Gold breached $2,000 per ounce multiple times this week, and prices hovered around that level Friday afternoon as U.S. traders roused themselves from their tryptophan-induced Thanksgiving torpor and returned to metals markets.

The latest Kitco News Weekly Gold Survey sees retail investors as optimistic as ever going into next week, while a majority of market analysts have joined them on the bullish side, albeit with a significant minority neutral on the yellow metal's near-term prospects.

Mark Leibovit, publisher of the VR Metals/Resource Letter, is bullish on gold for the coming week. "Giving the upside the benefit of the doubt regardless of strength or weakness in the US Dollar," he said. "Our risk is a resumption of a broad market sell-off, which could trigger selling in metals as the need to raise cash is on hold due to the engineered year-end rally in stocks."

Leibovit predicts new all-time highs for gold in 2024, but not necessarily for gold stocks. "Rather be in the metal or surrogate. My favorite is always CEF," he wrote, adding that the U.S. Dollar appears to be bouncing off technical support, which will impact gold and silver negatively.

Sean Lusk, co-director of commercial hedging at Walsh Trading, said markets are delusional if they think rate cuts are right around the corner, but he expects gold to make gains regardless.

"There's all this nonsense and noise about rate cuts next year," he said. "It's just completely nonsense, not with the equities being up where they are. It's not happening. This is more inflationary than anything."

Lusk said the market has learned to live with rates where they're at, and the Fed knows this. "It's warranted, given all the money we've printed, really over the last 24 years, but especially over the last three, the currency debasement. I think there's just a flight to safety here that has been unrelenting as it relates to gold and silver. This is what they want to see."

He said the idea that the Fed would begin cutting rates in the first half of next year is ludicrous. "They've got a big balance sheet to unwind," he said. "You're not going to do it by keeping equities up here, or by lowering rates."

"I think gold is catching some steam here," he added. "It's a safe-haven, uncertainty play, and that's usually why it rallies."

Lusk said markets have also seen some hard sell-offs in the energy sector, but this hasn't moved its way into metals. "There's been no correlation there," he noted. "That said, that can change in a heartbeat. But I just keep going back to the balance sheet that they have to unwind. Interest rates being lower… they might stay the same for a while, but from a dovish perspective, that's the best it's going to get."

Turning to the technical picture, Lusk said he sees strong resistance up around $2,060. "There's been a major congestion phase since the pandemic, from $1,730 to $2,070," he said. "If we hold above the 200-day moving average, down at $1,920, you're coming into a congestion where the market has had a hard time breaking through. $2,100, $2075 would be the low end of that range, all the way up to $2,160."

Lusk said in this environment, he's bullish on gold, and he sees precious metals rising with energy prices and seasonal support.

"I think energy is going a lot higher, and I think metals are going to go along for the ride," he said. "I wouldn't be short here. We could see some fluctuations, absolutely. But in the grand scheme of things, it looks to me like the path of least resistance is still higher. Seasonally, this thing from Christmas to Valentine's Day is pretty good; it's one of your best performers."

This week, 13 Wall Street analysts participated in the Kitco News Gold Survey. Seven experts, or 54%, expected to see higher gold prices next week, while only two analysts, representing 15%, predicted a drop in price. Four experts, or 31%, were neutral on gold for the coming week.

Meanwhile, 672 votes were cast in Kitco's online polls, and market participants were just as optimistic as they were in last week's survey. 431 retail investors, or 64%, looked for gold to rise next week. Another 156, or 23%, expected it would be lower, while 85 respondents, or 13%, were neutral on the near-term prospects for the precious metal.

Next week will be back to normal for data releases and market activity after this compressed Thanksgiving holiday week. Highlights will include the second print of U.S. Q3 GDP on Wednesday, Core PCE, Personal Income and Spending for October on Thursday, and ISM Manufacturing PMI for November on Friday.

Housing data will also be a major focus, with the release of October New Home Sales and final Building Permits on Monday, the S&P/Case-Shiller Home Price Index for September on Tuesday, MBA Mortgage Applications on Wednesday, and Pending Home Sales for October on Thursday.

Frank McGhee, head precious metals dealer at Alliance Financial, said he thinks gold is overbought and markets are mispricing a number of important factors.

"I think you've got a little bit of light-volume trading, especially in the silver market today, where you don't have a lot of participants and so the market's overreacting either way," he said of gold's Friday run above $2,000 per ounce. "I generally tend to think that you're going to see continued weakness out of gold. I don't really expect this rally to hold, you've already seen $40 or $50 before this last pop come out as geopolitical tensions started to ease, and I expect that's going to continue to happen over the next few weeks."

"I would not be surprised to come in one day and all of a sudden be down $50, $60 and heading back to the 200-day," he added. "We're way overbought."

McGhee said that seasonal factors, which would normally be supportive of gold prices at this time of year, are playing less of a role in the current environment. "Typically, the Indian buying season a few weeks ago is your big seasonal in the fall," he said. "But I think geopolitical right now is overriding it."

He also believes that metals markets, along with the equity markets, are mispricing a Fed easing scenario.

"I think the world is trying to say that the Fed's done and they're going to come right back down, and that just isn't going to be the case," McGhee said. "The Fed's going to hold up here, and they're going to give any of this ground up grudgingly over the next year."

McGhee also believes anyone expecting significant weakening in the employment picture, which will spur the Fed forward with rate cuts, is in for a letdown. 

"I just cannot conceive of this happening… the U. S. employment market just turning on a dime and starting to shed jobs," he said. "The mindset of most employers in the U.S. is it's too hard to get employees, and the ones you have, you're going to keep. I think that's where the market itself has it wrong. They're looking at older slowdowns where larger employers would shed people quickly. And I just don't think that's going to be the case going forward into the future."

The other component McGhee said markets are mispricing is the expectation that inflation will continue to decline at a steady rate, which will give the Fed room to begin cutting. "Did we get four or five points of inflation out of the market? Absolutely," he said. "But this last two points is going to be damn hard to squeeze out."

"And think about another component," he said. "We've got a full-blown shooting war that could bring every major player in the Middle East in, and gold hasn't made new highs. I think they may want to try and talk it higher, but the actual voting being done with people's pocketbooks… if anything was going to give us a run to $3,000, this last six months to a year should have, especially in the geopolitical area in this last six to eight weeks, and we just haven't done it."

McGhee said gold also has competition as an alternative asset and as an inflation hedge. "Bitcoin is siphoning a lot of the investment dollars off," he said.

Ultimately, he believes the precious metal won't be able to maintain these lofty levels. "They sucked a lot of people in," he said. "Markets tend to go in the opposite direction of where the crowd heads. And so that puts us well down below the 200-day average."

McGhee expects gold prices to retest $1,830 at least, and sooner rather than later. "The amount of work that we're doing here, if we fail, we're going to fail very quickly," he said. "It's the sort of thing you could see between now and the end of the year. If not, it certainly will be the second quarter of next year."

Adrian Day, President of Adrian Day Asset Management, is maintaining his neutral bias for gold prices. 

"I remain a little cautious on gold breaking through $2000 convincingly yet, though it's coming," he said. "We still have another Federal Reserve meeting this year when the Fed will aim to talk tough. But the cycle of tightening rates is done, and once the economy starts sliding into a recession, as foreign buyers abandon the long-term Treasury market – foreign holdings were down over $100 billion in the latest figures, led by Japan and China – the Fed will have to relent, initially perhaps on the balance sheet, and later on rates."

"Stopping tightening before inflation has been conquered will spark a dramatic move for gold," Day added.

Marc Chandler, Managing Director at Bannockburn Global Forex, also counts himself among the cautious as he expects gold to trade sideways in an elevated channel during the coming week. "Gold slipped through the support I cited last week but did not violate it on a closing basis and proceeded to rally back above $2000," he said, noting that the precious metal remained below the $2009 high seen in October.

"US bond yields softened in the first half of the week and the greenback was lower and when it bounced, the upticks were limited and corrective in nature," Chandler added. "I suspect there can be limited gains in gold toward $2010. I see support around $1977."

Darin Newsom, Senior Market Analyst at Barchart.com, is bullish on gold's prospects next week. "February gold remains in a short-term uptrend on its daily chart," he said. "With daily stochastics still below the overbought level of 80% as of Wednesday's close, there is time and space for Feb to challenge its previous high of $2,039.70."

"Also, once the U.S. Thanksgiving Holiday has come and gone, Burl Ives' classic 'Silver and Gold' will be playing on the radio nearly nonstop," Newsom noted. "This could put traders in a buying mood, at least until they get sick of it and start selling again."

Michael Moor, creator of Moor Analytics, said the technical picture remains bullish in the near term.

"I warned on 10/6 of strength, and we left a moderate bullish reversal below — we have traded $174.5 higher from the 18452 10/6 close," he said. "The trade above 19409 (-.5 of a tic per/hour) projects this upward $22 minimum, $104 (+) maximum — we have attained $78.8 so far.  These are OFF HOLD. The trade above 19846 (-1 tic per/hour) warns of decent strength — we have attained 25.2."

"There is a potential for another $30 (+) beyond this," Moor added. "If we break back below decently, look for decent pressure. We are likely in the midst of a lower-timeframe bullish structure."

And Kitco Senior Analyst Jim Wyckoff expects gold prices to make further gains next week. "Steady-higher as near-term technicals still favor the bulls," Wyckoff said.

Spot gold traded up 0.49% on the day on Friday, and was also up 1.10% since Monday. The precious metal last traded at $2,002.49 per ounce.

Source: Kitco

BDST: 1935 HRS, NOV 25, 2023
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