In an interview with Kitco News, Kathy Lien - Director of Proptraderedge.com - said that gold prices have been quite steady in recent weeks when building a support zone around $4,000/ounce. However, she said the rally has slowed significantly and the precious metal could be easily affected by better-than-expected economic data.
This expert said that in the next three months, gold prices may go down and even retest the support zone around 3,500 USD/ounce.
In a period of 0-3 months, the best way to describe gold is: This is a transaction that is too crowded. If there is a reason, an excuse for speculators to withdraw, we could see a strong correction, she said.
According to her, the biggest exassign for traders to chase away from gold may come from the US Federal Reserve (FED).
She pointed out that gold's rally is starting to slow as expectations of changing interest rates. After the Fed cut interest rates earlier this month, Fed Chairman Jerome Powell said further cuts in December are not certain.
Currently, the CME FedWatch tool shows that the market is pricing in a 79% chance of the Fed easing next month; however, many economists believe that the possibility of the Fed cutting interest rates in December is only as "a 50 50/50 penny".
In the context of increasing uncertainty and widespread pessimism, Lien said that any positive economic data could strengthen the view that the Fed temporarily suspends the cutting cycle - thereby supporting a new increase in the USD.
The USD index has surpassed the 200-day moving average for the first time since February. This is an important technical signal, and if the US dollar forms a new uptrend, it could put significant pressure on gold," she said.
The expert said she is closely monitoring the inflation data. Inflation is still quite persistent and I think the upcoming level of inflation could surprise many. If that were the case, the possibility of the Fed suspending interest rate cuts would create a significant downside risk for gold, she said.
She also said she will pay attention to shopping data for the holidays. This Friday is the biggest shopping day of the year and will be an important measure of consumers' health.
Gold has been supported by a lot of negative information, and I dont think investors have prepared for any good news. If holiday shopping is really strong, it will reinforce the view that the US economy is not weakening as quickly as people think, she said.
Data from the National Retail Federation (NRF) shows that more than 187 million people are expected to shop during the Thanksgiving holiday, up from 183 million last year. At the same time, NRF forecasts that holiday spending will reach 1 trillion USD, an increase of 3.7 - 4.2% compared to 2024.
Consumers are planning to spend about $890 on gifts and holiday items such as decorations, greeting cards, food and candy, said NRF.
However, according to a survey by Deloitte (one of the four largest auditing and consulting groups in the world) released on Monday, US consumers plan to spend an average of 622 USD in the period from November 27 to December 1, down 4% compared to last year.
Although gold is sensitive to positive economic data, she said there is another risk. According to her, when the demand for investment in gold increases, many investors have never really experienced a bear market.
What I am concerned about is that many investors have never seen a bear market for gold, and when there is an adjustment, we will see widespread sell-off and strong fluctuations. It will be very chaotic. When gold corrects, the decline is always deeper and much faster than expected, she said.
Although optimistic in the short term, she still maintains an optimistic view of gold's long-term prospects. She said that even if the FED temporarily suspends the current easing cycle, they are unlikely to raise interest rates again in the near future.
She added that a correction of about 15% could attract strong buying from investors and central banks - who continue to diversify reserves away from the US dollar.
Even if gold prices fall to $3,300 an ounce down about 17-18%, it has not broken any key support zone since the start of the year, she said.
