Weekly gold analysis: Bulls end three consecutive declines, will the gold price restart the bull market? Most analysts are bullish on the future.

FX678 Finance ·  Jun 17 06:22

Gold market maintained a steady rising trend before the weekend, but there was no significant response due to the continuous decline in consumer confidence and high inflation expectations in the United States. On Friday (June 14), spot gold rose 1.22% to close at $2,332.10 per ounce, rising throughout the day. It rose 1.71% last week, the first weekly increase in four weeks. Regarding the product composition, the operating income of products worth 10-30 billion yuan were 401/1288/60 million yuan respectively.

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On Friday, the University of Michigan released the preliminary Consumer Confidence Index, which fell from 69.1 (revised from May) to 65.6. The data was weaker than expected, with the general market expecting the index to be around 72.1.

The preliminary reaction of the gold market to the latest sentiment data is that it continues to encounter resistance at $2,350/ounce. In August, gold futures closed at $2,347.5 / ounce on Friday, up about 1.25% on the day.

Although the data was weaker than expected, Joanne Hsu, director of consumer research, denied the downward trend and said consumer sentiment had not changed much compared to May. "This month's reading is 3.5 index points lower than May, which is not significant statistically and is within the margin of error. Against the backdrop of rising inflation, current sentiment is about 31% higher than the low in June 2022," she said. "Overall, consumers believe that the economy has hardly changed compared to May."

New divergences between the Federal Reserve's interest rate predictions and market expectations may cause some fluctuations in the gold market in the short term. However, some analysts pointed out that as precious metals continue to consolidate further, attention to technical levels will become more important.

James Stanley, senior market strategist at Forex, said that the fundamental prospects dominated by geopolitical uncertainty and rising debt levels are still favorable for gold. However, he added that short-term technical prospects are a bit unstable as the price trend is forming a bearish head and shoulders pattern, with the neckline support area between $2,300/ounce and $2,275/ounce.

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(Spot gold weekly chart, source: Yihuitong)

Last week's headlines review

On Monday (June 10), investors waited for US inflation data and the Fed's interest rate decision later this week. The gold price rebounded after the precious metal had its biggest one-day drop in three and a half years the previous trading day. Spot gold rose 0.74% to close at $2,310.81 per ounce, fell to a daily low of $2,287.83 during the session, and then fluctuated upward, rising to a daily high of $2,313.82 at 00:33, slightly rebounding from the low point of $2,286.86 on the non-agricultural day. COMEX gold futures rose 0.13% to $2,327.95 per ounce, and COMEX silver futures rose 1.38%.Phillip Streible, chief market strategist at Blue Line Futures, said the selling on June 8 seemed a bit excessive; "Buyers are emerging at this lower price point." "With so many data and events coming up… we will see more volatility and more fireworks this week."

On Tuesday (June 11), the dollar's strength pushed the gold price up for the second consecutive day, but because traders were preparing for key data releases in the United States, the gold price remained at familiar levels. Precious metal traders were in a wait-and-see state as the Federal Open Market Committee (FOMC) began a two-day meeting. Spot gold rose 0.25% to close at $2,316.68 per ounce, and COMEX gold futures rose 0.29% to $2,333.85 per ounce; COMEX silver futures fell 1.65%.

"So many data and events are coming up… we will see more volatility and more fireworks this week."

On Wednesday (June 12), traders and industry experts said that the lightning-fast rise in gold prices to consecutive record highs suggests that gold prices will continue to rise in the second half of 2024, as the fundamentals of gold remain strong, although prices of $3,000/ounce seem out of reach. Investors are flocking to gold due to the Federal Reserve's interest rate policy, tension in Europe and the Middle East, and China's most noticeable central bank buying measures. Spot gold rose 0.34% to close at $2,324.73 per ounce, after the United States released CPI data, the spot gold price rose from below $2,315/ounce to a high during the day, then fell back to around $2,335/ounce after the 02:00 release of the FOMC statement, and fell after the end of Fed Chairman Powell's news conference, briefly dropping below $2,316/ounce. COMEX gold futures (including electronic trading sessions) rose 0.61% to $2,340.70 per ounce; COMEX silver futures rose 1.97% to $29.808 per ounce.

Sam Stovall, chief investment strategist of New York-based CFRA Research, said, "Although CPI is expected to decline slightly in tomorrow's report, investors are still being cautious." "CPI may be lower than expected, and the Federal Reserve may be optimistic that there will be at least one interest rate cut before the end of the year."

On Thursday (June 13), the probability of the Fed cutting interest rates this year continued to increase, and US stocks rose. Spot gold rose 0.97% to $2,322.60 per ounce, while COMEX gold futures rose 1.57% to $2,346.30 per ounce; COMEX silver futures rose 0.84% to $16.545 per ounce.Traders and industry experts say that the lightning-fast rise in gold prices to consecutive record highs suggests that, with gold's underlying fundamentals still strong, even though the price of $3,000/ounce seems out of reach, gold will continue to rise in the second half of 2024. Driven by the Federal Reserve's interest rate policy, geopolitical tensions in Europe and the Middle East, and the most noteworthy buying measures of the Chinese central bank, investors have flocked to gold.

On Friday (June 14), spot gold rose 1.22% to close at $2,332.10 per ounce. Full-day ups and downs rose; it rose 1.71% last week, its first weekly increase in four weeks. Regarding the product composition, the operating income of products worth 10-30 billion yuan were 401/1288/60 million yuan respectively.

As the Fed continues to cut rate-cutting expectations, the gold market is working hard to maintain a level of $2,350 per ounce.

The latest economic forecast shows that the Fed will cut interest rates once this year, lower than the three predicted in March. The Fed's rate forecast (also known as the dot chart) shows that the federal funds rate will exceed 5.00% by the end of this year.

August gold futures rose 0.79% on the same day.

Some economists believe that the Fed will keep its options open due to high inflation. However, the Fed did comment on inflation on Twitter.

The Fed said in a monetary policy statement: "Inflation has eased over the past year, but remains high. In recent months, the inflation rate has made some progress towards the committee's 2% target."

Last Thursday (June 13th) The US dollar index rose and the Fed's hawkish stance overwhelmed the mild US inflation report. The Fed's tough stance led to a rise in the US dollar against a basket of world currencies, and the prices of gold and silver fell sharply in the US mid-day, close to the intra-day low. Technical sales have occurred in both the gold and silver markets today, as the recent chart trends for these two metals have become more bearish. Spot gold fell 0.90% to close at $2,303.86 per ounce; COMEX gold futures fell 1.49% to close at $2,319.70 per ounce; COMEX silver futures fell 4.06% to close at $29.038 per ounce.

Since 2024, the performance of the commodity market has been impressive, with nonferrous metals, precious metals and other commodity prices showing significant increases, but prices have fluctuated significantly during the upward trend. Insiders say the Fed is switching from a rate hike cycle to a rate cut cycle this year, which in some ways has increased fluctuations in commodity prices. In the long run, the Fed's interest rate cuts are only a matter of time. For gold, its medium- to long-term outlook remains bullish, while for other commodities, attention needs to be paid to which will come earlier, an economic recession or a rate cut.

Outlook for this week

Last week, 13 Wall Street analysts participated in the Kitco News Gold Survey, and after last week's performance, they are more optimistic about the short-term prospects for precious metals. Eight experts (62%) expect gold prices to rise in the coming week, and only two analysts (15%) predict that prices will fall. The remaining three analysts (23% of the total) expect gold prices to consolidate in the coming week.

At the same time, Kitco's online survey received a total of 216 votes, with individual investors slightly more cautious than institutional investors, but overall optimistic. 117 retail traders (54%) expect gold prices to rise in the coming week. Another 49 respondents (23%) expect gold prices to fall, while 50 respondents (23% of the total) believe gold prices will consolidate in the coming week.

As the Fed's monetary policy decision is announced, the market focus will shift to Europe this week, as the Swiss National Bank and the Bank of England will both announce their monetary policy decisions on Thursday morning.

The market will also see the release of the New York State Manufacturing Index on Monday and May retail sales data on Tuesday. On Thursday, data on new home construction and building permits for May, as well as weekly jobless claims and the Philadelphia Fed Manufacturing Index, will be released. Existing home sales data for last week will be released on Friday morning.

Barchart Senior Market Analyst Darin Newsom expects gold to continue its rebound momentum from last week and rise further. "Although the midterm trend of August gold futures is still downward, its short-term trend has turned upward," he said. "This means that the contract should break through the previous high of $2,358.80 per ounce, with the next target rising to around $2,370 per ounce, followed by $2,391 per ounce."

"As the weekend approaches, I expect investment purchases related to the political turmoil in France to increase," Newsom added. "We can't call it a black swan event because it is predictable."

FxPro Senior Market Analyst Alex Kuptsikevich said he believes that the support for the $2,300 per ounce level of gold looks extremely fragile and unreliable.

"First, on June 8th, gold fell from its high point to its low point, with a decline of more than 4%, and trading volume was huge, breaking through the 50-day moving average," he said. "All other dynamics last week can be seen as bearish consolidation of liquidity, causing new blows to gold. This argument is supported by the fact that the 50-day moving average has become an active resistance."

"Second, the US dollar/ounce has been rising since June 8th, seeming to enter a 'buy-the-dip' mode," Kuptsikevich said. "The US dollar/ounce index has fallen back from the 200-day moving average since earlier this month. The rise in the US dollar/ounce combined with attractive bond yields makes the US dollar/ounce bond an effective competitor to gold."

The third factor dragging down gold is the continued decline of the stock market. "Apart from the individual stocks in the Nasdaq 100 index and the S&P 500 index that rose due to bearish pressures, the Dow Jones Industrial Average and the E-mini Russell 2000 index also fell significantly, not to mention that the CAC40 index in France fell 5% this week," he said. "As we hear about new risks of trade wars and protectionism, politics is again causing panic in the market."

Forexlive's currency strategist Adam Button is also considering the ever-changing political landscape and its short-term and long-term effects on precious metals and the US dollar/ounce.

"The consensus on open borders and open trade is based on the US dollar/ounce as its core," Button said. "Breaking this system will have an impact on the US dollar/ounce, and we have already seen these effects, especially now that the United States is using tariffs as a tool. A few days ago, Trump talked about using tariffs to replace income tax. This may even be an attack on countries like Canada. I don't think this is realistic, but who knows what it will be like in 10 years? What will happen in 2028? Does it look like two rational people in an election struggle?"

"This is the way the pendulum swings," he added. "So why hold US government bonds? When they say you cheat on tariffs, or you cheat on imports, they decide to steal your money, just like they did to Russia?"

"This sounds a bit ridiculous, but in such a world, how much is gold worth?" Button asked. "$10,000 per ounce? $20,000 per ounce?"

Regarding Europe, Button said the French-German consensus that has dominated Europe since the birth of the euro is coming to an end. "Where is the Eurozone going? If the European Union collapses, what's the point?" he asked. "We are seeing this in French bonds now. It is not difficult to imagine that the next German election, the next Hungarian election, and even the Netherlands will go in the same direction."

"Political turmoil is the current main theme," he said. "And this is a typical factor driving up the price of gold."

However, Button still doesn't think gold will rise in the short term. "Do I want to go long on gold in the coming week? No, I don't," he said. "If something can't go up because of good news, then it won't go up. This is the best CPI report that gold bulls can expect, but gold didn't go up. Gold performed well on June 15, but maybe it's political push and pull."

"I don't like the price trends of the past week, that's the bottom line for me," Button added. "If it falls below $2,300 per ounce, how much downside is there? Probably around $2,150 per ounce. Maybe I'm interested in that."

Another thing he wants to see is whether the gold price can withstand a genuine stock market shock.

"Nobody has forgotten how bad gold performed at the beginning of the COVID-19 pandemic," Button said. "I'm not saying we'll see a stock market drop like that, but this isn't a counter-cyclical trade. So I just want to see what gold will look like on days when the stock market performs poorly, a really bad day, and I think we're heading in that direction. We just need a bad headline news from NVIDIA. It's really dragging down the entire market."

Michael Moor, founder of Moor Analytics, is analyzing the technical chart of gold's recent price movements in lower and higher time frames.

Jim Wyckoff, senior analyst at Kitco, holds a neutral view on gold's future performance in the next week, "as both bullish and bearish are in neutral short-term technical trends, gold is oscillating and consolidating."

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(Spot gold daily chart, source: E-Huitong)

At 06:17 Beijing Time, spot gold was quoted at $2,330.56 per ounce.

The translation is provided by third-party software.

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