The Dollar Index (DXY) fell nearly 2% on Nov. 4 – its biggest drop since November 2015 – helping to boost gold prices, with spot gold up nearly 3% to $1,677.67 an ounce; while December gold futures rose 2.8% to $1,676.6, closing the week up nearly 2.2% – the biggest gain since late July.
“The US jobs report hit exactly where the gold market was looking, and that helped gold recover” said Jim Wyckoff, senior analyst at Kitco Metals.
Gold price moves inversely with USD.
The US central bank on Wednesday raised interest rates by 75 basis points, but signaled that it would soon scale back its aggressive rate hike to give the economy time to absorb the tightening policy. Fastest currency tightening in 40 years they’re doing. Those messages have led precious metal investors to believe that the Federal Reserve (Fed) will choose the path of decelerating the rate hike and choose the right time to stop the increase.
“If the US inflation report is released next week there is a surprise (inflation falls), gold could rise further to $ 1,700 an ounce,” said Edward Moya, senior analyst at OANDA.
The US has just released a series of economic data with mixed good and bad data, making it difficult for the market to predict the path of the Fed.
The Kitco News survey results show that sentiment in the market continues to improve, with the majority of analysts expecting prices to rise in the near term. The sentiment of retail investors also continued to improve but remained below the 50% threshold. This is a reversal of sentiment after gold prices ended October with a seventh consecutive monthly decline, the longest losing streak in 50 years.
Bond yields rose and the US dollar remained an important headwind for gold despite falling but still holding near 20-year highs. However, some analysts note that growing recession fears are boosting safe-haven demand for gold.
Ole Hansen, head of the commodity strategy at Saxo Bank, said a recession in the US will force the Federal Reserve to end its tightening cycle before reaching its 2% inflation target. He added that a stagnant inflationary environment with low economic growth and high inflation would create a bullish bias for gold.
However, Hansen added that while he expects gold prices to gain enough momentum to push higher, a move back to $1,675 will only bring the market back into the neutral zone.
“We can confidently call a bottom if prices can get back above $1,735. That would bring gold back to the upside” he said.
Christopher Vecchio, senior market analyst at DailyFX.com, said that he is neutral on the gold price outlook as he also believes prices will rise first to $1,680 and then to $1,730.
“We’re getting close to being able to say that gold has bottomed out, but gold still has a lot to do” he said.
This week, a total of 20 market professionals participated in the Kitco Wall Street survey. In which, 10 analysts, or 50%, said they are optimistic about gold prices next week; 2 analysts, or 10%, said they expect prices to fall; and eight analysts, or 40%, say they are neutral on the precious metal market.
On the retailers side, 520 people took part in online Main Street polls. In which, a total of 240 people, equivalent to 46%, forecast gold prices will increase; 169 people, or 33%, predict gold will fall; and 111 people, or 21%, forecast flat prices.
Kitco survey results on gold price outlook next week.
Concerns about the US economic recession began to appear with “cracks” in the labor market.
On Friday, the Bureau of Labor Statistics said 261,000 jobs were created in October, beating expectations. However, some analysts have said that when one looks at the numbers, there is a growing “weakness”.
The US unemployment rate rose to 3.7% from 3.5% in September; average hourly earnings rose 0.4% in October after rising 0.3% in September; but wage growth slowed to 4.7% year-on-year in October, after rising 5.0% in September.
“In the long-term, the new job market is clearly slowing down. In the “core” group of workers aged 25 to 54, job loss is increasing, a very important factor. The Fed will not stop tightening. because of that report, but it’s evidence that the jobs picture is deteriorating,” said Adrian Day, president of Adrian Day Asset Management.
Along with growing bullish fundamentals, many analysts note that the technical outlook for gold has turned positive.
“Gold has built a technical base above the $1,620 support and looks like it’s starting to kick in there,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.
However, not all analysts believe that gold’s rally is sustainable. Phillip Streible, the chief market strategist at Blue Line Futures, says that many investors have been burned by short-term bull runs like the current one.
He added that bond yields remained high, above 4%. That will still be a headwind for gold. Ultimately, he said that the Fed continues to raise rates and in this environment, gold rallies will end with strong selling.
Marc Chandler, managing director of Bannockburn Global Forex, said that he expects gold to hit $1,677 an ounce. “I would like to reduce the risk level before the US CPI release next Thursday – potentially proving difficult on the way to gold prices,” he said.
Reference: Kitco
Source: Vietnam Insider