Wall Street willing to trust gold again after a week of resilient price action, Main Street flips positive with payrolls on deck
(Kitco News) – Gold prices recovered from a dramatic decline at the outset to reinforce multiple key levels of support in the following days, and with prices flirting once again with $4,500 by the end of the week, market participants were more optimistic that the precious metal may have turned the corner.
Spot gold kicked off the week trading at $4,507.36, and it got the weakness out of the way early, dropping from a high of $4,524 15 minutes after the Sunday evening open all the way to the weekly low near $4,130 per ounce by 3:00 a.m. Eastern.
The bounce was nearly as hard as the fall, however, as gold was right back up to $4,460 per ounce by 7:00 a.m. Monday morning, and traded as high as $4,487 by 10:15 a.m. After a dip down to retest support near $4,300, gold settled into a relatively narrow range between $4,350 and $4,440 per ounce.
This held until just after the North American equity close on Tuesday, whereupon gold saw its sharpest rally of the week, rising from $4,400 all the way to the weekly high above $4,600 by 9:45 p.m. This in turn established a higher range – at least in the near term – with gold holding above $4,500 until an early morning slide saw gold fall back below key support, and to a midweek low near $4,360 just before Thursday’s equity close.
From here, the momentum shifted once again, with spot gold rising above $4,470 by 2:00 a.m. Friday morning, and after a dip back down to test support near $4,400, Friday morning saw gold's second strong ascent, with the spot price hitting a daily high of $4,555.63 just after 11:15 a.m. before pulling back and cruising into the close only $6 shy of $4,500 per ounce.
The latest Kitco News Weekly Gold Survey showed half of Wall Street back on the bullish bandwagon, while Main Street investors returned to their mild bullish bias after a solid weekly performance.
“Up,” said James Stanley, senior market strategist at Forex.com. “The late week response has been encouraging for bulls and with a few hours until the close, there’s still a possibility of a hammer formation on the weekly chart. Given the macro backdrop, I still see no reason to abandon a bullish bias even if the pullback has taken on a wide range. I’m still looking at this as opportunistic, as part of the bigger picture.”
“Up,” said Rich Checkan, president and COO of Asset Strategies International. “Between Wednesday and today, we are seeing signs that the overdone correction is bottoming out. Investors are looking for the bounce before resuming their buying. I expect investors to see this as a sign to do just that.”
“Remain a bull,” said Mark Leibovit, publisher of the VR Metals/Resource Letter.
“Up,” said Adrian Day, president of Adrian Day Asset Management. “I expect more back and forth but with an upward bias. I hesitate to call a bottom, but Thursday’s close-of-day trading just above $4,350 may be it. It is not quite to my downside target, but close.”
“If the Iran conflict dies down, then monetary factors will come to the fore,” Day added, “and although central banks around the world are pledging to fight inflation, as economic data weakens, that resolve will be tested.”
Jesse Colombo, independent precious metals analyst and founder of the BubbleBubble Report, was looking at gold’s move in relation to the U.S. dollar and oil prices on Friday, but also at its technical and timing factors.
Colombo said gold’s sharp move higher on Friday was probably due to several things, including a technical break above near-term resistance in the $4,470 area, regular trader positioning ahead of the weekend, and the more recent risk of Trump announcements about the Iran war after the Friday market close.
“I think that's definitely some of it,” he said. “Some of it is definitely a technical bounce that was due, and was really expected. But I've been watching a support zone from $4,300 to $4,600 I wrote about last week, and I showed that zone played an important role going all the way back to October. There were a bunch of highs and lows in that zone, and so far gold has held above that zone or at least within the zone, so that's what I'm watching. I would like to see that hold, ideally – and so far it has – and that's why this bounce today is not that surprising, because it's bouncing essentially off of that zone.”
“If it can stay above that zone, I think it's great, and I would like to see it rally from there, or at least bounce,” he said. “It still is in an uptrend according to the 200-day moving average, which is still trending upward.”
“I think this sell-off is overdone. It was just a knee-jerk reaction to the Iran war.”
Columbo added that it's not surprising to see gold and silver experience a more violent pullback at some point. “It just happens in these secular bull markets. Nothing goes up perfectly straight forever.”
Columbo said that the precious metals are still being buffeted by Iran headlines and Trump Truth Social posts, which makes it very difficult to gauge direction.
“There was initially expectations of a ceasefire and then there were doubts about it,” he said. “But I believe there's a higher chance that there's going to be some sort of an amelioration or a winding down of this Iran expedition. And assuming that does happen, oil would fall, the dollar would fall, and that would be bullish for precious metals.”
Columbo said he’s surprised to see how negative the sentiment surrounding precious metals has become.
“Many people believe this is it, what we saw in late January, that was the peak and it's pretty much all downhill from here,” he said. “I vehemently disagree with that. I believe we've got at least another seven, eight years left of this secular bull market. We're only two years in and people are already throwing in the towel. That's what you see in the early stages of a secular bull market.”
“The bull market's climbing a wall of worry. That's what this is.”
This week, 16 analysts participated in the Kitco News Gold Survey, with Wall Street returning to more balanced sentiment after gold worked higher off key support levels. Eight experts, or 50%, expected to see gold prices move higher during the week ahead, while three others, representing 19%, predicted a price decline. The remaining five analysts – 31% of the total – saw the risks evenly balanced in the near term.
Meanwhile, 263 votes were cast in Kitco’s online poll, with Main Street investor sentiment closely matching that of their professional counterparts for the first week in a while. 139 retail traders, or 53%, looked for gold prices to rise next week, while another 60, or 23%, predicted the yellow metal would lose ground. The remaining 64 investors, representing 24% of the total, expected gold prices to consolidate during the week ahead.
Next week will see one fewer trading session due to the Good Friday holiday, but government departments will still be running and the March employment report will be released on schedule, constituting the week’s major data event.
Other highlights include comments from Fed chair Powell from Harvard on Monday, JOLTS job openings and Consumer Confidence on Tuesday, the Wednesday release of ADP employment, Retail Sales and ISM Manufacturing PMI, and weekly jobless claims on Thursday morning.
“Gold (spot) held the 200-day moving average near $4092 on Monday, its lowest level since last November,” said Marc Chandler, managing director at Bannockburn Global Forex. “The attempt to rally was stymied in the middle of the week a little above $4602. A move above there would lift the technical tone and allow gains to around $4760. Still, an escalation of the conflict in Iran can push back to the lows. A small shelf may be in the $4350-$4375 area.”
“There is some speculation that if Middle East oil exporters need revenue, selling US Treasuries and gold may be taking place,” Chandler added.
John Weyer, director of the commercial hedge division at Walsh Trading, told Kitco News that Iran war uncertainty is continuing to make it very difficult to get a read on the metals, and the markets more generally.
“This has been a wild ride with everything going on with the Iran situation, and sometimes the things you think are going to happen clearly aren't,” he said. “There's definitely some technicals going on here, those still apply, but I thought when we had flareups of activity over Iran, that we'd, be above $5,000 by now, and hanging around there. But we, we've had some pullbacks off those earlier moves.”
“There's been a couple of days where they paid more attention to domestic markets than some of the stuff that’s going on globally,” he added. “But technicals are still at play here for some of this move up, and then everyone jumps on board.”
Weyer agreed that with the recent after-hours announcements from the President, traders are more likely to position themselves very defensively ahead of the weekend than they were a month ago.
“I would definitely hope so,” he said. “If I'm putting trades on, that's what I'm doing. You don't want to take of these weekends because in situations like this, you want to be caught short. Sometimes what we hear over the weekend changes it, and we open up, as we did Sunday night with crude, things change for a bit, they're dramatic and they're short lived. So I think people probably should be and probably are being a little more protective as far as risk on.”
Looking at the recent price action, Weyer said he believes it’s more likely that gold is attracting renewed interest from the bigger players who got out ahead of the late January top than from the retail investors who got shaken out late – and some of the new additions are going to stick around.
“The thing you’ve got to remember is in the last year and a half, they're picking up all kinds of new cars on the train,” he said. “People who have never been in it, or are getting into it now. I still think there's not a rush, but a mission to get to $5,000. A mission, meaning if you're buying at $4,000 or $4,300, most people are not buying it for it to go to $4,400. I think there's still the view that we go to $5,000.”
Weyer warned that next week will also be a short one due to the Easter holiday, which could create additional volatility in either direction. “Who knows what lighter volume will bring?”
Alex Kuptsikevich, senior market analyst at FxPro, told Kitco News that he sees gold prices declining once again next week.
“Gold began the week with a massive sell-off, only to end it on a strong note,” he said. “Nevertheless, falling equity markets and a rising dollar are creating a very toxic environment for gold. In such conditions, its upward momentum is often short-lived and can be explained by its status as a safe haven. At the same time, deteriorating market sentiment eventually triggers margin calls, which in turn affect gold prices. A striking example of such a move is the surge in prices in January–February 2020 following news of the coronavirus, which then fell in tandem with equities.”
“Our outlook on gold will only turn bullish upon clear signals from the major central banks regarding their readiness to ease monetary policy,” Kuptsikevich said.
Michael Moor, founder of Moor Analytics, expects gold prices to post gains next week.
“In a Higher time frame: I cautioned on 8/16/18 the break above $1,183.0 warned of renewed strength,” he wrote. “We have seen $4,443.1. This is ON HOLD. In a Medium time frame: The trade below 52554 (+15 tics per/hour) projects this down $220 minimum, $740 (+) maximum—we attained $1,526.8. This is ON HOLD. On a lower timeframe basis: The trade below 52554 (+15 tics per/hour) projects this down $220 minimum, $740 (+) maximum—we attained $1,155.4. This is ON HOLD.”
“This is currently bullish,” Moor said. “A maintained gap higher Monday will leave a medium bullish reversal below.”
And Kitco senior analyst Jim Wyckoff noted that gold and silver prices looked firmer on Friday amid upside price corrections following Thursday’s losses.
“It’s been a choppy trading week for the two metals, as the bulls and bears are weighing the bullish aspect of safe-haven demand amid the uncertainties of war against the bearish aspect of problematic inflation choking consumer and commercial demand for the metals,” he said.
“Technically, April gold futures bulls’ next upside price objective is to produce a close above solid resistance at $4,750.00,” Wyckoff said. “Bears' next near-term downside price objective is pushing futures prices below solid technical support at this week’s low of $4,100.00. First resistance is seen at the overnight high of $4,469.30 and then at $4,500.00. First support is seen at the overnight low of $4,369.10 and then at $4,300.00.”
At the time of writing, spot gold last traded at $4,493.68 per ounce for a gain of 0.48% on the week and 2.64% on the day.
