(Kitco News) – Gold prices explored every inch of the space between $3,300 and $3,400 per ounce this week, and when the dust had settled, traders were content to leave the yellow metal exactly where they found it.
Spot gold kicked off the week trading at $3,307.44 per ounce, and little stood in its way in the early going. After a brief retest of support near $3,300, gold prices rocketed higher during the Asian and European sessions, and by the North American open, spot gold was already trading at $3,366 per ounce.
By 6:45 p.m. EDT on Monday, the gold price had topped out at $3,390 per ounce, a level that would hold as the weekly high for the next few days.
From there, spot gold laddered lower overnight, and after a sharp dip down below $3,340 half an hour after Tuesday’s North American open, gold settled into a comfortable $40 range over the next two days, though the price did see some sharp peaks and valleys.
Spot gold finally broke above $3,380 just after 5:00 a.m. Eastern on Thursday morning, ultimately topping out at the weekly high of $3,403 per ounce. But after no new buyers emerged at these lofty levels, traders were content to book profits, and by noon Eastern, gold was all the way back down to $3,345 per ounce.
From there, the yellow metal saw its slowest and steadiest climb of the week, ultimately topping out at $3,374 per ounce by 1:00 a.m. Friday morning. And after gold failed to hold support at $3,350 at the American open, traders drove the spot price quickly down to $3,324 per ounce. By the market close, gold was almost right back where it began, though longs could take solace in the fact that $3,300 was never seriously threatened.
The latest Kitco News Weekly Gold Survey showed industry experts evenly divided on gold’s prospects, while retail traders grew more bullish after gold held key support.
“Up,” said James Stanley, senior market strategist at Forex.com. “I think it’s easy to look at the way that the week has played out and then look for a deeper pullback. But I’m still biased as bullish on gold and would rather look for another support to hit for the broader trend to play through.”
“At this point, I have spot testing support at prior resistance from 3325, and the notable item for me last week was how gold set a fresh near-term high with a bit of run above 3350,” Stanley added. “So I’m not going to count bulls out yet, and I have deeper supports at both 3300 and 3280.”
“Lower,” said Adam Button, head of currency strategy at Forexlive.com. “There are signs that the White House is in dealmaking mode. Gold is largely a trade war proxy at the moment, and we should see some moderate selling as deals are announced.”
“Higher,” said Rich Checkan, president and COO of Asset Strategies International. “Momentum favors both gold and silver at present. Although we may see some profit-taking, I expect gold to build higher over the next week on a weaker U.S. dollar, stalled peace initiatives in the Middle East and Ukraine, continued tariff ramifications, and the realization that the Big Beautiful Bill going through the U.S. Senate right now will increase the debt and lead to further monetary expansion and consumer price inflation.”
“Up,” said Adrian Day, president of Adrian Day Asset Management. “Finally, there are indications that North American investors are picking up their gold purchases, not yet in any flood, but the tide is turning.”
Sean Lusk, co-director of commercial hedging at Walsh Trading, was weighing the market’s reaction to Friday morning’s employment report.
“The number wasn't excellent, but it wasn't horrible either,” Lusk said. “It just dispels some of the economic slowdown talk. The dollar’s up… bond yields were up too, that's prompting maybe a little uneasiness here.”
“Listen, S&Ps are back, we're higher on the year,” he noted. “We're higher on the year in the Nasdaq, and we're just slightly lower in the Dow. You’re basically where you were last December at the end of the year, a little better than that, with all the stuff that's happened, which is a hell of a story here, a 20% rally up from April’s lows.”
“I'm surprised we're now down further in gold,” Lusk added. “But I think geopolitically, with everything going on, maybe you're not shorting it on a Friday.”
Barring something major in the Russia-Ukraine conflict, Lusk doesn’t see gold prices moving significantly higher in the near term.
“You're just doing a lot better than anybody thought possible,” he said. “What's the appeal here? Get long at $3,400 an ounce when the stock market's going nuts?”
“Now you can make the argument, and you would be correct in saying, you've had gold largely rally with equities over the last two years,” he conceded. “A lot of that was foreign central bank buying, to shore up all the money printing. It's a big part of why gold continues to get support here. But at the end of the day, nothing goes up forever, and some of the safe haven trade’s taken out of this, meaning if you get a couple of signed agreements and some of the saber-rattling backs off here, you're going to have a real hard time not retesting the recent lows down at $3,150.”
“Historically, you’ve just never been here,” he added. “Especially for the public who's gotten in long last. So coming into a month-end and quarter-end… I'd be really careful here. This bull is going to need to be fed up at these levels, because without it, those who have been long a long time aren't going to sit around here.”
Lusk is watching some major near-term support levels because if they fail to hold, gold could give back much of this year’s gains.
“You look at that Monday candle, we went up $80 on the geopolitical stuff,” he said. “If we blow through that again to the downside, technically this market will trade back down, $3,294 to $3,287 is going to be your support. But if they blow through that, it’s all the way down to $3,150, which is your May low, and if they blow through that, they're going to the April lows, $2,970 or $2,950. Those are the targets down.”
This week, 14 analysts participated in the Kitco News Gold Survey, with Wall Street maintaining its wait-and-see attitude after this week’s rise and fall. Seven experts, or 50%, expected to see gold prices rise during the week ahead, while six other analysts, or 43%, predicted price declines for the yellow metal. The remaining analyst, representing 7% of the total, saw gold trading sideways next week.
Meanwhile, 256 votes were cast in Kitco’s online poll, with Main Street growing more bullish after gold held its ground. 169 retail traders, or 66%, looked for gold prices to rise next week, while 39, or 15%, expected the yellow metal to trade lower. The remaining 48 investors, or 19%, saw prices continuing to consolidate during the week ahead.
After an employment-heavy data week, next week’s focus is on inflation, with the most important price stability metrics on the docket.
Wednesday will see the release of the U.S. Consumer Price Index for May, which will give market participants an updated read on the Fed’s appetite for a rate adjustment. Then, on Thursday, traders will watch the Producer Price Index along with weekly jobless claims. And Friday will see the publication of the preliminary University of Michigan Consumer Sentiment survey for June, which has shown sharply higher inflation expectations for two months now.
Marc Chandler, managing director at Bannockburn Global Forex, said gold prices are likely to see some selling pressure next week.
“Gold may struggle in the coming days as the US dollar may be firm after somewhat better than expected jobs data and expectations for a firm CPI reading next week,” he said. “Gold neared $3400 but stalled and may now slip back to $3300.”
“Up,” said Darin Newsom, senior market analyst at Barchart.com. “For all the same reasons. While there is likely to be short-term setbacks, gold will remain a safe-haven market for central banks and long-term investors.”
Kevin Grady, president of Phoenix Futures and Options, said Friday’s gold price decline looked like routine profit taking to him.
“There's just a lot of news out there,” he said. “I keep looking at the volumes, and the open interest is not so great. It's not like everybody's involved. I just feel like it's a lot of speculators that are in the market right now trading, so there's going to be a little profit taking.”
“What's keeping gold up here is that people are a little leery about the downgrade on the U.S.,” he said. “You hear people talk about default, and obviously I don't think any of us ever think that's going to happen, but I think it does give some sort of support to alternative investments.”
In the near term, Grady believes the May low should hold, depending on the trade deals that come through. “If it's China, it's going to be a bigger move than if it were Vietnam,” he said. “I think we're going to have to keep an eye on that. We're going to have to keep an eye on the bond yields, I think that's important. I think the bond yields are really a big factor.”
“Again, I always look at the volumes, look at the open interest historically versus where the open interest is now,” he said. “And I don't think it's such a robust open interest number. I just think a lot of people are out of the market, so you're just getting a lot of whipsaw in it. I think the majority of investors are underneath the market and they feel like, ‘Okay, if it gets down to these levels, May lows, April lows, we'll buy, but for right now, we need more direction.’”
“I think investors need direction, and speculators are right now in control of the market.”
Grady said that direction could come from next week’s CPI report, because it’s likely to determine whether or not the Federal Reserve cuts interest rates this summer.
“If you look at where the inflation numbers are, their target rate is 2%, if you can see 2.1%, levels around there… as far as inflation, I still say the energy numbers are the key to the inflation numbers. Everything's predicated off of the energy price. And I think that's why inflation's coming off, that's why everything's been coming off, is the energy numbers. We'll have to keep an eye on it, but I think gold's going to react accordingly.
“If you see those numbers near 2% next week, I can't see the Fed not acting,” he added. “I agreed that they shouldn't have, when Trump was saying, ‘You have to cut, you have to cut, you have to cut!’ I agreed they shouldn't, I think we needed to see more data. But now the data is coming in. The data is showing, I believe, that a 25-basis point cut is warranted.”
“A lot of times I don't like getting involved in the minutia of every single month,” Grady concluded. “But the next month's numbers are very important.”
“Down,” said Michael Moor, founder of Moor Analytics. “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. This is ON HOLD. On a Medium time frame: The break above 31482 warned of strength for days—we rallied $235.8. The trade above 32214 projects this upward $100 (+)—we have rallied $162.6. The above are ON HOLD. The trade above 33520 (-2.6 tics per/hour) projects this upward $72 minimum, $225 (+) maximum—we have attained $75.7 so far.”
“On a Lower time frame, however, we held exhaustion at 34294-342 with a 34277 high and rolled over $65.4 into a likely bearish correction/trend against the move up from 32691,” Moor said. “Decent trade below 33590 (+5 tics per/hour starting at 9:20 am) will project this downward $105 (+), but it would be preferable to see a bounce off of here first.”
And Kitco Senior Analyst Jim Wyckoff believes gold prices could still benefit from safe-haven demand next week. “Steady-higher as risk appetite far from robust and charts remain bullish.”
At the time of writing, spot gold last traded at $3,308.89 per ounce for a slight gain of 0.16% on the week but a loss of 1.31% on the day.
