Experts predict gold price increase this week

After hitting record highs last week, the gold market came under some technical selling pressure over the weekend.

Strong buying momentum pushed gold prices above $2,700 an ounce last Thursday, but some analysts expressed concern that the precious metal’s rally may be getting a little too far.

“After hitting a series of new record highs on the back of the Fed rate cut, gold prices have stabilized. Based on my estimates, prices could fall by 4-6% without damaging the overall bullish sentiment,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Hansen added that he sees initial support at $2,670 an ounce. If that level is broken, the next level to watch is $2,547 an ounce. In the worst case, gold could fall to $2,500 an ounce.

Alex Kuptsikevich, senior market analyst at FxPro, said he sees little room for gold to rise. Kuptsikevich noted that this week's jobs data could pose some risks for gold.

However, some analysts believe that gold still has momentum. Bart Melek, head of commodity strategy at TD Securities, said he expects gold prices to rise back above $2,700 an ounce.

Melek added that the gold outlook remains bullish as the Fed cuts interest rates to support a weakening labor market, even as inflation remains high.

“The Fed is clearly focused on the second half of its dual mandate, which is employment. This creates a perfect environment for gold. However, there is still a risk that inflation will remain high,” Melek said.

James Stanley, senior market strategist at Forex.com, also sees gold prices rising much higher: “Gold is overbought, but that doesn’t matter because prices can continue to rise.”

However, he does not recommend chasing the market. Instead, he suggests investors consider buying gold on dips. He sees initial support at $2,650 an ounce, followed by $2,635 an ounce and $2,600 an ounce.

Despite the potential for short-term volatility, Stanley said central bank policy easing, with the Fed cutting interest rates by 50 basis points and China announcing significant stimulus measures over the past week, has supported gold's bullish trend.

Stanley stressed that gold remains the only hedge against global currency depreciation as central banks around the world begin to ease interest rates.

Friday’s U.S. nonfarm payrolls report will be the main event of the week, but other reports are expected to generate some volatility. Markets will also be paying close attention to what Fed Chairman Jerome Powell has to say next week when he speaks at the National Association for Business Economics (NABE) annual meeting. It will be Powell’s first in-person event since the central bank’s monetary policy meeting last week.