(Kitco News) – Gold prices spent the week steadily building momentum, before ultimately exploding higher to hit levels not seen in four months as the steady drip of downbeat data confirmed the market’s optimism for a September rate cut.
Spot gold kicked off the week trading at $3,367.79 per ounce, and the yellow metal did little to excite traders at the outset, trading in a narrow $10 window through Monday's session.
After a brief dip down to $3,353 per ounce at 7:30 p.m. Monday evening, gold saw its first sharp move higher, rising to $3,383 per ounce by 8:45 p.m. EDT. This also established a new floor for the gold price near $3,370, and the yellow metal managed to trade as high as $3,394 per ounce late Tuesday afternoon.
After pulling back to test support near $3,375 during overnight trading, Wednesday saw spot gold once again set a fresh weekly high just a shade below $3,400 at 7:30 p.m. EDT.
Once again, the yellow metal pulled back, only this time support was found at $3,385 per ounce, which set up Thursday’s North American session for significant gains, with spot gold ultimately topping out above $3,422 per ounce 15 minutes before the equity close.
As was the pattern throughout the week, the Asian and European sessions were periods of consolidation and retests of support, though gold slid no lower than $3,405.
Finally, Friday morning brought the fireworks, with spot gold rocketing from $3,408.87 per ounce at 8:00 a.m. EDT all the way up to $3,450 by 12:45 p.m. and setting the weekly high of $3,453.97 15 minutes before markets closed for the long weekend.
The latest Kitco News Weekly Gold Survey showed Wall Street bulls firmly on board with the renewed rally narrative, while a strong majority of Main Street investors also predicted gold will make further gains next week.
“Up,” said Darin Newsom, senior market analyst at Barchart.com. “Gold’s Cash Index is in position to quietly post a new all-time high monthly close. That isn’t bearish.”
“I expect more back-and-forth within the range we’ve seen since April,” said Adrian Day, president of Adrian Day Asset Management. “Since we are at the top of that range today, the next week could see gold fall back. This will be only a minor and short-lived decline, and I do not expect any meaningful correction in gold before a breakout.”
“Buyers are returning and a catalyst – the reality of the Fed rate cut mid-month, even though it’s anticipated, or perhaps a stock market decline – could prompt that breakthrough,” Day said. “So, let’s say (essentially) UNCHANGED for the week ahead.”
“Higher, said Rich Checkan, president and COO of Asset Strategies International. “Market participants are as certain as they can be that the Federal Open Market Committee (FOMC) will cut rates at their September meeting (87% expect a rate cut), so I expect the gold price to continue higher from here.”
“I believe prices will move higher despite the fact that we moved above psychological resistance at $3,400 and should be ripe for a profit-taking pullback,” he added. “In addition, President Trump’s war with Lisa Cook will continue to send market participants out of U.S. dollars and into gold as a safe haven. And all this is going on as investors get back from vacations and back to business.”
Mark Leibovit, publisher of the VR Metals/Resource Letter, believes gold equities have the most upside at this point.
“The shares are the place to be,” he said.
Jesse Colombo, independent precious metals analyst and founder of the BubbleBubble Report, was looking to the charts for the rationale behind gold’s price breakout.
“A lot of it is technical,” he said. “Gold is in a volatility squeeze where, since it peaked in April, it's been going flat, and it's been forming a triangle pattern. It's building up energy, almost like a spring that's being compressed. And essentially what's happening right now is that pressure is being released.”
Colombo agreed that there doesn't seem to be any particular catalyst for gold’s big move. “I believe the main catalyst is just summer ending, to be honest,” he said. “In the summer, you have these low-volume trading conditions, and now traders are starting to come back. Especially next week after Labor Day, that's when the volume will really pick up.”
“That’s really what it is, it's just continuing where it left off in April, just continuing its rally,” he added. “That's how I see it.”
Colombo said the worse-but-not-terrible data is also serving to confirm the market’s broad consensus.
“I think there's a sense of relief, too,” he said. “I think after today's PCE report, there's a sense of relief that inflation didn't come in too hot, nothing that would derail the chances of a September rate cut. It looks like everything is lining up for that rate cut.”
“It's almost ‘no news is good news’,” Colombo explained. “Gold and metals were cautious going into some of these reports, and they've been fairly benign; they came in-line with expectations, and now gold can essentially continue on in the direction that it was heading before the summer. I wrote back in April that gold was very overbought technically after its fall and early spring rallies, and I suspected that it was going to need a period of consolidation, and we got that.”
“Now, after five months of consolidation, gold is no longer overbought,” he said. “It's still in a very good trend, but it's no longer overbought, so it sets it up technically to continue its bull market.”
Colombo said he's looking for Comex gold futures to close above $3,500 per ounce on Friday afternoon. “That was the price back in April, that's the resistance level,” he said. “I want to see a close above that, and I believe that when that happens, there's a very good chance we're going to hit 4,000 or even more within the next few months, assuming that breakout is confirmed.”
Colombo believes that if gold can hold above these levels, the next phase of the multi-year gold rally will really kick in. “I believe ETF buying will really pick up this fall,” he said. “You'll have a lot more Western and American ETF buying. When the rally started out in 2024, it was mostly driven by Asian investors and central banks, whereas Western investors have been laggards. But now they're starting to get on board, and I believe that they're going to be a big driver of this bull market.”
“I think we're going to see that heading into the end of the year, a lot more ETF accumulation of gold and silver.”
He said the next major target is the key psychological level of $4,000. “That's the next major resistance there is, because we’re going to be in blue-sky territory, assuming it closes above $3,500, so there are no historic resistance levels. $4,000 is the next most obvious one, and we could reach there probably by October, November.”
This week, 14 analysts participated in the Kitco News Gold Survey, with Wall Street bereft of bears after this week’s price appreciation. 12 experts, or 86%, expect to see gold prices rise during the week ahead, while none predicted a price decline. The remaining two analysts, or 14%, saw the yellow metal trading sideways next week.
Meanwhile, 179 votes were cast in Kitco’s online poll, with Main Street investors also growing more bullish after gold’s strong weekly performance. 121 retail traders, or 68%, looked for gold prices to rise next week, while another 30, or 17%, expected the yellow metal to lose ground. The remaining 28 investors, representing 16% of the total, saw prices continuing to consolidate during the week ahead.
Next week will be a shortened one, with North American markets closed for Labor Day on Monday, and the focus will be squarely on employment.
On Tuesday, markets will receive the ISM Manufacturing PMI for August, followed by JOLTS job openings on Wednesday.
Thursday will see the release of ADP payrolls for August, along with weekly jobless claims and the ISM Services PMI.
The week concludes on Friday with the U.S. Nonfarm Payrolls report for August, with traders and investors looking for weakening employment as further confirmation of the Fed’s expected mid-month rate cut.
“I like gold next week,” said Marc Chandler, managing director at Bannockburn Global Forex. “The attacks on the Fed’s independence, plus the prospects for a weak jobs report, may help lift the yellow metal. It posted an outside up day last Friday and again on Tuesday before pushing above $3400 on Thursday. It consolidated ahead of the weekend.”
“The next target is the July high near $3439 and then the June high near $3451,” he added.
John Weyer, director of the commercial hedge division at Walsh Trading, told Kitco News that it’s unclear what exactly was driving gold and silver so sharply higher on Friday.
“It's hard to make heads or tails of what's going on with the metals here as of late,” he said. “Usually, if we’ve got a flight to quality, you're going to see big negatives in equities. We’re down about 150, 160 in the Dow as we speak, but that's not a big move these days.”
Silver’s run-up was also a little puzzling from a safe haven standpoint. “A lot of times we talk about the separation between gold and silver, silver more on industrial demand as opposed to flight to quality,” he noted. “But we're seeing them both move together in big moves here, and I'm not correlating to any fundamental right now.”
“I don't know if this is anticipation in some of the data we're getting little by little, that maybe the jobs picture isn't as rosy as it seems when we dig deeper.”
“It's tough,” he added. “The correlation seems to be off on the strength of the metals versus the weakness in some of the other markets.”
Weyer said this may be a case of the tail wagging the dog a little bit.
“I think it's getting ahead of what we may see,” he said. “It's almost as if the metals markets have a gut feeling. Not bad data, but not as good as expected, and as we start digging deep in some of these areas, you're seeing some inflationary stuff, particularly high in certain sectors. You wonder if this is getting ahead of that in anticipation of further not-so-rosy data down the line.”
He said the downbeat geopolitical situation may also be contributing to gold’s gains.
“I think in the last few days or so, we've moved far away from the idea that there's an agreement going to happen with the Russia-Ukraine situation, to the point of not only no agreement, but maybe continuing to progress the wrong way,” he said. “Maybe there's some of that going on.”
“I have the currencies in front of me, and the dollar is steady,” Weyer added. “Again, you look at gold and you’d say [maybe] it’s a flat-out safe haven play, and often you'll see the dollar move with it directionally, or the dollar's getting slammed. It's doing neither. It's just steady, up small, down small. So again, it tells you metals are doing something on their own here.”
Weyer said he thinks much of Friday’s price action in precious metals is being driven by technical factors and exacerbated by low liquidity.
“If we get above $3,534 [in Comex futures], you're going to get some self-fulfilling prophecy there,” he said. “It's going to attract buyers. We’ve been waiting to see it get to this level; now we're there, and we're going to take it further. That's going to trigger the technicals, much of which is program trading. That's probably got a big hand in this as well, particularly in gold.”
Alex Kuptsikevich, senior market analyst at FxPro, expects gold prices will remain rangebound next week.
“Gold is trading above $3,400 again at the end of the week,” he said. “The upper limit of the trading range, within which the price has been fluctuating since April, is close to $3,430. Gold bulls are drawing strength from the dynamics of the US yield curve. Yields on 2- and 10-year Treasuries are falling. The market is painting a stagflationary backdrop, which is the best food for gold bugs.”
Kuptsikevich said gold's ability to break through the resistance zone above $3,430 will be a good indication of whether or not the market is ready to return to the rally after months of tug-of-war. “But it is worth being cautious with early bullish bets at these levels,” he said. “Formally, there is now a greater chance of another pullback to the lower end of the range at $3,300-3,315. At the same time, investors should remember that whichever way the breakout occurs, the subsequent movement could be very strong, given how long the gold market has been gathering strength while remaining in a sideways trend.”
And Kitco senior analyst Jim Wyckoff predicts more gains for gold prices next week. “Steady-higher as charts turn more bullish amid Fed leaning easier on U.S. monetary policy.”
At the time of writing, spot gold last traded at $3,449.19 per ounce for a marginal gain of 0.94% on the day and 3.26% on the week.
