By Ernest Hoffman, Kitco News
(Kitco News) – After enduring a two-week beatdown following Donald Trump's election victory, gold prices saw a strong rebound this week, posting gains in every trading session and gaining nearly $150 by Friday afternoon.
Spot gold kicked off the week trading at $2563 per ounce, and precious metals traders made their intentions known early on, spiking the yellow metal up $10 in the first hour or so of trading, and pushing the price to $2,594 per ounce by 8:15 p.m. Sunday evening. Gold continued to test the $2,600 per ounce resistance level throughout the European session, finally breaking through just after 8:30 a.m. EST on Monday morning.
From there, it was a series of slow and steady climbs punctuated by sharp spikes higher as a combination of gold-supportive data releases and worrying geopolitical headlines pushed the yellow metal upward. The next level of resistance to be breached was $2,625 per ounce, with spot gold breaking through just after 3:30 a.m. Tuesday morning. After a brief pullback following a top just below $2,640 around 7:45 a.m. EST, spot gold once again resumed its steady uptrend, hitting the then-weekly high of $2,641.42 shortly after 9:15 p.m. EST.
Midnight brought the only significant pullback of the week, with spot gold falling from $2,638 back down to $2,621 by 3:00 a.m. Eastern. But the yellow metal then resumed its multi-day uptrend, and by the North American market open on Wednesday it was trading above $2,645 per ounce.
Economic data then took a back seat to geopolitical news as the ratcheting up of missile strikes and bellicose rhetoric pushed the price steadily higher, with spot gold hitting a high of $2,673 per ounce shortly after 6:00 a.m. EST Thursday. It then set a fresh weekly high of $2,690 by 10:00 p.m., and broke decisively through the $2,700 per ounce resistance level around 4:30 a.m. EST Friday morning.
After multiple attempts to breach $2,708 failed, gold saw its final significant dip of the week when it fell to $2,687 per ounce just before the North American market open. But by 10:30 a.m., it had recouped all of its losses and the yellow metal set the weekly high of $2,711.51 per ounce just after 2:00 p.m. EST, after which it held comfortably above $2,700 for the remainder of the session.
The latest Kitco News Weekly Gold Survey showed the previous week’s strong bearish sentiment among industry experts evaporating completely, while retail traders moved firmly back into bullish pastures.
“Next week, I see gold and silver prices higher,” said Rich Checkan, president and COO of Asset Strategies International. “The trend is up after the post-election sell-off, driven by escalating tensions between Russia and Ukraine and by bargain hunting after the dip.”
“Next week will be a holiday-shortened trading week in the U.S., and I see gold buyers taking positions in the market versus on the sidelines over the long Thanksgiving holiday weekend,” Checkan added.
“Up,” said Darin Newsom, senior market analyst at Barchart.com. “Given the abruptness of the market’s short-term uptrend, a selloff could occur at any time. This possibility is increased by next week’s US holiday followed immediately by the end of the month.”
“All that being said, I think Chaos continues to trump technical patterns and Russia’s Putin isn’t backing away from his threats of using nuclear weapons,” he added. “This should keep investors buying gold, at least through the end of 2024.”
“Gold has had a big week — up every day,” said Marc Chandler, managing director at Bannockburn Global Forex. “The weekly gain of about 5% recouped the previous week’s loss and snaps a three-week drop. A close above $2700 signals a return to the record highs set at the end of Oct. near $2790.”
Chandler said that geopolitics seem to be just as important – if not more so – than financial developments. “The dollar remains strong and US rates steady to firmer,” he said. “The price action looks particularly bullish to me, and a move to $3000 next year seems reasonable.”
“Up,” said James Stanley, senior market strategist at Forex.com. “I’ve stayed with ‘up’ for a while now and see no reason to change at this point. Bulls made a statement move over the past week and as of right now it’s been the strongest weekly outing for gold in a year. This was a pretty clear response from bulls responding to the pullback that started around the Q4 open, and it doesn’t look like they’re ready to give up control at this point.”
“Higher,” said Mark Leibovit, publisher of the VR Metals/Resource Letter. “Coming off oversold position.”
Daniel Pavilonis, senior commodities broker at RJO Futures, thinks gold’s strong performance this week is all about geopolitics.
“With everything that's going on in Russia and Ukraine, it just seems like the current administration is trying to ramp things up to get what they want out of that whole situation,” he said. “And I think the anticipation is either to put the Trump administration in a bad position where it's going to be hard to get out of it, or do things ahead of any kind of peace agreement. I think that's ultimately what would happen. The escalation, from long-range missiles to landmines, it was just out of left field, but it makes sense. And I think gold likes that.”
“If there's an escalation there where it balloons into something more catastrophic, I think gold makes new highs and just keeps on running,” he added. “Geopolitics are one of the biggest drivers in gold.”
As for the stock market, Pavilonis said he thinks equities are continuing to rally because fears over the effects of possible tariffs are being tempered.
“On the surface, the tariffs look inflationary, but if you look at the details of what they are, and how this would be implemented, companies that manufacture stuff here would get massive tax cuts and the inflationary tariffs would be offset. I think that would be extremely bullish for the U.S. economy. Global companies may have some strategy to think about, but I think if you look at the Russell, you're looking at smaller companies, home-based companies, I think they would do really well.”
Pavilonis also thinks they might see money being repatriated back to the U.S. like it was the last time Trump was in office. “I think, all in all, that would probably be good for stocks, and I think that's what the stock market is looking for,” he said. “But if there is escalation with Russia, and it turns into something more than just Russia-Ukraine, then I think you would see a situation where stocks go down and gold still goes up.”
In the near term, if gold prices can hold above $2,700, Pavilonis believes the yellow metal can make further gains. “The next level up would be about $2,800, the previous resistance or previous high,” he said. “It's just really dependent on if there is escalation to really move the needle on this thing. If there isn't, if it's just nothing going on, I think we just stay sideways for a little bit.”
Pavilonis also thinks market participants are positioning themselves based on geopolitical risk on Friday ahead of the Thanksgiving holiday.
“I think that would be the driving force and I think that's what we're seeing today as we're going into the weekend,” he said. “We have a holiday week next week where business is open as usual except for the holiday, but I think Monday-Tuesday-Wednesday, it's not going to be,” he said. “I think there's going to be a lot of people on holiday here, even though Thanksgiving's not until Wednesday. So it might not be a lot of market action, but that could also mean if something does happen, the market can move a lot further than usual.”
This week, 18 analysts participated in the Kitco News Gold Survey, and the bears have all returned to their caves as no one on Wall Street was willing to bet against gold in the near term. Fully 16 experts, or 89%, expected to see gold prices rise during the week ahead, while the remaining two analysts, representing 11% of the total, expected to see price consolidation for the precious metal.
Meanwhile, 189 votes were cast in Kitco’s online poll, with Main Street sentiment rebounding back into bullish territory along with the price action. 125 retail traders, or 66%, looked for gold prices to rise next week, while another 36, or 19%, expected the yellow metal to trade lower. The remaining 28 investors, representing 15% of the total, expected gold to trend sideways in the near term.
Next week's economic news calendar will be truncated by the American Thanksgiving holiday, but there are still several significant releases on the docket. Markets will be paying attention to the Conference Board’s consumer confidence index for November and new home sales for October on Tuesday morning, followed by the release of the minutes from the last FOMC meeting at 2:00 p.m.
Then, Wednesday will see the rest of the significant U.S. data front-loaded ahead of the holiday, with October core PCE inflation, durable goods orders, and weekly jobless claims all coming out at 8:30 a.m., followed by pending home sales for October at 10:00 a.m. EST.
“I am bullish on gold for next week,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “This week has shown that just because Trump got elected doesn’t mean it’s going to be all sunshine and rainbows or that he is going to get his way all the time. There are serious geopolitical and other risks out there, and gold appears to be resuming its upward trend following a correction.”
Kevin Grady, president of Phoenix Futures and Options, expects the shortened holiday week to be an eventful one for precious metals traders.
“I'm predicting a very active week,” Grady said. “I think you're going to see very large volumes Monday, Tuesday, and Wednesday. And the reason for that also is we're in a roll period right now, where we're rolling out of the December contract and into the February contract. You're going to see some very high volumes this week and by Wednesday afternoon the banks are all going to be rolled, they're going to be no more in December's, they're going to be into February. I think people are going to try to keep their positions close to the vest going into the holiday weekend.”
Grady believes there’s a firm floor beneath the gold market right now, and the people holding positions are unlikely to be spooked out of them.
“I think a lot of the people that even bought the dips, they're not getting out,” he said. “You can try to drop the market down $40 or something like that in a flash crash, they're not getting out. But the short-term speculators that are following the trend here I think a lot of those people are going to be flattening out on Wednesday. I just don't see the upside to trying to say, ‘Let me take a ride in a flyer over the weekend.’”
Grady said he’ll also be watching the market on Thanksgiving Day. “I've seen crazy things happen on holiday weekends and anyone who's traded those crazy moves, no one wants to really experience that.”
That said, Grady also doesn’t expect gold prices to gain much more in the near term. “We've had a nice bounce back here,” he said. “I don't know if people are necessarily going to be going so long into this weekend, buying up any of these highs, pushing this market up, because we've already had appreciation. You could see it another $15 higher. I'm more like neutral for next week as far as price action. I don't think the people are going to come in, goosing the market going into this holiday weekend. I think a lot of the short-term speculators are going to be positioned more flat.
“But the long-term strong hands are going to stay in the market,” Grady said. “They're not getting out.”
Analysts at CPM Group see potential for spot gold to rise to $2,730 within the next two weeks.
“Gold prices are rising sharply,” they noted. “Political and military developments related to the Russian Ukraine war, developments in the Baltic and Middle East, and U.S. presidential transition are leading investors to buy gold. So, too, are economic concerns about weaker growth in many countries from the United States and Europe to China and India, coupled with concerns of a sooner, deeper recession in the industrialized economies.
“Finally, the roll of the December Comex gold futures contract next week, complicated by the U.S. Thanksgiving holiday, is adding some short-term pressure on gold that may extend into next week,” they said.
“CPM Group’s previous two Buy recommendations were pierced yesterday and again today, with gold touching $2,712.40 this morning,” the analysts wrote. “Prices are expected to remain strong into next week, but could see profit-taking in the first week of December. Whether prices come off some in early December will depend heavily on political developments and financial market opinions about economic prospects.”
“I see gold headed up,” said Michael Moor, Founder of Moor Analytics, “unless we fail back below 26749 (+1 tic per/hour starting at 8:20 am) decently – which should resume bearishness. In a higher timeframe, we are still in an overall bull trend from November 2015, and likely in the later stages. Part of this is a prediction I made of $151 minimum, $954 (+) maximum from $2,148.4 – of which we have attained $653.4 so far. These are OFF HOLD.”
“In a lower time frame, last week we saw a continuance and fulfillment of downside predictions, namely, the trade below 27730 brought in $231.5 of pressure, the trade below 27539 brought in $212.4 of pressure, the trade below 27141 projected this downward $95 (+) and we attained $171.9. These were put ON HOLD on 11/18. On 11/18 we left the minor bullish reversal below warned about — we have seen $111.5 from the 26009 open.”
And Kitco Senior Analyst Jim Wyckoff expects to see gold prices make further gains next week. “Higher amid keener risk aversion and more bullish technicals,” he said.
At the time of writing, spot gold last traded at $2,708.96 per ounce for a gain of 1.38% on the day and 5.44% on the week.
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