(Kitco News) – Precious metals investors witnessed another strong performance from gold this week, as growing optimism about trade tariffs sapped the yellow metal's momentum even as investor interest in Asia and elsewhere continued to support price gains.
Spot gold kicked off the week trading at $3,239.76, and while metals prices did see some dramatic swings, the opening ultimately proved to be the weekly low.
Gold's first big move began at 4:00 a.m. Eastern on Monday morning, with European traders pushing the yellow metal from $3,263 per ounce up to $3,320 by 8:30 a.m. Once North American traders joined, they managed to push gold to a high of $3,336 per ounce not long before the close. Then it was Asia's turn to drive gold prices from $3,325 all the way to $3,382 per ounce in the first two hours of trading.
With gold prices now holding comfortably above $3,300 per ounce, the yellow metal ratcheted steadily higher on Tuesday, topping out at the weekly high above $3,431 per ounce just before 5:00 p.m. Eastern before a round of profit-taking drove spot gold to retest $3,365 at the start of the Asian session.
What followed was the week's steadiest and least eventful stretch of trading, with gold prices coasting comfortably through Wednesday's data, the Federal Reserve rate announcement, and the press conference while trading in a relatively narrow $30 range.
After another push higher to try to reclaim support above $3,400 per ounce at 10:00 p.m. Eastern on Wednesday evening, gold saw its most pronounced decline of the week, falling to $3,330 per ounce by 2:30 a.m., and when news of planned meetings between the United States and China hit the wires late Thursday morning, it sparked a retest of $3,300 by 3:15 p.m. and a decline all the way to $3,277 at the start of Asian trading.
But this multi-day low proved attractive to investors, and by 1:00 a.m. Eastern, spot gold was back up to $3,330 per ounce, where it closed out the week after a relatively uneventful North American session on Friday.
The latest Kitco News Weekly Gold Survey showed industry experts evenly split between bulls, bears, and the fence, while a slim majority of retail traders held a bullish bias after the yellow metal’s solid gains.
“I am bullish on Gold for the coming week,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “The US Dollar continues to steadily weaken, keeping a tailwind behind gold. The UK trade deal and the Fed didn’t move the needle, so it would likely take something really big to change the current trend.”
“Unchanged,” said Adrian Day, president of Adrian Day Asset Management. “Increased concern about an impending US recession as well as some optimism of an easing in the tariff war, particularly between China and the US, could weigh on gold, though it has been remarkably resilient, indicating significant pent-up buying demand.”
“Up,” said Darin Newsom, senior market analyst at Barchart.com. “If I had to pin one analytical thought to the bulletin board, it would be ‘Precious Metals Should Go Up’. I highlight the word ‘Should’ because there are no absolutes in markets. That being said, it was foolish on my part to vote ‘Down’ last week based on technical analysis. To me, technical analysis has gone the way of newspapers - largely irrelevant in this day and age of algorithm-driven trade.”
Mark Leibovit, publisher of the VR Metals/Resource Letter, is advising investors who are long gold to ensure they’re well protected from downside risk. “Still hedge with inverse ETFs GLL and ZSL,” he said.
“Up,” said James Stanley, senior market strategist at Forex.com. “I think $3,500 resistance is imposing for spot gold, but we’ve still seen bulls push to defend 3200 in the prior week and then 3300 this week – so I don’t think that buyers are completely done for yet.”
Daniel Pavilonis, senior commodities broker at RJO Futures, was trying to figure out the fair market value of gold in light of this week’s developments and the recent wild price action.
“We’ve seen this big whipsaw in gold after hitting $3,500 and then coming down to $3,200 and then going back up to $3,400 and then coming back down to $3,300. I think this is all off of China,” he said. “China is coming to some kind of negotiation. I think there's a possibility that ties become closer with China, and tariffs start to be removed or at least reduced. Gold sold off yesterday when Trump said something along the lines that he'd be willing to reduce tariffs while negotiations are going on with China, extending an olive branch. I think in that context, we can see what the market is thinking.”
“The overall inflation picture, it's been pretty stagnant,” Pavilonis added. “But I think China and trade deals are going have a bigger effect on the price of gold. Do we start to break down here, and maybe make a quick move to the 200-day moving average, somewhere around $2,700 or $2,800? Then maybe we hold there and continue to move higher.”
“There's a lot of long-term gold investors, even in the futurist markets, that have done very well, especially this last couple of years,” he said. “If there is some kind of deal struck in Switzerland, I wouldn't be surprised if gold sells off.”
Pavilonis said the other key element to the gold picture is the Federal Reserve’s monetary policy.
“Powell's in a bad position,” he said. “The market is neutral right now, so if he cuts rates, it could mean a sign that A, he's bowing down to Trump and it's for political reasons, or B, that the economy needs some assistance.”
On the other hand, Pavilonis said the Fed could signal undue concern about inflation if it were to raise rates, “that we're slightly above the 2% inflation level, and we need to raise rates because we're starting to see inflation, which was not what [Powell] was saying at all. We're in a good position here. The economy's still humming along. The jobs market is not overheated. Yes, there's some weaknesses there, but some of that was just government hiring and government weakness.”
Pavilonis said the key question now is, what's holding gold up at these elevated levels?
“What is the necessity for gold to be at $3,500, other than a possible kinetic or all-out economic war with China?” he asked. “Or these tariffs breaking apart the fabric of our economy right now? I think that's one of the biggest drivers of gold. But we're not seeing that happen, and in fact, maybe we've already passed the paradigm where it hasn't happened and now we're starting to see some deals here. Should gold be at $3,500, or should it be at $2,800?”
“I think the 200-day moving average is a pretty good mean reversion,” he said. “Maybe we got a little bit ahead of ourselves. Conversely, if there is no deal and things start to unwind and get much worse, could we see gold at $4,300, $4,500? I think you can see a situation where there is a lot of profit taking, there is a lot of risk-off, and the risk-off is contained somewhere around the 200-day moving average, which might create a nice buying opportunity.”
“These tariff negotiations and the economic implications, they're not just going to be papered over overnight,” Pavilonis warned. “I think things will be pretty spotty, and I think that's going to be supportive for gold overall, but I can see us pulling back here in the near term.”
This week, 15 analysts participated in the Kitco News Gold Survey, with Wall Street returning to a perfectly balanced distribution between the three possible positions. Five experts, representing 33%, expected to see gold prices rise during the week ahead, while five other analysts predicted price declines for the yellow metal. The remaining five experts, or 33%, saw gold trading in a range next week.
Meanwhile, 267 votes were cast in Kitco’s online poll, with Main Street maintaining the majority bullish bias of last week. 144 retail traders, or 54%, looked for Related news
