Wall Street evenly divided between bulls, bears, and the fence, Main Street cooler on gold’s potential gains

After a series of dramatic performances throughout the summer, gold traders were treated to a relatively calm and steady week as, with the exception of a couple of dips, the precious metal traded within a $25 range above $2,500 per ounce.

Spot gold kicked off the week trading just above $2,514 per ounce before rising to $2,525 during the European trading session on Monday. The North American open saw the yellow metal driven down to $2512 by 11:15 am EDT, and by early Tuesday morning, spot gold had fallen to the then-weekly low of $2,505 per ounce. This time, the North American trading session provided the upward momentum, helping to propel gold prices to their weekly high above $2,525 per ounce shortly after 7:00 pm EDT before the Asian session delivered a perfect reverse image of the day's gains.

Wednesday morning saw spot gold hit its weekly low of $2,496 before it once again bounced back up to the $2,505 range, which acted as a magnet for gold's price action throughout the week. From there, gold prices went on an upward march, topping out above $2,523 per ounce by 6:00 am Eastern on Thursday before a sharp sell-off coinciding with the release of the second estimate of U.S. Q2 GDP and the weekly jobless claims report saw it once again return to the $2,505 level at 8:30 a.m. But by 1:00 p.m. Eastern, gold was once again trading at its weekly high close to $2,527 per ounce, and after a modest slide during the Asian session, European traders pushed it close to that level once again.

Friday morning brought the week’s most anticipated economic indicator, the U.S. PCE price index report for July which, even though it was in line with economists’ expectations, still saw the yellow metal slide all the way down to a fresh weekly low of $2,494.21 per ounce just after 1:15 pm Eastern.

Gold prices returned once again to the $2,505 level and continued to hover right around support at $2,500 per ounce for the duration of Friday's trading session.

The latest Kitco News Weekly Gold Survey saw retail investors reining in their recent bullishness on gold prices, while industry experts were evenly distributed across the sentiment spectrum.

“Up,” said Adrian Day, President of Adrian Day Asset Management. “As we get close to the Federal Reserve’s rate cut, momentum will likely build. The first rate cut in the cycle has been a bullish signal for gold for the last 20+ years, and although it’s already priced in to some degree, I still expect a positive reaction.”

“I like gold lower next week,” said Marc Chandler, Managing Director at Bannockburn Global Forex. “The upward momentum stalled. If the markets move to hurt most of the people most of the time, maybe the pain trade now is a sequential improvement in US jobs creation and a tick lower in the unemployment rate. This could extend the dollar’s upside correction that began in recent days and push up US rates. I can envision a move toward $2470-75.”

“Sideways,” said Darin Newsom, Senior Market Analyst at Barchart.com. “I’m getting no clear read on Dec gold’s daily chart as we approach the end of the week/month Friday. Given that, I’m going to go with a sideways trend next week, looking for a breakout in either direction.”

Phillip Streible, Head of Market Strategy at Blue Line Futures, is bearish on gold but said that any corrections are expected to be shallow and present buying opportunities. He added that September is a terrible month for gold historically, so traders should look for opportunities to buy, but don't want to be overweight.

Bob Haberkorn, Senior Commodities Broker at RJO Futures, was looking at the price action in light of the sideways churn this week.

“$2,500 is the handle, and it's naturally going to be a spot that people will trade around,” he said. “People are looking to buy below $2,500, and the way the market moves with stops and limit orders, it'll naturally trade around there, but I think $2,480 looks to be more of a support level.”

“We're down today just because the dollar's up, it's risk-off heading into the long weekend,” he added. “That's how it feels with all these markets today, there's just people clearing positions out of anything to wait and see into next week.”

Looking ahead to next Friday’s employment data, Haberkorn said even if the nonfarm payrolls report is bad, he thinks it's very unlikely that the Fed would cut by 50 basis points to kick off their easing cycle.

“I think right now there's just so much pressure that's built up for rate cuts, Powell tipped his hand that it's coming here, and the market's not going to be surprised,” he said. “But I think to get a 50-basis point cut… I don't think we're there, and I don't think, with the inflation numbers and with some of the housing numbers that we've seen, I just don't think it's going to be possible between now and the next meeting to do 50.”

Haberkorn said the most likely scenario he sees is that the Fed delivers one 25 bps cut, then sits back and watches. “I think we're more likely to see a quarter, then they hold off a little bit to see how things go,” he said, “Inflation is still here, people are still feeling the pain of inflation, and I don't think the job's finished.”

“They have 25 points coming at the next meeting,” he said. “If it wasn't an election year, I think they'd be waiting to see, but because we have an election coming up here, and there is a lot of political pressure right now to start cutting rates, I could see them doing two quarter-point cuts between now and November.”

“The quarter-point cut in itself is just the Fed throwing out some charity,” he added. “‘We'll give you a quarter, leave us alone for a little bit.’ That's what it feels like to me, because I don't think they're anywhere near to their targets, or where they need the numbers to be with the inflation, to do anything drastic.”

This week, 15 analysts participated in the Kitco News Gold Survey, and no one view on the price action held sway. Five experts, or 33%, expect to see gold prices rise during the week ahead, while another five analysts believe gold will trade lower next week. The remaining five experts predicted sideways trading for the precious metal.

Meanwhile, 199 votes were cast in Kitco’s online poll, with Main Street investors remaining bullish on balance, but less so than last week’s poll. 112 retail traders, or 56%, looked for gold prices to rise next week. Another 47, or 24%, expected the yellow metal to trade lower, while 40 respondents, representing the remaining 20%, saw prices consolidating during the week ahead.

After the past week was dominated by the runup to Friday’s inflation data, market participants will be focused on employment indicators next week when North American markets return from the long weekend.

On Tuesday, markets will receive the U.S. ISM Manufacturing PMI for August, and Wednesday brings the Bank of Canada’s monetary policy decision and U.S. JOLTS Job Openings. Then on Thursday, traders will be watching ADP Employment for August, the weekly jobless claims report, and the U.S. ISM Services PMI.

But the big risk event next week is the Friday morning release of U.S. Nonfarm Payrolls for August, which some market experts believe has the potential to bump the Fed’s expected September rate cut from 25 to 50 basis points.

Adam Button, head of currency strategy at Forexlive.com, believes the chances of a larger cut from the Federal Reserve will depend on the unemployment rate in the payrolls report.

“Powell was clear that he doesn't want to see any further deterioration in the labor market,” he said. “If we see the unemployment rate tick up one tick, it'll make it a tough call. The consensus is down to 4.2% from 4.3%. If we were to see a two-tenths miss, if we were to see 4.4% or 4.5% unemployment… you’ve just got to go back to March and you're at 3.8%, now you're at 4.3%. It's come up quick.”

“At 4.5%, I’d put it at 60 percent [chance] for 50 basis points,” he added. “I think the unemployment rate is where you want to watch.”

On the question of whether a September rate cut would be a one-off followed by a pause, or the start of a steady easing cycle, Button said he believes it’s the latter.

“I think Powell was clear that the plan is to bring rates down to neutral and it's really a question of how quickly we get there,” he said. “Given the signaling, I don't see how [the Fed] could take October off the table.”

Button agreed that Powell wouldn’t stubbornly hold off on signaling rate cuts meeting after meeting, then finally say they’re ready to ease at the highest-profile speech outside of an FOMC meeting, only to deliver a one-off rate cut.

“Also, you had other Fed officials saying ‘gradual’ or ‘measured’ or something along those lines,” he added. “He didn't say that. I think the key thing was what he didn't say. He didn't say gradual or measured. And then, to top it off, you had Daly, previously she had said ‘gradual’, and then she got teed up to say it again and didn't. She's a bit of a mouthpiece for Powell.”

“And that's it. They want 50 on the table,” he said. “You don't put 50 on the table if you're not planning to do 25.”

Turning to the price action for gold, Button said September’s seasonal weakness could provide fence-sitters with a good entry opportunity.

“I'm just waiting for a dip,” he said. “I don't think anyone's fooling themselves that we're going to see $2,000 again, $2,000 is a dream. $2,300 is maybe realistic.”

“$200 was about the dip you got last year,” he added. “It was more like $300 if you really go tip to top, but it unfolded a little more slowly. I think that's probably the best you can hope for, $2,300, and an outside chance you get back to $2,100. I'd be pretty aggressive if it gets to $2,300. And for next week, something like $2,440.”

Alex Kuptsikevich, Senior Market Analyst at FxPro, sees gold prices attempting to break out of their recent triangle chart pattern.

“Gold has hit a glass ceiling at $2525 an ounce on the spot market, which it has been battling against for the past two weeks,” he said. “A series of smaller and smaller pullbacks and more frequent rallies to the resistance indicate impressive buying pressure. Under these conditions, we should expect a breakout to the historical highs soon, but it will be important to watch how the price behaves afterwards.”

Kuptsikevich said that over the past two weeks, a triangle of horizontal resistance and rising support has formed on the gold chart.

“This is a clear indication that buyers are taking the initiative at increasingly higher levels,” he wrote. “The same conclusion can be drawn if we look at the longer-term chart period since April, when the trend of increasingly shallow corrections continued. The current consolidation is an oscillation around the upper boundary of the uptrend since then.”

He noted an ongoing divergence between the RSI and the price trend, which he characterized as a sign of upward exhaustion. “However, we saw a similar situation from October 2023 to February 2024, which was followed by a strong uptrend rather than a short-term uptrend,” he noted.

“One of the main drivers of the gold price over the past two months has been the dollar's near 5% weakness against a basket of major currencies, which largely explains the 8.5% appreciation in the ounce,” Kuptsikevich said. “However, we note that the DXY is attempting to reverse its direction to the upside as it reaches the lower end of its trading range in early 2023.”

Taken together, he said that these signals “point to a likely near-term break of resistance with a renewal of historical highs, which could be followed by a medium- or even long-term reversal in the dynamics of the gold price.”

“If we take a look beyond the charts, gold's short-term fate will be determined by the Fed's monetary policy outlook: how much it will cut interest rates before the end of the year,” he concluded. “The monthly Employment report on September 6th and the CPI on the 11th will help clarify the answer.”

“Down,” said Mark Leibovit, publisher of the VR Metals/Resource Letter. “Have hedge long positions. Looking for a correction.”

Moor Analytics Founder Michael Moor believes the risks to gold prices are skewed to the downside, but the yellow metal could still post gains in the near term. “The trade back below 2558 (+3.3 tics per/hour) warns of renewed pressure. The trade below 25417 (+2.5 tics per/hour starting at 5:00am) further warns of pressure: but if we break back above decently, look for decent strength. Decent trade above 25537 (-1 tic per/hour starting at 5:00am) will warn of decent strength.”

Ole Hansen, Head of Commodity Strategy at Saxo Bank, expects gold to trade lower during the week ahead. “Gold is running low on energy, so looking for consolidation/correction ahead of Sept FOMC meet,” he said.

And Kitco Senior Analyst Jim Wyckoff still sees a favorable picture for gold prices next week. “Steady-higher as charts remain bullish, fundamentals remain friendly,” he said.

At the time of writing, spot gold last traded at $2,503.19 per ounce for a loss of 0.71% on the day and 0.35% on the week.

Kitco Media

Ernest Hoffmanr

Time to Buy Gold and Silver

Tim Moseley

Gold eases from record levels as the dollar and yields rise

Gold prices have retreated from recent record highs as rising yields and a strengthening dollar suggest a potentially less aggressive rate cut by the Federal Reserve. This shift comes amid a series of economic indicators that suggest a less aggressive rate-cut by the Fed next month.

The U.S. Bureau of Economic Analysis recently revised its estimate for second-quarter GDP growth to 3%, up from the initial reading of 2.8%. This upward revision underscores the economy's resilience despite prevailing high interest rates, challenging assumptions about the immediate need for monetary policy easing.

The latest Personal Consumption Expenditures (PCE) index report, a key inflation indicator closely watched by the Federal Reserve, has further complicated the economic landscape. The report revealed that consumer spending increased by a robust 0.5% last month, aligning closely with economists' expectations.

The PCE price index rose 0.2% in July and 2.5% year-over-year, while core inflation, which excludes volatile food and energy costs, increased by 0.2% monthly as anticipated. However, the 12-month core inflation figure came in at 2.6%, slightly below the estimated 2.7%.

This PCE report will be the last one available to the Federal Reserve before its September 17-18 Federal Open Market Committee (FOMC) meeting. While Fed officials will get the latest Consumer Price Index (CPI) report on September 11, the core PCE remains their preferred inflation measure and is likely to carry more weight in their deliberations.

Attention now shifts to next week's jobs report, which will play a crucial role in shaping expectations for the September rate decision. Federal Reserve officials will scrutinize the August hiring numbers for any signs of continued labor market contraction, with particular focus on the latest unemployment figures.

A worsening unemployment rate could incentivize the Fed to cut rates more aggressively in an attempt to cushion the economy from the potential repercussions of a cooling job market.

The dollar gained 0.34% taking the index to 101.738. Dollar strength, coupled with rising yields, contributed to the decline in gold prices today. As of 4:45 PM EDT, the most active December gold futures contract was fixed at $2,535.70, representing a daily decline of $18.80 (-0.74%).

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Wishing you as always good trading,

Kitco Media

Gary Wagner

Time to Buy Gold and Silver

Tim Moseley

Gold, silver boosted by bullish charts

Gold and silver prices are higher in midday U.S. trading Thursday, with technically based buying from the speculators featured amid bullish charts. December gold was last up $17.50 at $2,555.20 and September silver was up $0.259 at $29.46.

Traders are looking ahead to Friday’s personal income and outlays report, including its inflation gauges that Fed officials monitor very closely.

U.S. stock indexes are solidly higher near midday and have made good rebounds from their August lows.

The key outside markets today see the U.S. dollar index higher. Nymex crude oil prices are up and trading around $76.00 a barrel. The benchmark 10-year U.S. Treasury note is presently fetching 3.871%.

Technically, December gold bulls have the strong overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $2,600.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $2,475.00. First resistance is seen at this week’s high of $2,564.30 and then at the contract high of $2,570.40. First support is seen at today’s low of $2,536.50 and then at this week’s low of $2,527.80. Wyckoff's Market Rating: 9.0.

September silver futures bulls have the overall near-term technical advantage as prices are in an uptrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $31.00. The next downside price objective for the bears is closing prices below solid support at $28.00. First resistance is seen at $30.00 and then at this week’s high of $30.225. Next support is seen at this week’s low of $29.08 and then at last week’s low of $28.795. Wyckoff's Market Rating: 6.0

Kitco Media

Jim Wyckoff

Time to Buy Gold and Silver

Tim Moseley

The [gold] ship is crowded. Do you have a slot secured on the lifeboat?’ – TD Securities’ Ghali

The long gold trade is more crowded than ever, and despite the strong macro environment and imminent Fed rate cuts, the risk of a significant price pullback is growing by the day, according to TD Securities’ Senior Commodity Strategist Daniel Ghali.

In a research note published Monday, Ghali said that even though the Federal Reserve is almost certain to cut its benchmark interest rate at the upcoming September meeting, the chances of a correction in the gold market are increasing every day.

“Our gauge of macro fund positioning in Gold is now at the highest levels recorded in the depths of the pandemic,” he wrote, adding that market positioning has reached “the local highs set in Sep 2019, and previously in Jul 2016. Symmetrically, extreme short positioning from this cohort marked the lows in 2018 and 2022,” he noted.

“This time around, CTAs are also max long and Shanghai traders' net length has also inched towards record highs,” he said. “Algos are also vulnerable in silver, with most scenarios for prices pointing to selling activity on the horizon, barring a break north of $31.5/oz.”

Ghali said the current setup is “the antithesis to the early-year dichotomy in positioning that helped to propel Gold on its trajectory towards current all-time highs.”

“Downside risks are now more potent,” he added. “The ship is crowded. In fact, it has scarcely been as crowded as it is today. Do you have a slot secured on the lifeboat?”

In a follow-up note published Tuesday, Ghali characterized gold markets as “unanimously bullish” with visible short positions hovering near ten-year lows, driven by high deficits, slowing growth, sticky inflation, currency devaluation, and the imminent start of theFed’s rate-cutting cycle.

Reiterating that macro fund positioning has reached the heights seen during the worst days of the Covid-19 pandemic, he observed that “It is more statistically consistent with deep recession cuts than it is with normalization cuts, or alternatively may be bloated due to geopolitics, deficits, or any number of the bullish narratives touted above.”

“What is clear is that macro funds have scarcely held more Gold than they do today,” Ghali said. “CTAs are also effectively 'max long.' Chinese ETF outflows have resumed. Shanghai trader positioning near record-highs already reflects Gold’s allure in the face of a weaker domestic currency, stock and property market.”

Despite all the economic headwinds facing Chinese investors, “Asia is on a buyer's strike in physical,” he noted. “Visible short positions remain near decade-lows. Narratives in Gold markets are unanimously bullish. We see significant risks to the near-term outlook tied to positioning, despite the strong fundamental backdrop.”

After setting fresh all-time highs last week, gold prices have since pulled back somewhat, with spot gold twice dipping below $2,500 per ounce during Wednesday’s session. Spot gold last traded at $2,507.60 per ounce for a loss of 0.68% on the daily chart.t

Ernest Hoffman

Time to Buy Gold and Silver

Tim Moseley

The goal of net zero by 2050 can lead to a "global homicide" as the world is looking at an energy crisis, according to Alex Epstein, philosopher, energy expert, and author of 'Fossil Future,' who says the framework in which fossil fuels are viewed needs to be reframed, adding that the benefits outweigh the side effects, especially in the context of human flourishing and technological progress.

The United Nations has been leading the charge for a world with net zero emissions by 2050. Net zero means balancing the amount of greenhouse gases we emit with the amount that we remove from the atmosphere.

This goal gained formal traction with a Paris Agreement adopted at the 2015 UN Climate Change Conference. Even though the 2050 deadline wasn't explicitly outlined in the agreement, it quickly became the global benchmark. More than 140 nations, including the world's largest polluters, China, the U.S., India, and the European Union, have pledged to reach net zero.

Understanding fossil fuels: What are fossil fuels?

Epstein tells Michelle Makori, lead anchor and editor-in-chief at Kitco News, that it is critical to understand fossil fuels in order to grasp both their side effects and benefits.

"Fossil fuels are high-energy hydrocarbons derived from ancient life," he explains. "The significance of that is when you burn a hydrocarbon, it releases a lot of energy as the bonds break apart. When you combine the hydrogen with the oxygen, you create water vapor. And then, of course, you combine the carbon and the oxygen, and you create CO2, which is the biggest concern people have in terms of our impact on climate."

Epstein explained that the world's goal should be achieving a more livable climate, and that is not what net zero is about.

"If you really wanted a more livable climate and thought about it for two seconds, you'd realize we've made it far more livable already. Are we safer from climate now than 100 years ago? … Obviously we're safer now. The key to climate livability is not impacting the climate. The key is mastering the climate."

According to Epstein, climate livability, energy abundance and human flourishing should be the goal. He argues the world got "duped" into the net zero argument. Watch the video above for details.

"The idea that we should strive to have no impact on climate. The idea that we should strive to have no impact on anything is an anti-human idea. I reject this idea that we are some uniquely evil species whose impact we should hate," Epstein highlighted.

The real cost of net zero

Fossil fuels are essential for human flourishing as well as economic and technological progress, especially at a time when the world is facing an energy crisis, noted Epstein. His message comes at a time when North American Electric Reliability Corporation (NERC) is warning that much of North America may face electricity shortages starting in 2024, with more than 300 million people at risk of electricity shortages this year.

Epstein pointed out that the world is not in the middle of a successful transition to renewable energy, as many believe.

"We're in an energy addition at most. People deny this. They pretend solar and wind are rapidly replacing fossil fuels. It's just it's just not happening. We're using more fossil fuels than ever every year, despite the fact that getting rid of fossil fuels via net zero is literally the number one political goal in the world."

Watch the video above for Epstein's take on why fossil fuels are uniquely cost-effective and scalable.

There has been no technological developments significant enough to replace the the attributes that have made fossil fuels vital in the past, Epstein noted.

"Nothing fundamentally has changed to make fossil fuels less necessary. Particularly because most of the world still has very little energy," he added. "We're already seeing a global energy crisis and blackouts in the United States, the degradation of our grid, and we haven't even moved in the direction of net zero. All we've done is slow the growth of fossil fuels globally, and we've created all these problems. We haven't even reduced fossil fuels globally yet. They want to get rid of them in 26 years. So it's just an act of global homicide."
 

For consequences, if this net zero goal continues to be pushed forward, watch the video above.

There is a path to finding a form of energy better than fossil fuels, but humanity won't get there via bans.

"You don't get that by banning fossil fuels and making everyone poor and die early. You get that by having a world of innovation and capitalism where fossil fuels ultimately pave the way for something superior. It's a gradual process, but it's a process we should welcome. But you don't welcome it by destroying the fossil fuels that make it possible," Epstein noted.

Bitcoin as energy money

Epstein pointed out that the concept of fossil fuels as the combination of natural storage, natural concentration, and natural abundance, harnessed ultra-cost effectively by generations of economic innovation and achievement, can be applied to gold and Bitcoin.

"What we've seen with the government's monopoly on money – the purchasing power gets totally diluted. Money is used to manipulate the economy in all sorts of ways, favoring different sectors over other sectors and favoring certain people over other people. You create enormous amounts of corruption. You create the long-term problems with deficit spending," he said.

As with energy, the world should be free to choose the best form of money, Epstein added.

"I believe in human freedom in all areas of life. And just as energy is a fundamental area of life, money is a fundamental area of life," he explained. "I've always objected to the idea that the government dictates money. People should be free to discover what the best form of money is for them. Bitcoin is a fascinating innovation."

For Epstein's description of Bitcoin as energy money, watch the video above. He also addresses the wrong type of thinking when examining Bitcoin's energy use.

Kitco Media

Anna Golubova

Time to Buy Gold and Silver

Tim Moseley

Gold Reaches New Record High Following Powell's Historic Speech

In a remarkable turn of events, gold futures have once again traded to a new record closing price of $2,533.60, following Federal Reserve Chairman Jerome Powell's pivotal speech at the Economic Symposium in Jackson Hole, Wyoming. The speech, which signaled a shift in monetary policy, has sent ripples through various financial sectors, including precious metals and U.S. equities.

Chairman Powell's declaration that "the time has come for policy to adjust" marks a significant turning point in the Federal Reserve's approach. He noted that inflation has contracted closer to the Fed's 2% target while expressing concern over the labor market's well-being.

Powell emphasized that current “labor market conditions are less tight than pre-pandemic levels in 2019, a year when inflation ran below 2%”. He further stated that it seems unlikely the labor market will be a source of elevated inflationary pressures in the near future, adding that he does not seek or welcome further cooling in labor market conditions.

The financial world has interpreted Powell's remarks as a clear indication that the Federal Reserve is prepared to begin a series of interest rate cuts. While no specific timeline was provided, market expectations are high for a rate cut at the upcoming Federal Open Market Committee (FOMC) meeting on September 18-19. The CME's FedWatch tool currently indicates a 71.5% probability of a 25-basis point cut and a 28.5% chance of a more aggressive 50-basis point reduction.

In response to these developments, gold futures continued its ascent, with the most active December contract reaching an intraday high of $2,561.20. By late afternoon, it had settled at $2,553.60, representing a modest gain of $4.90. This upward movement occurred despite a slight strengthening of the U.S. dollar, which gained 0.20% to reach 100.87 on the dollar index.
 

The dollar's performance is worth noting, as it experienced a sharp -0.83% decline on Friday, resulting in a -1.69%weekly decline. This took the dollar index its lowest value this year. Technical analysis suggests that the dollar could find support just below the 100 level on the index, based on lows observed in July 2023.

Today's continued strength in gold prices demonstrates that while the market had anticipated dovish comments from Chairman Powell and had partially priced in a September rate cut, the full impact of these expectations had not been fully realized. This is evidenced by the moderate price advance witnessed today.

The gold market's reaction to Powell's speech and the subsequent anticipation of policy shifts underscores the intricate relationship between monetary policy, economic indicators, and precious metal valuations. As investors and analysts digest the implications of the Fed's potential move towards monetary easing, gold's role as a safe-haven asset and hedge against economic uncertainty appears to be reinforced.

As we approach the September FOMC meeting, all eyes will be on the Federal Reserve's decision and any further guidance provided regarding the pace and extent of future rate cuts. The coming weeks promise to be a critical period for gold prices and the broader financial markets as they adjust to the evolving economic landscape and the major pivot that was announced by Powell regarding the monetary policy of the Federal Reserve.

Kitco Media

Gary Wagner

Time to Buy Gold and Silver

Tim Moseley

Wall Street experts and Main Street investors see gold climbing higher next week as momentum builds

Precious metals investors embarked on a now familiar roller coaster ride this week, but the ups and downs brought them back to nearly the same level, albeit an elevated one.

Spot gold opened the week trading around $2,505 per ounce, before dipping below the $2,500 level in the middle of the European trading session. North American investors found the yellow metal trading just below $2,490 per ounce at the open, and they promptly pushed it back above $2,500, where it traded throughout Monday, barring a few dips.

Gold prices hit their high-water mark for the week early Tuesday, in a sharp move up that began during the Asian trading session and continued throughout the day, with gold topping out above $2,530 per ounce 15 minutes after American markets began trading. The high was short-lived, however, as spot gold slid all the way back to $2,506 by noon Eastern.

The middle of the week was a period of consolidation that saw spot gold oscillate between $2,519 and $2,500, which was starting to look like solid support as the days wore on. But Thursday morning brought the release of worse-than-expected U.S. jobless claims, which drove gold from $2,503 at 8:30 a.m. down to the weekly low of $2,475 per ounce by 10:00 a.m. EDT.

From there, it was a slow and steady march higher over the final two days of the week, with spot gold double-topping back at $2,500 per ounce early Friday morning, before breaking decisively through resistance during Federal Reserve chair Jerome Powell’s highly anticipated address from Jackson Hole, which seemed to confirm that the central bank is prioritizing weakness in the employment market over lingering inflation.

After a double-top near $2,517 per ounce shortly after 11:00 a.m. EDT, gold settled into a narrower range on either side of $2,510 for the duration of Friday's trading session.

The latest Kitco News Weekly Gold Survey shows a solid majority of both industry experts and retail investors believe gold will rise above this week’s recent all-time highs.

“Gold set a record high on Tuesday near $2531.75 in the spot market and consolidated for the rest of the week,” said Marc Chandler, Managing Director at Bannockburn Global Forex. “The week’s low was set Thursday slightly below $2471. The dollar was mostly softer and interest rates lower. I expect the US dollar and rates to trade firmer over the next week or so, in the run-up to the US jobs report on September 6.”

“The yellow metal can make a new high, but the momentum indicators are getting stretched and my outlook for the dollar and rates suggests gold may have a consolidative phase,” Chandler added. “Initial support may be in the $2460-70 area.”

“Higher,” said Adam Button, head of currency strategy at Forexlive.com. “There is no sense in fighting the momentum.”

Darin Newsom, Senior Market Analyst at Barchart.com, sees gold prices trending lower during the days ahead. “I will stick with this direction for another week based on the idea Dec gold’s short-term trend (daily close-only chart) has turned down,” he said. “The downside target is near $2,493.”

Kevin Grady, President of Phoenix Futures and Options, said the gold market is squarely focused on the Fed’s expected rate cuts, and with good reason.

“They’re talking about the rate cuts,” he said. “Now we're starting to see it's 55 percent that they're going to be able to do a 50-basis point cut instead of a quarter, but I think that the rates are going down. You've seen the central banks are buying, so I think that's the key right now, is the right people are buying it. You're getting a ripe, fresh environment for gold. I think new highs are ahead for gold.”

Grady said that gold’s performance even in a high-rate environment means that the precious metal will fly higher once rates begin to fall. “We've been waiting for that, and gold has been steady, holding up the whole time, even with all these Fed meetings where you're getting no rate cut,” he said.

“I think right now the time is prime for gold. It's like the perfect storm in a positive way for gold, so I think you're going to be seeing higher prices.”

Grady sees gold trading around $2,500 going into the September meeting and thinks that level could act as a floor once the first rate cut goes through, but the real support is somewhat lower.

“We've been hitting lower levels, there's been some levels that we've held down there, like $2460, that's the level for me,” he said. “I know a lot of people look at $2,500, but that's more of a psychological number. I think you look at that support number, what it held, and that's what I would be looking for.”

Grady also believes the massive 800,000-plus revision to the last 12 months’ jobs data has solidified the Fed’s resolve to lower interest rates. “I think it’s going to spur the rate cuts,” he said. “I think they should have cut at the last meeting. They should have at least done a quarter point as a signal for the market to get ready.”

“It's tough, anytime you're thinking about doing a 50-basis point cut right away,” he added. “To me, that shows, ‘Oh, we missed the window.’ I think you do it incrementally, that's the way to do it. But I do think that things are softening. You saw when the U. S. market's going down, a lot of these global markets are following suit. I think that it should be September.”

“I don't think they're going to do 50 basis points, but that revision, that would be the one thing to spark it.”

Grady thinks that the rate cuts are not the end of the story, however, because the overall economy is still very inflationary, and the cuts could increase those pressures.

“They're going to be cutting rates into an environment that's extremely inflationary and still hasn't come off,” he said. “It's going to be really interesting.”

This week, 12 analysts participated in the Kitco News Gold Survey, with a solid majority of Wall Street seeing potential gains above this week’s fresh all-time highs. Seven experts, or 58%, expect to see gold prices rise during the week ahead, while two analysts, or 17%, believe gold will trade lower next week. The remaining three experts, representing 25% of the total, predicted a sideways chop for the precious metal.

Meanwhile, 225 votes were cast in Kitco’s online poll, with Main Street investors more bullish on balance than their expert counterparts. 146 retail traders, or 65%, looked for gold prices to rise next week. Another 41, or 18%, expected the yellow metal to trade lower, while 38 respondents, representing the remaining 17%, saw prices consolidating during the week ahead.

Market participants will be focused on key inflation data next week, with July’s U.S. Personal Consumption Expenditures (PCE) Index on Friday the clear highlight. Markets will also receive U.S. Durable Goods Orders for July on Monday and August Consumer Confidence on Tuesday, with weekly jobless claims and U.S. Preliminary Q2 GDP released on Thursday morning.

Traders will also pay attention to comments from the Fed’s Christopher Waller early Wednesday morning, and Raphael Bostic on Thursday afternoon.

James Stanley, senior market strategist at Forex.com, thinks gold prices will trend lower next week. “I think we’ll see some profit taking and a pullback to test below $2500, but I’m not expecting any bearish sequences to be long-lasting at this point,” he said. “More of a pullback than a reversal.”

John Weyer, Director of the Commercial Hedge Division at Walsh Trading, said he was surprised at how many market participants expected Powell’s Jackson Hole speech to deliver new information.

“I've been chuckling to myself how many people are looking for action today, as if the Fed's going to step out of their norm of clear forecasting and tipping the hat on what they want to do and when they're going to do it,” he said. “I think today's comments are basically, he's not rocking the boat for anything they've said previously, and I feel like they're on a schedule to take some action in September.”

“One thing they've been good at in recent vintage is they tell you what they're going to do, and they stick to it, they don't throw you any surprises,” he added. “And I think they're continuing down that path.”

Weyer believes that this week's massive revision to the last 12 months of jobs data gives the Fed cover to cut deeper than 25 basis points. “It got us to the idea that their first action could be 50 basis points,” he said. “I think that was set up a few weeks back as well. And I think that change, from previous signals and his comments at the last Fed meeting, hinted that perhaps they might be open to, based on data, as they always point to, a more aggressive action at the beginning. They've been saying for as long as these concerns started, ‘we're going to point to the data, we're going to rely on the data, we're going to go off data. They didn't reverse or throw something new, so I think they've already given the hint.”

“I'm going 50 basis points,” Weyer said. “There are still some people who are skeptical, they think that's too much for first action, but I think they realize the new data tells them they have to take action. Other people want to say they're doing that because they waited too long. Maybe they did. We don't know until after. But it certainly gives them license to perhaps go more aggressive at the front end.”

In terms of market levels, Weyer said that while a round number like $2,500 gets a lot of attention, it may be a little too high to act as support.

“When you get to those large numbers, that becomes a psychological level as well,” he said. “You have to consider all the participants now who are new, or pay attention to these things, as opposed to the everyday participants that have to go hedge the markets. I think $2,500 is a good area. We've got some stuff here, $2,450 as well, but I think the psychological and the technical are going to hold there.”

“These are areas, not exact numbers,” he added. “If over the course of a few weeks, you get to $2,480 on a chart, it's not that far off.”

"What will be interesting to see is, if they take action and rates go lower, what gold continues to do,” Weyer said. “It's become a safe haven play for sure, but what tells me that maybe it might slow down is silver's making a good move today but in a lot of the recent strong moves to the upside with gold, there's been a not as big a move for silver, which is more of an industrial use. That tells me there's a lot of noise around gold as well, that may not have the support to continue to move higher."

"Silver slowed down a bit because it's a practical metal, it has much more uses than gold. The attraction of gold is the same as it was a thousand years ago. You get many people in times like these, concerns about rates, concerns about the economy, concern about inflation, geopolitical concerns. I don't know that they sustain some of those moves to the upside,” he said. “But somewhere between $2,500 and $2,450, should be some support in there.”

Michael Moor, Founder of Moor Analytics, expects the yellow metal is likely in for a period of consolidation during the week ahead. “On a higher timeframe: The solid trade above 21475-84 projects this upward $151 minimum, $954 (+) maximum. We have attained $415.4. This is ON HOLD,” he said. “On a lower timeframe basis: The trade above 23276 (-2 tics per/hour) warned of decent strength—we have attained $236.2. This is ON HOLD.”

“The solid trade back below 25403 warns of solid pressure, likely for days,” Moor added. “I would CAUTION we came shy of higher timeframe exhaustion at 25752 with a 25704 high and rolled over into a lower timeframe bearish correction/trend against the move up from 24038, but what could possibly be a higher timeframe correction against the move up from 19339—and if so the minimum target would be 23950. Decent trade below 25173 (+3.3 tics per/hour) will project this downward; but if we break below here decently and back above decently, look for decent strength. Solid trade back above 25405-07 will once again warn of solid strength.”

And Kitco Senior Analyst Jim Wyckoff sees both the technical picture and fundamental factors favoring price gains for gold next week. “Higher as charts, fundamentals remain overall bullish,” he said.

At the time of writing, spot gold last traded at $2,509.97 per ounce for a gain of 1.02% on the day but a nearly flat reading of 0.13% on the week.

Kitco Media

Ernest Hoffman

Time to Buy Gold and Silver

Tim Moseley