The Golden Outlook: A Sky Full of Opportunities

Gold entered the week at near-historic highs and continued to break records due to economic and geopolitical factors. In just two weeks, gold prices impressively surged by $120, with more than half of that increase occurring in the last two sessions.

On Friday, December gold futures traded at $2,647.10, a remarkable one-day increase of $40.90. Spot gold also ended the week above $2,600, reaching $2,620.63 per ounce.

This significant increase underscores gold’s role as a safe-haven asset during economic uncertainty and geopolitical conflicts. The performance of this precious metal reflects investors’ growing demand for stability amid shifting monetary policies and international tensions.

Domestically, gold prices rose by approximately VND 2 million per tael. Specifically, SJC gold bars increased to VND 80-82 million per tael (buying-selling), compared to VND 78.5-80.5 million per tael a week earlier. SJC 9999 gold rings also rose to VND 78.7-80 million per tael from VND 77.8-79.1 million per tael previously.

 The latest Kitco News survey revealed that retail investors are highly optimistic about gold’s prospects for the coming week, while industry experts are divided between predicting further price increases and a short-term sideways trend.

“Prices will go up,” said Adrian Day, president of Adrian Day Asset Management. “Currently, the upward momentum of gold prices seems unstoppable, although there will undoubtedly be pauses or pullbacks along the way. Over the past two years, central banks and Chinese investors have dominated gold purchases for their own reasons, but now Western investors are returning to the market as macroeconomic conditions evolve, with interest rates gradually declining and the economy visibly slowing down.”

Marc Chandler, Chief Market Strategist at Bannockburn Global Forex, opined that gold is likely to trade sideways next week. He stated, “Midweek, gold reached our $2,600 target, which we set after the Fed’s 50-basis point rate cut.” “Subsequently, prices pulled back, testing support near $2,550, before turning higher and making new highs before the week’s end.”

“Next week, the market is likely to be quieter, which could mean some profit-taking by momentum traders, especially if US rates adjust higher due to a stronger US dollar.” “With gold above the Bollinger Band ($2,604), the bulls may be patient, waiting for a more attractive entry point,” Chandler analyzed.

Colin Cieszynski, Chief Market Strategist at SIA Wealth Management, shared his optimism about gold’s performance next week. “After reaching a new all-time high, it appears that a new leg higher may have technically begun,” he remarked.

Mark Leibovit of VR Metals/Resource Letter forecasted a decline in gold prices for the upcoming week. “Prices are due to decline, as this is the trading top for the week based on cycles,” he asserted.

Sean Lusk, Commercial Hedging Strategist at Walsh Trading, focused on deciphering the implications of the Fed’s latest data release. The 50-basis point rate cut significantly impacted him, but it was the Fed’s updated forecasts that truly shocked him.

“I was surprised by all the forthcoming rate cuts beyond the 50 that they projected on the dot plot,” he admitted. “In my view, this will eventually increase inflation risks, but they must be thinking that the job market is worsening.”

“Clearly, they [the Fed] have shifted their focus to maintaining employment, but at the same time, doesn’t that increase the risk of future inflation?” he queried. “I don’t understand any of this. A 25-basis point cut is just a fantasy; it doesn’t do much, so initially, I understood the 50-basis point cut. Why not just leave it there and see if the unemployment rate continues to decline?”

Mr. Lusk mentioned that while others might disagree, he doesn’t believe the Fed is cutting rates for political reasons ahead of the November election.

“I believe what they’re saying,” he asserted. “There’s obviously some concern about a recession, and that’s why they’re doing this. I was actually surprised to see these long-term rates moving up as we’ve seen. Over the long term, and we’ll see what happens here, we need to see private sector growth…I don’t think it [the job market] paints a rosy picture for the economy,” he added.

Regarding the implications for gold, Mr. Lusk predicted that gold prices would continue to rise, at least in the short term. “It looks like we’re heading towards $2,685…not too far away, as prices are currently at $2,648,” he stated. “But nothing goes up forever, and we know that a healthy correction is looming,” he warned.

“What will prevent gold prices from falling is a significant stock market sell-off, as this would reignite worries in the market. You’ll see gold lose its luster because if stocks aren’t affected, no one will line up to buy it at $2,600 per ounce, at least not in the short term.” “The market will reach a state of equilibrium.”

Year-to-date, gold prices have surged by 27%, the most considerable increase since 2010.

 This week, 19 Wall Street analysts participated in the Kitco News survey about the prospects for gold prices next week, with the majority expecting prices to consolidate or continue rising, potentially surpassing last week’s gains. Among them, nine analysts, or 47%, predicted that gold prices would rise during the week, while eight analysts, or 42%, anticipated a sideways market, and only two people, or 11%, expected gold to decline next week.

Meanwhile, 189 Main Street participants responded to the survey, and most of them regained their optimism. Specifically, 129 respondents, or 68%, expected gold prices to rise in the upcoming week, whereas 29 people, or 15%, predicted a decline, and the remaining 31 respondents, or 17%, foresaw a sideways market.

Next week, although there won’t be as many significant events as in the past few days, some essential economic indicators will be released: the US will announce the preliminary S&P PMI on Monday, consumer confidence on Tuesday, new home sales on Wednesday, and durable goods orders on Thursday…

Notably, an essential indicator will be released on Friday morning: the Core Personal Consumption Expenditure (PCE) Price Index for August – the Federal Reserve’s preferred inflation measure when considering interest rate adjustments.

Reference: Kitco News