After four consecutive weeks of decline, gold prices are entering a new trading week in a context where market sentiment is still quite cautious. Although the precious metal has recovered from below 4,000 USD/ounce at the end of last week, analysts have not yet agreed on the upcoming trend as all attention is focused on the US jobs data series and the monetary policy outlook of the US Federal Reserve (Fed).
Kitco News' weekly gold survey shows that the pessimistic faction still prevails, but the gap between views has narrowed significantly.
Among the 18 Wall Street experts surveyed, 44% predict gold prices will continue to fall next week, while 28% expect prices to recover and the remaining 28% believe the market will move sideways.
For individual investors, online survey results also reflect caution. 46% predict gold prices will decrease, 37% believe gold will increase again and 17% believe the market will accumulate.
According to Mr. Adrian Day - Chairman of Adrian Day Asset Management, the market is currently under the simultaneous impact of many opposite factors. On the one hand, geopolitical risks can still support safe-haven demand. On the other hand, falling oil prices are contributing to cooling down inflation, thereby potentially reducing the need for the Fed to continue raising interest rates in the coming months.
Mr. Neil Welsh - Director of Metals at Britannia Global Markets - said that the market is still in an accumulation phase instead of entering a long-term downward cycle.
Meanwhile, Mr. Darin Newsom - Senior Analyst at Barchart. com - said that cash flow may soon return to the gold market when a portion of capital leaves the energy group. He also noted that central banks are still maintaining gold buying activities, while many technical indicators show that the precious metal is in a sell-off state.
Sharing the same view, Mr. Rich Checkan - Chairman of Asset Strategies International - said that the $4,000/ounce zone is playing a role as an important psychological support threshold.
The recent sell-off was too strong. I believe that both individual investors and central banks will continue to take advantage of the current price range to increase buying," he said.
Analyst Jesse Colombo also assessed that the adjustment lasting for many months is just a mid-term adjustment in the long-term uptrend cycle.
According to him, the 3,900-4,100 USD/ounce area is forming a noteworthy support zone. If gold prices can maintain above the 4,100 USD/ounce mark, market sentiment is likely to improve and open up opportunities towards the 4,100-4,600 USD/ounce resistance zone.
However, not all experts are optimistic. Mr. Sean Lusk - Co-Director in charge of trade risk prevention of Walsh Trading - said that gold still has the potential to fall to the 3,700-3,800 USD/ounce range before forming more attractive buying opportunities.
Mr. Alex Kuptsikevich - FxPro's analyst - also warned that technical signals are still leaning towards a downward trend as many long-term indicators have not shown clear signs of reversal.
Meanwhile, CPM Group continues to maintain the recommendation to sell gold in the short term with a target of 3,800 USD/ounce. According to this organization, strong USD, expectations that the Fed will continue to raise interest rates, positive US economic data and investor profit-taking activities are still factors putting pressure on the market.
Although short-term views are still very different, most analysts agree that the long-term outlook for gold has not changed. The demand for gold from central banks, the trend of foreign exchange reserve diversification, high global public debt and geopolitical risks are still seen as fundamental drivers supporting gold prices.
Next week, the focus of the market will be a series of important US economic data, including the consumer confidence index, JOLTS jobs report, ADP private sector jobs data, ISM manufacturing PMI index and especially the non-farm payrolls report. These are considered factors that can shape expectations for Fed policy as well as decide the next trend of gold prices in the short term.
