Gold prices may stagnate this week
While individual investors remain optimistic about the gold market, analysts are cautious, saying that the precious metal's price growth momentum is gradually narrowing.
The latest Kitco News weekly gold survey shows industry experts are evenly split between bullish and bearish forecasts for the near term, while retail investors remain bullish.
Of the 14 Wall Street analysts surveyed, six (43%) expect the precious metal to rise next week, while six see it falling. The remaining two (14%) see the market moving sideways.
Meanwhile, 62% of retail investors bet gold will increase this week, 20% predict the market will close the week in the red and 17% expect prices to not fluctuate much.
Darin Newsom, senior market analyst at Barchart, said gold could continue its positive trend until it is disrupted. The factors that could act as a headwind for the precious metal are investor activity. However, with geopolitical volatility on the rise, investors are unlikely to change their view of gold as a “safe haven.”
Kevin Grady, head of Phoenix Futures and Options, also said he sees no pressure on gold at the moment. "Correction pressure is normal. Interest rate movements continue to benefit gold and equities," Grady commented.
Market attention will be on a number of economic releases this week, including non-farm payrolls, manufacturing PMI, some US employment data and CPI in Europe. In addition, Fed Chairman Jerome Powell’s speech at the National Association for Business Economics (NABE) annual meeting on September 30 will also be of interest.
The precious metal’s recent surge has technical indicators pointing to a correction. However, James Stanley, senior market strategist at Forex.com, said overbought conditions are not a concern as central banks continue to ease. “Gold has further to go,” Stanley said.
On the other hand, Mark Leibovit of VR Metals/Resource Letter thinks prices will fall. Daniel Pavilonis, senior commodities broker at RJO Futures, also shares this forecast.
“I think we’re headed for profit taking,” Pavilonis said. “We don’t know how the election is going to play out. If you look at the market structure, it looks like gold is going to continue to go up to $3,000, but I think there’s a lot of headwinds right now.”
This expert believes that there are many factors affecting the momentum of gold price increase. "I think the market is under pressure to take profits. Investors should hedge risks and reduce their portfolios," Pavilonis said.
In addition to macro factors, Ole Hansen, head of commodity strategy at Saxo Bank, also predicted that gold could fall because the recent rally partly came from investors' FOMO (fear of missing out).
“Gold prices will fall as the recent rally is driven by FOMO and leveraged traders using derivatives,” Hansen said. “Physical demand is likely to dry up in the short term until investors adjust to new, higher prices.”