(Kitco News) - Gold has finished the week on a strong note, ending a six-week losing streak and bouncing off a fresh 5 and-a-half year low.
Gold’s rally started in earnest Friday, following the release of November’s nonfarm payrolls report, which was relatively in line with expectations. The data showed that 211,000 jobs were created in November with consensus forecast calling for job gains of around 200,000. At the same time, October’s already red-hot labor market report was revised up to 298,000 jobs.
Comex February gold futures ended Friday’s session up almost 2% on the day and 2.6% for the week, settling at $1,084.10 an ounce.
Gold’s rally also managed to support other precious metals, with silver prices ending the week at $14.528 an ounce, a gain of 3.6%.
According to Kitco’s weekly Wall Street vs. Main Street Gold Survey, optimism is high that the bounce off of fresh multi-year lows is the beginning of a new surge of momentum.
This week, 417 people participated in Kitco’s online survey. Of those respondents, 240 people, or 58%, are bullish on gold in the short-term. At the same time, 144 people, or 35%, are bearish and 33, or 8%, are neutral on gold prices.
Out of 36 market experts contacted, 19 responded, of which 11, or 58%, said they expect to see higher prices next week. At the same time, five analysts, or 26%, expect to see lower prices, and three people, or 16%, are neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.
Analysts attributed gold’s late-week push higher to shifting expectations in the U.S. dollar. Many economists and analysts have commented that Friday’s in-line employment report all but confirms the Fed will raise interest rates by 25 basis points after its monetary policy meeting in less than two weeks.
According to some analysts, because expectations of a rate hike are close to fully priced into the markets, many investors and traders are starting to doubt whether the U.S. dollar can move higher under current market conditions, prompting them to take profits in their long U.S. dollar positions.
“There is a good chance that the dollar has at-least temporarily topped. The modest rate hike expected from the Federal Reserve is not meaningful for gold and has been more-than-discounted in any event,” said Adrian Day, president of Adrian Day Asset Management.
Adam Button, currency analyst at Forexlive.com, said he is bullish on gold as expectations of a Fed rate hike can’t really move any higher. He explained that all the bad news is priced into the gold market and all the good news is priced into the U.S. dollar.
“Looking at the chart, the gold market is definitely damaged but it finally has a reason to rally,” he said. “I just think the U.S. dollar will take a break for the next little while.”
Other analysts are optimistic on gold from a technical perspective, explaining that although the gold market hit new multi-year lows this week, prices still held above the psychologically important $1,000 an ounce level.
Ralph Preston of Heritage West Financial said that he expects to see more technical follow through in gold in the short-term.
Another factor that is creating optimism in the marketplace is that December is historically a positive month for gold as demand picks up during the holiday season. George Gero, precious-metals strategist with RBC Capital Markets Global Futures, said that he expects to see some stability in the gold market from increased physical demand.
However, not all analysts are optimistic that gold can continue its current uptrend.
Gero remains neutral on the market as prices remain below $1,100 an ounce.
With little data to come out next week, Colin Cieszynski, senior market analyst at CMC Markets, said that he is expecting markets to refocus their attention on the impending rate hikes.
“I just think investors looked around the markets Friday morning and saw that gold was the only asset that hasn’t rallied against the U.S. dollar and jumped on that trade,” he said. “It won’t take much to push gold back down to its lows.”
Cieszynski added that he expects U.S. dollar bulls will re-establish new long positions after this week’s rout.
“I think, technically, gold is still being drawn toward the $1,000 round number and a retest of that key psychological level remains possible,” he said. “Dollar bulls will take one last kick at the can before the Fed signals that rates won’t be moving higher anytime soon.”
For U.S. markets, the only data of significant importance will be November’s retail sales numbers and producer price index data, both of which will be released Friday.
By Neils Christensen of Kitco News; nchristensen@kitco.com
Follow me on Twitter @neils_C
