Both analysts and retail investors see higher gold prices next week

Gold climbed higher this week, with prices rising over 1.25% as Friday's nonfarm payrolls report showed an increase in the unemployment rate and the ISM Manufacturing Index indicated continued weakness in U.S. industry.

The latest Kitco News Weekly Gold Survey shows that over two-thirds of retail investors expect gold prices to post gains during the shortened week ending September 8. And after weeks of caution and divided opinions, market analysts are just as bullish as Main Street heading into the Labor Day long weekend.

Adrian Day, President of Adrian Day Asset Management, sees gold prices increasing in the near term. "The tide seems to be turning for gold," he said. "Economic news in the U.S. and elsewhere is mixed, but the preponderance is suggesting a weakening global economy. The market is already pricing in the end of rate hikes in the U.S., though "tighter for longer' is still tightening."

Daniel Pavilonis, Senior Commodities Broker at RJO Futures, sees gold hitting a hard ceiling in the short term.

"I think gold is actually going to continue to be capped under the highs, and possibly continue to move lower," Pavilonis said. "The rationale behind that is some of the data is still coming out relatively strong. You look at core services, non-housing services, there's some labor indicators that are still pretty strong, in terms of inflationary."

Pavilonis said that yields are moving higher the further out you look across the curve, "so it's not so much of a front-end issue or a temporary issue."

"I think inflation is starting to be quote-unquote "confirmed,' that this is going to be around a lot longer," meaning the Fed is unlikely to cut rates before the end of 2024, he said. "I think that's really what's capped the metals market from moving higher."

This week, 11 Wall Street analysts participated in the Kitco News Gold Survey. Seven experts, or 64%, expected to see higher gold prices next week, while three analysts, or 27%, predicted a drop in price. Only one analyst, or 9%, was neutral on gold for the coming week.

Meanwhile, 534 votes were cast in online polls. Of these, 360 respondents, or 67%, looked for gold to rise next week. Another 101, or 19%, expected it would be lower, while 73 voters, or 14%, were neutral in the near term.

Wall Street

Bullish64%

Bearish27%

Neutral9%

VS

Main Street

Bullish67%

Bearish19%

Neutral14%

The latest survey shows that retail investors expect gold prices to trade around $1,962 per ounce next week.

The coming week will see a few significant economic data releases, with the ISM Services PMI for August and jobless claims the highlights.

Marc Chandler, Managing Director at Bannockburn Global Forex, expects gold to build on this week's performance. "I like gold higher again next week, especially if it can close above the $1950-53 area [on Friday], which is about where I have a trendline off the May and July highs coming in. It is also a retracement objective," he said. "The US jobs data will not change views on the US economy, and that the labor market is becoming less tight. The 2-year yield has been rebuffed again as it pushed above 5.0%."

Chandler said his next target for the yellow metal is $1975-85 based on the spot market.

Sean Lusk, Co-Director of Commercial Hedging at Walsh Trading, is still cautious about gold's short-term prospects, but sees it trending downward next week amid DXY and stock market strength and mixed messages from the data.

"We traded back through some support levels this week, but as it stands right now, the jury's still out on whether there's going to be a continuation rally in the next week," Lusk said.

"With higher equities and higher dollars, it's simply going to mean lower gold prices. In my view, this recent turnaround in gold was due to the stock market being a little on its heels, and therefore, you have the possibility of some further pullback in the metals should we continue in that environment. I'll bull up longer-term, but it doesn't mean we can't swing and retest $1900 as the downside again."

Frank McGhee, Precious Metals Dealer at Alliance Financial, also sees gold trending lower next week as concerns over the impact of a slowing economy, and "with the Fed not giving any indication of the long-dreamed-about pivot, rather "higher for longer' starts to bite."

Adam Button, Chief Currency Analyst at Forexlive.com, believes the pivot is in play. "There is a small chance left of a Fed rate hike in November, but that will be priced out in short order, and the focus will shift to when the first rate cut is coming," Button said. "As that focus shifts, gold will shine."

And Kitco's Jim Wyckoff sees an uptrend beginning to form for the precious metal. "Steady-higher as gold prices are now starting to trend up on the daily bar chart," he said.

Gold prices are currently up 1.25% on the week, with spot gold last trading at $1940.75 an ounce at the time of writing.

By

Ernest Hoffman

For Kitco News

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