(Kitco News) – After gold prices saw one of their worst days in years – and the rally failed to set a 10-week record streak of gains – traders, experts, and regular investors were left wondering what comes next for the yellow metal.
Spot gold kicked off the week trading at $4,259.43 per ounce, and things were looking good for the yellow metal in the early going. After a quick dip down to test support near $4,220, gold shot up to $4,320 by 8:30 a.m. EDT, and hit $4,350 by 11:30. 15 minutes before the North American equity close, spot gold was trading as high as $4,380 per ounce.
But this proved to be the weekly high, and also the inflection point for the precious metal’s price action. After three more attempts to hold $4,370 failed, gold prices began to drift lower, hitting $4,340 just before 11:00 p.m. and dipping below $4,325 just before 2:00 a.m.
It was the European equity open that opened the floodgates, as spot gold fell from $4,343 per ounce at 2:45 a.m. Eastern all the way to $4,245 per ounce by 4:00 a.m. And when that level was breached just before 8:00 a.m. EDT, gold fell dramatically all the way down to $4,100 an hour after the North American open.
A second to bounce at this level provided some near-term optimism for precious metals traders, but Asia had yet to exit their positions, and the Asian open drove spot gold right down to $4,036 per ounce. After an attempt to reclaim $4,160 couldn't hold, spot gold slid all the way to $4,020 by 7:15 a.m., and established the weekly low just above $4,000 per ounce at 10:45 a.m. EDT Wednesday morning.
At this point, most speculators and shorts had been shaken out of the metals market, but bulls were also less than enthusiastic after the two-day beatdown. Spot gold fell no further, but nor could it muster much momentum, and the rest of the week saw the yellow metal trade in a $100 range between $4,050 and $4,150 per ounce.
The latest Kitco News Weekly Gold Survey showed the overwhelming majority of Wall Street switching to a bearish or neutral bias, while Main Street investors still clung to a slim bullish majority.
“Flat,” said Mark Leibovit, publisher of the VR Metals/Resource Letter. “No positions. Watching.”
“Up,” said Rich Checkan, president and COO of Asset Strategies International. “The correction was a long time in coming, but it was a bit overdone as a result of the fear it generated in weak-handed investors in gold and silver. The lower-than-expected CPI, coupled with next week’s anticipated rate cut, should be enough to flip gold back into positive territory.”
Neil Welsh, Head of Metals at Britannia Global Markets, is neutral on gold for next week. “Gold’s recent volatility looks more like a constructive correction than a reversal,” he said. “It feels less like a peak and more like the market taking a breather to consolidate before pushing higher again.”
“Still more softness likely before a new base, so down,” said Adrian Day, president of Adrian Day Asset Management. “I am not expecting a long or deep correction, and we may see the low this week.”
Day added that he has no concerns about the yellow metal further out. “All the drivers of gold over the last three years remain firmly intact.”
Colin Cieszynski, chief market strategist at SIA Wealth Management, told Kitco News that he’s neutral on gold for the coming week – not because he thinks there will be no big moves, but because it’s impossible to know which way the market will go.
Cieszynski said that despite all the anticipation, Friday morning’s inflation numbers weren’t a major catalyst for the price action.
“I thought that the CPI report was a big nothingburger,” he said. “It was 3%, they were expecting 3.1%, and it's been delayed; who knows, with the government shutdown, if there's any distortions or not? I didn't have any major expectations for it anyway, and there was nothing that really shook me in it either.”
Cieszynski said the gold market’s bounce seemed to be a technical one, and wasn’t really related to CPI or the consumer sentiment report released later.
“There's been no big move in the U.S. dollar off of this, even cryptos are pretty quiet today,” he said. “The selloff in gold […] it just seems like it ran its course and then it bounced back.”
Cieszynski said we're now likely in a consolidation phase, and the price could bounce around between $4,000 and $4,300 per ounce for some time.
“I think you could go that way for a while, because we've had such a big run up in gold,” he said. “People are waiting for the next big catalyst. There's little things that might move it a little bit day to day, but I think we've had a lot of news built into the price of gold now. The question is, where do we go from here?”
“That $4,000 to $4,400 was so fast,” he added. “But the good news also was that $4,000 held. I still think the longer-term trend in gold is intact. Gold has been overbought for a while, and now it's probably due for a pause just to digest this move. Nothing out of the ordinary, just normal technicals and trading.”
“It was not lost on me that gold had its sell-off the day after Diwali,” Cieszynski added. “So you do get a bit of ‘buy on rumor, sell on news’ kind of thing. And we've had a lot of ‘buy on rumor.’”
This week, 17 analysts participated in the Kitco News Gold Survey, with less than one-fifth of Wall Street experts maintaining a bullish bias. Only three experts, or 18%, expect to see gold prices rise during the week ahead, while six others, or 35%, predicted a price decline. The remaining eight analysts, representing 47% of the total, expected the yellow metal to trade sideways next week.
Meanwhile, 274 votes were cast in Kitco’s online poll, with Main Street investors’ bullish sentiment waning in the wake of this week’s selloff. 144 retail traders, or 53%, looked for gold prices to rise higher next week, while another 62, or 23%, predicted the yellow metal would lose ground. The remaining 68 investors, representing 25% of the total, expected prices to consolidate during the week ahead.
With the U.S. government shutdown still ongoing, there will be few economic data releases next week. Instead, central banks will once again take center stage, with the Fed rate decision the major focus.
On Tuesday, markets will receive U.S. Consumer Confidence for October. Then
The action will be concentrated on Wednesday, with the Bank of Canada’s monetary policy decision and U.S. Pending Home Sales in the morning, ahead of the Federal Reserve monetary policy decision at 2 pm. Later in the evening, the Bank of Japan will also update its monetary policy.
The week’s events end with the ECB monetary policy decision on Thursday morning.
“Gold snapped a nine-week advance last week, with prejudice,” said Marc Chandler, managing director at Bannockburn Global Forex. “It seemed more a function of market positioning than a macro development. In spot, it bottomed near $4000 on Wed. I look for a move above $4200 and ideally $4240 to signal a low is in place.”
Sean Lusk, co-director of commercial hedging at Walsh Trading, told Kitco News that gold was overdue for a correction, and it’s getting harder to predict the price direction going forward.
“The stock market has performed extraordinarily well. I think the economy's doing much better than anybody thought possible, the equities clearly show that. Even the dollar is not breaking. In metals, we're well off the lows, still elevated, but the question is, does this start to decouple from the stock market a little bit here? And so far, really, it hasn't. We've backed off the highs from a ridiculously overbought situation, but the market has held in here.”
“Heading into the weekend, with enhanced sanctions on Russia and the energy market getting a boost, I think maybe there's enough safe haven worry, at least for today, that if you back up in metals a little bit, it's just purely end-of-the-week profit-taking.”
Lusk said the metals market may be experiencing some exhaustion after having passed through so many price thresholds in such a short period of time.
“Everyone's looking for a pullback to get back in,” he said. “I just feel that you're going to get, with the Fed, potential trade deals, maybe they can get the government open… maybe some certainties enter into the market.”
He also cautioned that the market is entering one of the most bearish seasonal stretches for gold, from the end of October through the first two or three weeks of December. “We've had a hell of a run,” he said. “It's a commodity after all. You could still influence the ETFs, but it doesn't mean futures prices have to stay up here.”
Lusk said the current precious metals market shows some of the characteristics of a bubble because of the enormity of the rally in a short amount of time.
“You've rallied up almost $1,100 an ounce from the August lows, and now we're backing off from the highs,” he noted. “It's tough to gauge where this is going, but I would think if some more certainties crept into the market one by one, maybe that gives a reason or a prod to unwind some positions here and take profits. That's what good traders do: Take the money, reset, re-evaluate everything as we get to ‘26, and then decide if they want to buy back in. I think that's probably what's going to happen here.”
Lusk said he could see the market breaking in either direction from here.
“This thing could go back down to $3,690, the 40% target, and we're still in a major uptrend; I wouldn't be surprised if that happened,” he said. “But I also wouldn't be surprised if we made a run for 70% up at $4,589 or thereabouts in the December contract. That would be one target for year-end. Or [the] February [contract] really, because the Dec is going to be off, Feb's going to be most traded probably around Thanksgiving.”
Alex Kuptsikevich, senior market analyst at FxPro, expects gold prices to slide lower next week – and maybe for many weeks to come.
“On Tuesday, gold experienced its most significant sell-off in 12 years,” he noted. “In dollar terms, Monday's intraday drop of $230 per ounce was the worst in history. Gold has never risen for more than nine consecutive weeks in history. This time was no exception. However, the price remained above $4,000, fuelling optimism among those who saw the collapse at the start of the week as an opportunity to join the further rally.”
“Bespoke Investment Group notes that in the 21st century, there have been only six cases when the precious metal fell by 3% or more in a single day,” he added. “And in the following month, it lost an average of 18%.”
“We believe that the situation is more similar to what we saw in August 2020, when an outstanding rally and new historical highs were followed by a 30-week decline, and the latest highs became the upper limit of the range for the next three years,” Kuptsikevich said. “A more pessimistic scenario takes us back to the peak in 2011, after which the bear market lasted for four years.”
Michael Moor, founder of Moor Analytics, believes gold’s price action will likely reverse course next week.
“UP, unless we break below the formation mentioned in last line under Lower Timeframe,” he said. “In a Higher time frame: I cautioned on 8/16/18 the break above $1,179.7-$1,183. warned of renewed strength. We have seen $3,214.3. On a Medium time frame: The break above 31482 warned of strength for days—we rallied $1,249.8. The trade above 32214 projects this upward $100 (+)—we rallied $1,176.6. The trade above 32236 warned of renewed strength—we rallied $1,174.4. The trade above 32392 projected this up 115 (+)—we attained $1,158.8. These are ON HOLD.”
“On a Lower time frame: The trade above 33411 has brought in $1,056.9 of strength,” Moor said. “The trade above 33850 has brought in $1,013.0 of strength. The trade above 34186 has brought in $979.4 of strength. The break back above 35640 has brought in $834.0 of strength. The trade above 36658 has brought in $732.2 of strength. The trade above 37143 has brought in $683.7 of strength. The break above 37725 has brought in $625.5 of strength. The trade back above 38828 brought in $515.2 of strength. These are ON HOLD. I warned the trade back below 43896-920 would likely bring in pressure—we have come off $368.4. The trade below 41960 warned of pressure (for $200(+)?)—we have attained $174.8. The trade below 41234 (+8 per/hour) has brought in $102.2 of pressure. These are ON HOLD.”
“The maintained gap higher put bearishness on hold temporarily, but decent trade below 41010 will take them off hold,” he added. “Decent trade below 40596 (+6.4 per/hour starting at 6:00 am) will project this down $95 minimum, $220 (+) maximum. A maintained gap lower will leave a minor bearish reversal. 'Decent' today is $42.0.”
And Kitco senior analyst Jim Wyckoff expects gold prices to continue their wild oscillations with a downward bias next week.
“Gold and silver prices near midday Friday have clawed back most of their overnight losses following a tame U.S. CPI report that puts the Federal Reserve firmly on track to lower U.S. interest rates by a quarter-point next week,” he said. “This week, the daily price volatility in gold and silver futures markets became so extreme that both bulls and bears could have been forced out of the markets in the same trading session, due to major whipsaw price action. Look for continued higher volatility next week in both precious metals markets, which would favor the bears.”
“What the high volatility has likely done is drive many speculators out of the gold and silver futures markets because they are scared to trade such volatility,” Wyckoff added. “Less participation from the speculative segment of futures markets is generally bearish, as it can be argued that the majority of speculative traders would rather play the long side than the short side.”
“Fundamentally, the gold and silver bulls can argue there are still bullish elements at play,” he said. “The U.S. government shutdown has entered its fourth week, with no signs of ending, which means there continues to be a dearth of important U.S. economic data. That means keener uncertainty in the marketplace, and that’s bullish for the safe-haven metals.”
At the time of writing, spot gold last traded at $4,102.45 per ounce for a loss of 5.40% on the week and 0.54% on the day.
