Gold prices started March on a positive note as prices surged to a two-month high after disappointing US economic data raised expectations of an early interest rate cut by the Federal Reserve.
Spot gold prices ended Friday’s session (1/3) up 2.1% to $2,086.21 per ounce, the highest since late November 2023, and posted the second weekly gain in a row. Meanwhile, April 2024 gold futures also rose about 2% to $2,095.7.
In Vietnam, gold prices continued their volatile streak. On Saturday (2/3), domestic gold prices started rising to over 81 million VND/tael but then fell to 77.9 – 80.6 million VND/tael (buying – selling) in the afternoon of the same day. However, this price level is still higher than the range of 76.25 – 78.7 million VND/tael (buying – selling) a week ago.
World gold price movements.
Data released on Friday showed that US manufacturing activity continued to decline in February and surveys by the University of Michigan indicated weakening consumer sentiment. Earlier, data on Thursday showed that US inflation in January 2024 was the lowest in nearly 3 years, reigniting market expectations that the Federal Reserve will consider interest rate cuts.
Bart Melek, head of commodity strategy at TD Securities, said that gold is trending upward as the market believes the Fed will loosen monetary policy by mid-year. He said, “In the next 3 to 4 months, prices will hit record highs if we see weak economic data and the market believes that the Fed is ready to cut interest rates,” and added that the strong buying power of central banks is also supporting the market.
A weekly survey of gold by Kitco News showed that both Wall Street analysts and retail investors were cautiously optimistic about gold’s prospects for the next week.
Adam Button, chief currency strategist at Forexlive.com, said that Friday’s price increase demonstrated the potential of gold. However, he added that he didn’t believe this rebound was supported by strong fundamentals.
“I don’t understand how a lower ISM manufacturing index can push gold so high. I would be more confident that this rally was sustainable if it came following disappointing employment data. I think investors need to be careful because it shows how many investors are waiting for the US dollar to fall before getting into the market.”
James Stanley, senior market strategist at Forex.com, said he is also not pursuing the market at this time, even though he predicts prices will rise in the near future.
“I don’t think it’s time for the Fed to pivot. And while I’ve been very bullish about gold for the past few weeks, even after the price fell to $2,000, the fact that prices traded immediately above $2,075 makes me not want to chase it at this point. That’s the highest price of 2020 and still a significant technical hurdle for the bulls three and a half years from now,” he said.
According to Stanley: “Next week’s Non-Farm Payroll report will be highly relevant macro-wise, but we have to wait until next Friday for it to be released, so gold prices may approach $2,100, but I’m not optimistic that’s enough to suggest further gains.”
This week, 14 analysts participated in Kitco News’ gold survey and none predicted a decline in gold prices for the coming week (4-8 March). The survey showed that 11 analysts, or 79%, were bullish on price prospects, while 3 analysts, or 21%, took a neutral view on the precious metal.
Meanwhile, sentiment among retail investors on Main Street continues to steadily improve. This week, 175 online surveys by Kitco attracted Main Street. Of those, 77 retail investors (up from last week), or 44%, expect gold prices to rise next week; 43 others, or 25%, predicted the price would fall, while 55 respondents, or 31%, had a neutral view on the short-term outlook for the precious metal.
Marc Chandler, CEO of Bannockburn Global Forex, said the $2,088 level could be the key resistance level for gold next week. “Beyond that, the resistance level will be the record high set in early December, at $2,135.60. I think we’ll see the US dollar need to recover, and that could restore faith in the Fed’s readiness to cut interest rates. Some Wall Street economists have already given up hope that the Fed is about to cut rates, and former Treasury Secretary Summers has warned that the next move may still be a rate hike,” he said.
Phillip Strieble, market strategist at Blue Line Futures, said that although gold is experiencing an impressive rebound, he wants to see the metal hold a higher support level to confirm that this isn’t another price trap.
Some analysts say that while gold is experiencing an impressive rebound, it faces a significant resistance level at $2,100 per ounce.
Sean Lusk, co-director of commercial hedging at Walsh Trading, said he predicts gold prices will rise next week, but remains cautious about chasing the market. Lusk advised investors to consider options for exposure to gold and take advantage of the market’s momentum.
Reference: Kitco News
