefully as some weakness has crept in; if that continues it could add another leg for gold.”
“Still concerned about a February cyclical trading peak,” said Mark Leibovit, publisher of the VR Metals/Resource Letter.
Sean Lusk, co-director of commercial hedging at Walsh Trading, was trying to square the Federal Reserve’s latest rate projections with gold’s strong recent performance.
“There's a lot of noise,” Lusk said. “Maybe there's not anything new in the grand scheme of things, but you still have gold pretty well supported, you have the dollar which is up today, but it's bending back.”
“I just don't know what the hell they're going to do with rates,” he added. “I think the cutting is over. I don't care who says what, it's totally ridiculous to even consider it. It was ridiculous last year.”
Lusk said that he believes the Fed’s generous rate cut projections were based on the expectation of weakness in employment. “They were worried about it and that was the cause for lowering rates, over the course of three years, 300 basis points,” he said. “Butt now that's backed off, you don't hear much about that anymore. So did the Fed misread the employment situation, or were they basically saying, ‘Government hires don't count’? Now these government hires, the recent ones, are just going right out the door.”
Lusk said that even with gold prices setting new record highs, there are plenty of reasons for countries, institutions, and individuals to keep buying. “Look, we've already rallied $300 to start the year, which is over 10%,” he said. “The administration, namely Trump, wants, lower rates, but the only way he knows he can get there is to cut spending. That takes a lot of time because you're not going to see the direct results. You've got to buy these people out, it's not net positive for a while.”
“We could be on a rocky path here,” Lusk warned. “I think there's just way more uncertainties, and that's why gold has shot up and made new highs the last two months, because nobody knows where the hell it'll be. You run 10% through the first half of one fiscal quarter, it's pretty quick, but it's not unheard of, we've done it before. Seasonally, some of its best performance periods are between mid to late December through Valentine's Day. We still really haven't seen a turnover or break in the market, although I wouldn't be surprised if one's coming.”
“It's maybe inevitable that you'll see the front month trade up to maybe a little bit past $3,000 an ounce, but, are you going to attract new longs at that level from a technical perspective, or a fundamental perspective?” Lusk mused. “That'll be a tough nut to crack, just like it was when we hit $2,000 the first time, or $2,500. We'll see what happens.”
“I just think there’s real uncertainty here on many fronts,” he said. “For gold, the path of least resistance is still higher.”
“I am overall bullish, but short-term bearish here,” said Michael Moor, Founder of Moor Analytics. “Decent trade back above 29542 (-.6 of a tic per/hour starting at 11:20am EST) will negate the short-term bearishness. In a higher time frame, we are still in an overall bull trend from November 2015, and likely in the later stages. Part of this is a prediction I made of $151 minimum, $954 (+) maximum from $2,148.4 – of which we have attained $825.0 so far. This is ON HOLD.”
“On a lower time frame, the trade above 27041 (-.6 of a tic per/hour) has brought in $269.3 of strength,” he added. “The trade above 27247 (-.6 of a tic per/hour) projected this upward $55 minimum, $235 (+) maximum – we have attained $248.7. These are ON HOLD.”
“I warned we may be in the last stretch up from the 16183 low in November of 2022, with possible exhaustion at 29627-936 – we have held this 5 times now,” Moor pointed out. “Decent trade below 29404 (+3.5 tics per/hour starting at 11:20pm) should bring in pressure, but if we break below decently and back above decently, look for decent strength.”
And Kitco Senior Analyst Jim Wyckoff still expects to see gold prices rise further in the near term. “Higher as safe-haven demand and bullish technicals will keep a solid floor under the gold market,” he said.
At the time of writing, spot gold last traded at $2,936.15 per ounce for a loss of 0.11% on the day but a gain of 1.48% on the week.
