Will the Gold’s Five-Week Price Increase Continue?

Gold prices displayed familiar movements during the week of April 15-19: opening at USD 2,367/ounce, hovering around USD 2,360-2,390 until geopolitical shocks propelled prices to USD 2,417.59 on Friday morning (April 19) before ending the week at USD 2,395.15/ounce. Altogether, spot gold prices increased by 2.2%, extending gains for the fifth consecutive week.

In the domestic market, SJC gold bar prices fluctuated between VND 81.65 – VND 83.95 million/tael over the weekend, an increase compared to the previous weekend’s range of VND 81.2 – 83.7 million/tael. Gold ring prices also rose to VND 75.36 – VND 77.35 million/tael, compared to VND 73.4 – 76.2 million/tael a week earlier.

Currently, the gold market is being influenced by ongoing geopolitical tensions in the Middle East. A week ago, when drones attacked Israel, gold prices surged to an all-time high of USD 2,426/ounce. A week later, at the end of this week, gold prices surpassed USD 2,400 again after Iran was attacked.

However, the retaliatory attacks between the two sides were not destructive and served more as symbolic gestures, leading to a rapid decline in gold prices thereafter.

David Meger, director of metals at High Ridge Futures, said: “The market has been driven by the increasing and decreasing tensions in the Middle East. If tensions ease, the yellow metal will also fall.” “However, in the long run, the uptrend will continue as the Federal Reserve may not cut interest rates as soon as the market expects.”

Indeed, Fed officials have unanimously agreed that interest rate cuts are not yet necessary. The market currently predicts only a 67% chance that the Fed will cut rates in September.

 Kitco News’ weekly survey indicates that both Wall Street and Main Street continue to bet on gold prices rising next week, despite potential setbacks along the way.

Colin Cieszynski, chief market strategist at SIA Wealth Management, said: “I am bullish on gold next week.” “At this point, the macro risk is still high, with a lot of geopolitical uncertainty going on. As we’ve seen, gold can catch fire overnight for a big rally.”

Adrian Day, president of Adrian Day Asset Management, believes gold will trade sideways in the coming week. He said: “The strength of gold in the face of central banks delaying rate cuts is notable, but there will be pauses along the way.” “I don’t think there will be a deep or prolonged correction, but a pause of a few days at least.”

Dennis Gartman, founder of The Gartman Letter , also indicated that he would join the bullish camp next week. He said: “I wouldn’t be surprised if gold goes back to new highs next week.” “Then it starts racing again.”

Daniel Pavilonis, a senior commodities broker at RJO Futures, said geopolitical conflicts will continue to push gold prices higher, even if tensions do not escalate.

He said: “There’s still a lot of geopolitical uncertainty, whether this is the Israelis going over there, whether it’s going to be the end of it, or whether there’s something else going on behind the scenes?”

Pavilonis added: “I think that’s one of the reasons why the yellow metal does continue to get bought, and probably the primary reason.” “I look for higher prices next week. Right now, it’s a safe-haven story and gold is where people want to go.” In his opinion, the Israel-Iran conflict will be a driving force for gold and other markets in the near future. “I think all the attention right now is on the Middle East.” “This will either fall by the wayside and nobody cares or it’s something that brings in more countries and then gold really could start taking off.” “Right now, that’s really the center of attention.”

This week, 14 Wall Street analysts participated in Kitco News’ Gold Survey, and despite a significant shift from last week toward expecting sideways prices, even fewer analysts are predicting a decline. Specifically, 10 analysts, or 71%, expect to see higher gold prices next week; while 3 analysts, or 21%, are calling for gold to be steady. Only 01 analyst, or 7% of those surveyed, anticipates lower prices.

Meanwhile, 149 votes were cast in the Main Street survey amongst retail investors. Sentiment there was more mixed about whether the precious metal will hold its lofty perch. Specifically, 95 retail traders, or 64%, predict gold will rise next week; 29 others, or 19%, forecast a decline; while 25 respondents, or 17%, see prices moving sideways.

With geopolitical risks sucking the ‘oxygen’ out of the market in recent times, the good news is that next week will bring little economic data that could impact the gold market. However, traders will be looking ahead to: U.S. existing home sales for March , due out on Tuesday (April 23); durable goods orders for March , due out on Wednesday (April 24); new home sales , jobless claims and first-quarter GDP on Thursday (April 25); and the PCE index and the University of Michigan’s consumer sentiment numbers on Friday (April 26).

Some observers suggest the market is overbought and could be due for a sell-off. However, the overall trend suggests prices will head higher, and with geopolitical tensions expected to continue until the U.S. presidential election in November, gold is likely to remain an attractive destination for safe-haven investors.

Reference: Kitco News