(Kitco News) – Gold prices saw another choppy week, as renewed Middle East uncertainty and bargain-hunting failed to offset pressure from elevated Treasury yields, a resilient U.S. dollar, and fresh evidence that the Federal Reserve remains concerned about inflation.
Spot gold kicked off the week trading at $4,175.71 per ounce on Sunday evening, and the yellow metal initially pushed higher as traders continued to monitor the U.S.-Iran conflict and the risk of disruptions in the Strait of Hormuz. The move carried into Monday’s session, when gold set its weekly high at $4,202.67 per ounce, but the rally quickly faded as oil-linked inflation concerns reinforced expectations that the Fed would remain cautious on rates.
The selling accelerated Tuesday and Wednesday, with gold breaking below $4,100 as traders looked ahead to the minutes from the June FOMC meeting Wednesday afternoon. The minutes showed growing concern among policymakers about elevated inflation, with some officials making the case for an immediate rate hike and many others seeing hikes as necessary if inflation remained sticky. Gold ultimately set its weekly low at $4,021.76 per ounce on Wednesday as higher yields and a stronger dollar limited safe-haven demand.
Gold prices then rebounded Thursday after weekly jobless claims came in at 215,000, slightly below expectations, while the dollar eased and traders reassessed the likelihood of a July rate hike. But the recovery stalled below $4,140 as renewed fighting between the U.S. and Iran kept oil prices supported and maintained pressure on inflation expectations.
After failing to reclaim $4,150, spot gold closed the week at $4,120.67 per ounce, with a last-minute push leaving the yellow metal comfortably above $4,100 per ounce and nearly flat on the day, but still over 1.4% lower on the weekly chart.
The latest Kitco News Weekly Gold Survey showed Wall Street and Main Street divided and indecisive on gold’s near-term prospects after the yellow metal failed to break out of its recent consolidation channel.
“Neutral,” said Adam Button, head of currency strategy at investingLive. “It's hard to get excited while the shooting continues in Iran. Risks are to the upside for oil, so probably to the downside for gold.”
“Bull,” said Mark Leibovit, publisher of the VR Metals/Resource Letter. “Gold may now see $4700-$4800 in the next few weeks.”
Daniel Pavilonis, senior commodities broker at StoneX Group, told Kitco News he sees further weakness from gold and silver before they catch a meaningful bid.
“The chart just looks really broken right now on gold,” he said. “It looks like we can continue to go a little bit lower.”
Pavilonis said he thinks the money is moving into international markets rather than the metals.
“I think a big driver of silver and gold when they were rallying was a lot of the Asian markets were jumping into those metals,” he said. “Now it seems like there's a lot of tech companies… the money has just moved to different markets, and gold, at least for the time being, has lost its shine.”
“Looking at the chart here – whether it's gold or anything else, without labeling it – the market just looks like it's creeping lower and we're sitting on a fault line, on these lows,” Pavilonis said. “There's probably a lot of [sell] orders underneath these levels, and if we slip through those, I think we’ve got another leg down.”
Pavilonis said if gold does break below the recent lows, he expects it to fall to the $3,800 - $3,600 range, if not lower. “I think we peek below that, and then there's probably a washout there, and then maybe we can continue to go higher.”
Looking ahead to next week’s CPI data, Pavilonis said he doesn’t see inflation driving gold prices to a significant degree in the near term.
“Inflation could seem somewhat transient,” he said. “The expectation is that we're seeing maybe a little inflation here, but it should dissipate. I don't see that moving through into demand and building into the demand side of things. We don't seem to quite be in the same kind of situation we were in when gold saw positive feedback loops: the market moves higher, and then people jump on the bandwagon and this is the reason why, and so on and so forth. Right now, it just seems that it's weak.”
“There's not a lot of buying interest,” Pavilonis added. “I'm not seeing a lot of flow on my side, and the market's been slapped down so many times on the bullish side. There's been a few times since the market had that sharp sell-off back in March, and a lot of people got long again, and then it got battered down again. Then it tried to make another move, and then slowly but surely the market's been unwinding.”
“I think traders are wanting to see more of a solid low, and some rational reason why to get long and I don't think inflation is it,” he said. “If we see consecutive inflation numbers, inflation growing, that’s one thing. But an inflation number with a new Fed that doesn't really seem as serious about inflation, and possibly even letting inflation run a little bit, it just doesn't seem like you need to be in a safe-haven asset.”
Pavilonis said the longs that are entering the gold market are operating on a kind of hindsight bias where “It's like, ‘Hey, gold was up here, and now it's down here, so it's pretty cheap.’ But the narrative has changed,” he said. “Those buyers are getting stopped out, and the market is due for probably another slice lower. And then, after that flush, I think you come in and buy it. And that might take some time.”
This week, 13 analysts participated in the Kitco News Gold Survey, with Wall Street sentiment spread across bullish, bearish and undecided following gold’s lack of conviction. Five experts, or 38%, expected to see gold prices gain ground during the week ahead, while three others, representing 23% of the total, predicted a price decline. The remaining five analysts, or 38%, saw the yellow metal trending sideways next week.
Meanwhile, 282 votes were cast in Kitco’s online poll, with Main Street investors renouncing their bullish bias in the face of gold’s underperformance. 117 retail traders, or 42%, looked for gold prices to rise next week, while 108 others, or 38%, predicted the yellow metal would lose ground. The remaining 57 investors, representing 20% of the total, expected to see consolidation during the coming week.
After a slow post-Independence-Day week, next week’s calendar has more meat on the bone, with last month’s CPI report and new Fed chair Warsh’s first testimony in Washington the definite highlights, but plenty more economic data for markets to digest.
On Tuesday morning, traders will be watching US CPI for June, while Kevin Warsh begins to testify before the House Financial Services Committee.
Wednesday will bring US PPI for June, the Empire State Manufacturing Survey, the Bank of Canada’s monetary policy decision, while Warsh will testify before the Senate Banking Committee.
On Thursday, markets will be watching the June Retail Sales, the Philly Fed Manufacturing Survey, and weekly jobless claims, followed by the Pending Home Sales report.
And on Friday morning, markets will receive June Housing Starts and Building permits, followed by the University of Michigan Preliminary Consumer Sentiment for July.
“Gold is uninspiring,” said Marc Chandler, managing director at Bannockburn Global Forex. “Although it took out last week’s high on Monday when it reached nearly $4203, within two days it slid back to $4022. In order to lift the tone, the tarnished metal must rise above the downtrend line connecting the late May and mid-June and early July highs. It is near $4126 at the start of next week and finished the week around $4066.”
Sean Lusk, co-director of commercial hedging at Walsh Trading, told Kitco News he’s still waiting to see signs of sustained strength from the precious metals, and the recent moves higher have been unconvincing.
“Significantly, gold is approaching five percent down for the year, and silver's been down almost 15 percent,” he said. “We just haven't seen the allure, on the physical side, come back to the way it was. It’s a struggle for people. The volatility has been retreating most recently, but rallies continue to be sold here.”
“We're still elevated,” Lusk continued. “We're double the price we were a couple years ago, in 2024. But what are the new drivers that are going to take you to $5,000 and beyond? I'm not sure we're seeing that. So I just think there's a pause here. I think a lot of investors are just way more comfortable with the returns they're getting in the [stock market] here, versus, what we've seen in the metals.”
Lusk said he’s looking to next week’s June CPI report to provide some direction, but it won’t necessarily be good news for gold.
“We're going to have another bit of inflation data next week, so we'll see what that brings,” he said. “But if it's hotter, then the dollar's going to rise and that's going to put pressure on gold.”
“I think seasonally we should do a little bit better in the next two months, once you go into Labor Day, concluding summer,” he said. “The Fed's not going to [raise rates], even if the employment situation improves. I think they're going to sit on their hands for a while.”
Lusk said investors need to appreciate the magnitude of gold’s recent rally from a historical context.
“We were around $5,600, and then we had a low of $3,900… big move, $1,600. But that's after a big run-up. For this thing to really turn higher, we’ve really got to close over, in my estimation, $4,500, if not $4,700. We’ve got a long way up.”
“We've seen dips below $4,000, but they haven't stayed there for long,” Lusk added. “Silver dips down in the high to mid-fifties. We'll see what happens.”
Alex Kuptsikevich, senior market analyst at FxPro, expects gold prices to decline once again next week.
“Gold’s impressive rebound last week failed to gain momentum this week,” he noted. “Despite reports of substantial central bank purchases of the metal, a downward trend has persisted since around mid-May, and the resistance line running through recent highs has fallen from $4,750 to $4,150. On the other hand, gold has so far managed to avoid falling below the psychologically significant round figure of $4,000 for any sustained period. Geopolitical news should be acting as a catalyst, but in reality, the oil market is ignoring much of the bellicose rhetoric, and the debt markets are following suit, taking their time to return to expectations of tighter monetary policy. This is helping gold to stage a fairly orderly retreat.”
“A significant factor is that, for the time being, gold is retreating through relatively uncontested territory, whilst much stronger support is likely to emerge as it approaches the $4,000 mark,” Kuptsikevich added.
Michael Moor, founder of Moor Analytics, expects to see gold prices rise next week.
“HIGHER unless we fail below the line mentioned in the 'lower timeframe basis' below,” he wrote. “In a Higher time frame: I cautioned on 8/16/18 the break above $1,183.0 warned of renewed strength. We have seen $4,443.1. This is ON HOLD. We held exhaustion with a 56268 high and rolled over $1,651.1. This is ON HOLD. On a medium timeframe basis: The trade below 52554 projected this down $740 (+)—we attained $1,300.0. The trade below 52036 brought in $1,248.2 of pressure. The trade below 51606 brought in $1,205.2 of pressure. These are ON HOLD.”
“On a lower timeframe basis: We held exhaustion with a 49177 high and rolled over $962.3,” Moor said. “The break below 48185 projected this down $185 (+)—we attained $863.1. The trade below 47923 projected this down $205 (+)—we attained $836.9. The break below 47420 brought in $786.6 of pressure. On 5/15 we left a medium bearish reversal—we have come off $597.8 from 45532. We held exhaustion with a 44036 high and rolled over $448.2. On 6/18 we left a minor bearish reversal—we have come off $323.9 from the 42793 open. These are ON HOLD. We held macro exhaustion at 39741-357 with a 39554 low and bounced $260.1—if this holds and we start a bona fide bullish correction, the minimum target is 49636. The trade above 40288 (-11 tics per/hour) brought in $186.7 of strength. These are OFF HOLD. We held exhaustion at 41795-2324 with a 42155 high and rolled over $183.0 into a bearish correction/trend against the move up from 39554. This is ON HOLD. The break below 40428-21 and back above is currently bringing in some of the decent strength warned about—we have seen $105.6. Yesterday left a minor bullish reversal.”
At the time of writing, spot gold last traded at $4,120.67 per ounce for a loss of 1.43% on the week and 0.08% on the day.
