(Kitco News) - Despite a strong start to the week, both gold and silver are ending with a whimper, as the precious metals have been unable to maintain their breakout gains.
Gold began the week with a solid rally above $3,400 before shifting sentiment prompted many investors to take profits, sending prices down toward support near $3,300 an ounce. Meanwhile, silver managed to hit a new 14-year high at $39.527 on Tuesday but is now testing support at $38 an ounce.
Spot gold last traded at $3,328.40 an ounce, down more than 1% on the day and 0.62% on the week. Spot silver last traded at $38.05 an ounce, down 2% on the day and roughly flat for the week.
Phillip Streible, Chief Market Strategist at Blue Line Futures, said gold is struggling as investors shift their focus to equity markets, which are currently trading at record valuations.
He added that gold also faced pressure this week after the U.S. and Japan announced a potential trade deal that would impose a 15% tariff on Japanese imports into the U.S. This deal is also being considered as a blueprint for negotiations with the European Union, where President Donald Trump said there's a 50/50 chance of reaching an agreement.
“Trade war fears are starting to ease, so we are seeing a shift in safe-haven demand for gold,” Streible said. “Instead of looking for protection, investors are now distracted by strong earnings reports and potential trade deals.”
Streible noted that gold prices could continue to decline next week, as the Federal Reserve is expected to keep interest rates unchanged following its monetary policy meeting. He pointed out that the central bank’s neutral policy stance could support near-term strength in the U.S. dollar.
However, he added that gold might find some support by the end of next week if U.S. labor market data comes in weaker than expected.
“Any weakness in the labor market that supports a rate cut from the Federal Reserve will be positive for gold,” he said.
Barbara Lambrecht, Commodity Analyst at Commerzbank, echoed this sentiment in a note Friday, stating that she is also monitoring investor-driven safe-haven demand.
“Fundamentally, the trends in investment demand suggest that the gold price has peaked for the time being, especially as no interest rate cut is expected during Wednesday’s FOMC meeting,” she said.
Alex Kuptsikevich, Chief Market Analyst at FxPro, noted that this marks the fourth failed breakout at $3,400, and technical risks are beginning to mount. He added that gold prices are now trading near their 50-day moving average.
“A sharp drop below this line in the new week would be a key signal of a shift from consolidation to correction,” he said. “If gold moves into correction mode, there is potential for a rapid decline to $3,150 or even $3,050. The upper target lies near the highs before the ‘liberation day’ and the 61.8% retracement of the rally since the end of last year. The lower target is already approaching a 50% retracement and is not far from the 200-day moving average.”
Although gold may have more room to fall, some analysts view any correction as a buying opportunity.
Aakash Doshi, Global Head of Gold Strategy at State Street Investment Management, said that gold continues to enjoy fundamental support as an important monetary asset. He noted that although risk-on sentiment has pushed equity markets to all-time highs, gold prices remain less than 5% below their April all-time highs.
“There are structural reasons why dips like these continue to offer buying opportunities,” he said.
Looking beyond next week’s Federal Reserve meeting, Doshi said he remains optimistic that gold will regain its footing by August. He expects the Fed to shift away from its neutral stance by the time of its annual Jackson Hole symposium in Wyoming.
While gold continues to struggle, analysts are not giving up on silver. Christian Magoon, CEO of Amplify ETFs — which manages the Junior Silver Miners ETF (SILJ) — said that successful U.S. trade deals could provide greater certainty in the manufacturing sector, potentially boosting industrial demand.
The Federal Reserve isn't the only central bank in focus next week. The Bank of Canada is also set to hold its monetary policy meeting on Wednesday and is widely expected to leave interest rates unchanged. Bank of Japan will also hold its monetary policy meeting late Wednesday.
Economic data to watch next week:
Tuesday: JOLTS job openings, US Consumer Confidence
Wednesday: ADP employment data, US advance GDP, Bank of Canada monetary policy decision, pending home sales, Federal Reserve monetary policy decision, Bank of Japan monetary policy decision
Thursday: US PCE, weekly jobless claims
Friday: US nonfarm payrolls, ISM Manufacturing PMI
