(Kitco News) – Gold traders rode out another tumultuous week of price action, which saw the yellow metal decline for the second week in a row.
Spot gold kicked off the week trading at $3326.84 per ounce on Sunday evening before quickly falling to $3271.25, a low which would hold for three days.
By the North American open on Monday morning, gold was once again trading within a few dollars of $3,300, and American traders pushed prices higher throughout the session, with spot gold topping out at $3,352 per ounce just before the close.
This proved to be the weekly high, however, as Asian traders took the yellow metal down to $3,307 per ounce in overnight trading.
Tuesday was the least eventful 24-hour period for the precious metal this week, as gold traded within a narrow $20 range between $3,307 and $3,328 per ounce.
But drama returned to the metals market early Wednesday morning, with spot gold falling from $3,314 per ounce at 3:30 a.m. EDT to test support at $3,270 per ounce multiple times before 8 a.m., only to return right back to where it was in time for the North American open.
After failing to break above $3,320 per ounce, gold spent the session slowly sliding before beginning its most pronounced decline of the week 15 minutes before the North American close, when spot gold fell from $3,300 per ounce all the way to $3,226 per ounce by midnight.
With Chinese traders now celebrating the May Day holiday, there was no one left to lift prices higher, so spot gold ultimately tested $3,200 per ounce shortly before 8:00 a.m. on Thursday.
But after a second test of $3,207 held at 11:30 a.m. EDT, gold managed to pull off the fresh weekly lows, ultimately topping out at $3,265 just before 6:00 a.m. Friday morning.
Then, the release of better-than-expected non-farm payrolls sent gold on the decline once again, and after failing to break above $3,263 per ounce just before 11:00 a.m., the yellow metal saw its final sharp sell-off, dropping to a daily low of $3,222.75 just before 1:00 p.m. before rising into the 3230s ahead of the weekend.
The latest Kitco News Weekly Gold Survey showed only a small minority of industry experts expecting gains for gold next week, while half of retail traders still hold a bullish bias despite the yellow metal’s slide.
“As Peggy Lee asked, ‘Is that all there is?’ Gold has pulled back over 7% from its high less than two weeks ago, and while that is meaningful, it is not sufficient to flush out all weak holders and profit takers,” said Adrian Day, president of Adrian Day Asset Management. “Growing concerns about a U.S. recession––typically negative for gold at the onset––as well as the possibility of some easing of U.S.–China tariff tensions could lessen demand for gold in the near term.”
“We feel some more downside is possible,” Day said. “We are a hesitant DOWN for the week ahead.”
“Down,” said Darin Newsom, senior market analyst at Barchart.com. “If we can believe what we see from a technical analysis point of view, something I’m growing to doubt more with each passing week, June gold’s short-term trend is down on its daily chart. Looking ahead to next week, the US Federal Open Market Committee is not expected to change the Fed fund rate, possibly leading to a short-covering bounce in the US dollar.”
“Does anything change longer-term? Not that I see,” Newsom added. “At least as of Friday morning. But who knows what will happen over the weekend.”
“Remain cautious on gold and a bit less on silver,” said Mark Leibovit, publisher of the VR Metals/Resource Letter. “Long inverse ETFs GLL and ZSL as a hedge.”
“Up,” said Rich Checkan, president and COO of Asset Strategies International. “The current pullback was overdone, and we have seen enough in the way of bad U.S. economic data this past week to give Chairman Jerome Powell enough to be concerned about at next week’s FOMC meeting. Gold inches higher.”
Fawad Razaqzada, market analyst at StoneX Bullion, said gold could very well fall back to $3,000 per ounce if optimism surrounding trade deals persists.
“There’s renewed optimism about trade deals, with China apparently also ready to start talks,” he wrote. “While those talks could take a while, investors have been piling back to equities as if deals have already been reached. The S&P 500 has rallied more than 17% from its lowest point in April. Yet, gold’s decline from its highest point to this week’s low has been a more modest 8.5% or $298 in nominal terms.”
“Obviously, other factors are at play for gold, such as the dollar,” Razaqzada added. “But from a purely haven point of view, demand should have weakened for gold more meaningfully if stock market investors are correct in pricing in trade agreements. On that basis, the near-term gold forecast is looking a little murky, and a possible drop to, and potentially below, the $3K mark could be on the cards.”
He said his gold forecast still leans constructive despite the safe haven bid weakening. “The bulls would argue that unless we begin to see a clear pattern of lower highs and lower lows, coupled with meaningful breakthroughs in trade talks—rather than more political grandstanding from Washington—the prospect of fresh highs can’t yet be ruled out,” Razaqzada wrote. “That said, the bears also have a compelling reason to exert pressure, as discussed above. And given the historically overbought momentum indicators on the long-term charts of gold, they have good reason to start defending broken support levels. So, I reckon the path of least resistance appears to be tilted lower.”
John Weyer, director of the commercial hedge division at Walsh Trading, said he believes the gold market will continue to be dominated by tariff news, whether rumor or fact.
“I think anytime we get one of these tariff headlines, to be honest,” he said. “You definitely get a sense that there's some deals being made here, and the Chinese ones may be a little more solidified, depending on how you interpret it.”
Weyer said he agreed that many countries are likely to sit tight and just wait for the market to push back against the Trump administration. “Someone may think they have the cards, but they really may not,” he said. “The other thing is, people keep saying this will be tough on China, but they also have a much higher tolerance for pain. So we have a standoff, and the big question is, who's going to bend first? And to be honest, I think they're willing to suffer quite a bit before cracking.”
As far as the near-term direction for gold prices, Weyer expects it to trade sideways, but with significant volatility.
“I think it’s rangebound, but it's a big range,” he said. “And I do think, because nothing else tells me otherwise, that we're not going to stop reacting to these headlines. Some of the people, I've got to believe, have been kicked out of gold already, and are saying, ‘I'm going to sit on the sidelines here for a bit.’”
Weyer said that while gold is a legitimate safe haven, it can also be volatile.
“People have had historical thinking of, ‘You can never go wrong gold,’ but you’ve got to be ready for some whipsaws,” he said. “I think a lot of people may have been fooled by the safe haven play, but it also has a whole lot of volatility.”
This week, 18 analysts participated in the Kitco News Gold Survey, with half of Wall Street expecting further declines for the yellow metal once again. Five experts, or 28%, expected to see gold prices rise during the week ahead, while nine analysts, representing 50%, predicted price declines for the yellow metal. The remaining four experts, or 22%, saw gold trading in a range next week.
Meanwhile, 273 votes were cast in Kitco’s online poll, with Main Street returning to a bullish bias by a narrow majority. 143 retail traders, or 52%, looked for gold prices to rise higher next week, while another 79, or 29%, expected gold to trade lower. The remaining 51 investors, representing 19% of the total, saw prices consolidating during the week ahead.
After a week focused on employment, next week is all about the Fed, with the May FOMC meeting, rate decision, and press conference scheduled for Wednesday. While markets are pricing in a hold in the Fed funds rate, all eyes and ears will be trained on Chairman Powell’s statement and his exchanges with reporters following his critical comments earlier in April.
Then the Fed governors fly off to the Reykjavik Economic Conference in Iceland, where Barr, Kugler, Waller, and Cook will participate in panel discussions on topics including AI, employment, and monetary policy research on Friday.
Traders will also be paying attention to the ISM Services PMI for May on Monday morning and weekly jobless claims data on Thursday.
“Gold held above $3200 on Thursday and traded firmer ahead of the weekend, reaching almost $3270,” said Marc Chandler, managing director at Bannockburn Global Forex. “I am not sure the pullback is over. I am constructive the dollar and look for higher US rates in the near-term. That could see one more leg lower in gold into the $3150-65 area. A move above $3315 would ease the downside concerns.”
“Up,” said Adam Button, head of currency strategy at Forexlive.com. “The market is overestimating how close the US is to meaningful trade deals. We need to see some clarity on how low the US is willing to bring down tariffs, because a 10% floor isn’t going to cut it for major trading partners.”
Alex Kuptsikevich, senior market analyst at FxPro, said the pressure on gold intensified once again at the end of the week.
“For the last several months, we have observed that consolidation in the first half of the week often follows a strong move in its second half,” he said. “The beginning of April was for the bulls, while the last couple of weeks were driven by the bears, who are testing the $3200 mark. This pullback has brought the price back to the mid-April consolidation area.”
“If the market continues to move down the same steps, the next stop will be the area of $2900,” Kuptsikevich warned. “In this case, however, the price will already be trading below the 50-day moving average, indicating a break in the uptrend. An acceleration of the sell-off could quickly take the price to consolidate to the $2600-$2700 area.”
Analysts at CPM Group are recommending investors stand aside if they’re not in positions but stay long gold if they are, and prepare to buy the dips, with potential for $3,150 to $3,000 in the next two weeks.
“The U.S. Administration has walked back from some of its threatened tariffs while also suffering some push back in the courts and in terms of public support,” they wrote, adding that recent weak data “contributed to a sense that the Trump Administration may back away from some of the economically and politically destructive initiatives it has been pushing.”
“The reduction in risks seems most likely to be short-lived,” they warned. “The sell-off may be somewhat temporary based on the likelihood that the Administration will not give up on its plans but rather will regroup and renew its efforts. Thus, the drop in prices and any further declines seem most likely to represent a buying opportunity. This thinking is predicated on the idea that the underlying economic and political issues that have been driving investors into gold and silver have not changed, although in recent days, there have been some indications that some problematic trends may soften. The reality is that there also have been some indications that worse is yet to come.”
“CPM has been discussing the idea of a peak in prices in March to May, followed by some retracement through August before new highs later in the year,” the analysts added. “There may be one more move higher in May, thus buying on any dips or even around current levels may make sense on an ultra-short term.”
“Down,” said Michael Moor, founder of Moor Analytics. “The break below 34839 (+4 per/hour) warned of decent pressure – we have seen $213.1 of pressure. In a higher time frame, we are still in an overall bull trend from August of 2018, 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 $1,361.5 FULFILLING THE MAXIMUM! This is ON HOLD.”
“On a lower time frame, the break below 32947 (+2 tics per/hour) projects this downward $78 (+)—we have attained $85.3. Yesterday we left a fairly significant medium reversal above. Today has a good likelihood of seeing range expansion. A maintained gap higher will leave a minor bullish reversal below, but this will be more effective with a break/settlement above 32915 in the process.”
And Kitco Senior Analyst Jim Wyckoff sees gold prices heading back up next week. “Steady-up on a corrective bounce from recent selling pressure.”
At the time of writing, spot gold last traded at $3,233.63 per ounce for a loss of 0.11% on the day and 2.79% on the week.
