World gold prices experienced a week of strong fluctuations when they hit a peak of nearly 4,700 USD/ounce and then plummeted after Fed Chairman Kevin Warsh's tough statement. However, half of Wall Street experts still predict gold prices will increase next week.
World gold prices experienced a volatile week when the strong increase at the beginning of the week quickly reversed after the speech of US Federal Reserve (Fed) Chairman Kevin Warsh at the Jackson Hole conference.
Spot gold prices opened the week at 4,618.79 USD/ounce and increased continuously in the first sessions of the week. By Tuesday, the precious metal peaked the week at 4,697.66 USD/ounce, as investors continued to assess the impact of the US Treasury Department's move to buy back long-term bonds and concerns about the ability to control public debt.
However, the upward momentum began to weaken from midweek. Gold prices fell below 4,600 USD/ounce as US bond yields rose and investors became cautious before Mr. Warsh's speech.
Selling pressure increased in the last session of the week after the Fed Chairman issued a message considered tough on inflation and monetary policy. Gold prices fell more than 1% in just a few hours, hitting a week low of 4,445.45 USD/ounce before recovering slightly and ending the week around 4,455 USD/ounce.
Adam Button - Head of Currency Strategy at InvestingLive - believes that gold prices may even fall when Mr. Warsh signals the possibility of interest rate hikes in September. However, Marc Chandler - Managing Director of Bannockburn Global Forex - said that gold prices may test the 4,440 USD/ounce zone, even fall to 4,360 USD/ounce if important support levels are broken.
In the opposite direction, James Stanley - senior market strategist at Forex. com - still maintains a positive outlook. He assessed the sharp decline after Mr. Warsh's speech as a healthy correction and said that the long-term outlook for gold has not changed.
Rich Checkan - Chairman and CEO of Asset Strategies International - also believes that gold prices still have room to increase. According to him, adjustments should be seen as short-term buying opportunities.
Darin Newsom - senior analyst at Barchart. com - is more cautious, saying that it is very difficult to accurately predict the direction of gold next week. However, he still said that, in the long term, gold holding positions are still more attractive than short selling.
Meanwhile, Adrian Day - Chairman of Adrian Day Asset Management - predicts gold will move sideways after recording its strongest monthly increase since 1999. He said that gold prices need a break after a hot rally, but the long-term trend is still supported by large fiscal deficits, high debt service costs and persistent inflation.
Daniel Pavilonis - senior commodity broker at StoneX - said that the weekend decline is the result of the synthesis of US economic data, the strengthening USD and expectations of interest rate hikes. According to him, the possibility of the Fed raising interest rates in September and December is putting pressure on precious metals.
However, the US economy is generally still stable and if inflationary pressure cools down, the environment for gold and precious metals may become more favorable.
Notably, Alex Kuptsikevich - senior market analyst at FxPro - believes that the sell-off at the end of the week may help relieve over-buying in the short term and create room for gold prices to recover.
Gold prices have found buying power when adjusting to the 4,600 USD/ounce range, showing that demand is still quite strong. The upward momentum of silver and palladium also reinforces the notion that gold's decline may only be a short-term correction.
Technically, Fawad Razaqzada - market analyst at Forex. com - said that gold prices have fallen below the important resistance zone of 4,655 USD/ounce and are testing the short-term uptrend line. The next support zones are being monitored around 4,436 USD and 4,400 USD/ounce.
Next week, the focus of the market will shift to US jobs data. The Nonfarm Payrolls report released on Friday is particularly noteworthy, along with the PMI index of manufacturing, JOLTS job positions, ADP jobs report and PMI of services.
These data may directly impact the Fed's interest rate expectations and thereby decide the next direction of gold prices.
At the time of update, spot gold price was at 4,455.43 USD/ounce, down 3.30% in the week and down 0.49% in the day. Despite a strong correction, surveys show that experts and investors still lean towards the scenario of gold recovery next week.
