Welcome to Kitco News’ 2023 Outlook Series. Uncertainty continues to dominate financial markets as central bank monetary policies push the global economy into a recession to cool down inflation. Stay tuned to Kitco News to learn from the experts on how to navigate turbulent financial markets in 2023.
(Kitco News) – Gold prices could hover around $1,900 an ounce next week after Friday’s selloff cooled market sentiment among Wall Street analysts.
At the same time, retail investors, who missed gold’s $300 rally since its November two-year lows, remain bullish on gold and are anxious to get into the market, according to the latest Kitco News Weekly Gold Survey.
“All our clients are telling us a different reason why they want to buy gold. Some are worried about geopolitical uncertainty; others are worried about inflation impacting the dollar’s purchasing power,” said Phillip Streible, chief market strategist at Blue Line Futures. “This is a sign of underlying strength in the precious metal.”
Retail investors waiting for an opportunity to enter the gold market found their chance Friday after a surprisingly strong January employment report caused gold prices to drop more than 2% on the day. The Bureau of Labor Statistics said that 517,000 jobs were created in January, significantly beating expectations of job gains of around 193,000.
Some analysts note that there is further downside risk for gold as economists have said that surging momentum in the U.S. labor market could force the Federal Reserve to maintain its aggressive policy stance longer than expected.
The Federal Reserve has said that it needs to see softness in the labor market before they are confident that they have inflation under control.
However, some analysts remain sitting on the sidelines, waiting for the dust to settle.
This week, 18 Wall Street analysts participated in the Kitco News Gold Survey. Among the participants, eight analysts, or 44%, were bearish on gold in the near term. At the same time, three analysts, or 17%, were bullish for next week and seven analysts, or 39%, saw prices trading sideways.
Meanwhile, 740 votes were cast in online polls. Of these, 461 respondents, or 61%, looked for gold to rise next week. Another 183, or 25%, said it would be lower, while 106 voters, or 14%, were neutral in the near term.
The mixed outlook on gold comes as gold prices end the week down 3.5%, with most of the selloff coming Thursday and Friday. Last week the majority of analysts were bearish on gold as retail investors were bullish.
With gold prices dropping solidly below $1,900 an ounce, many analysts are watching support around $1,850 an ounce. April gold futures last traded at $1,877.30 an ounce.
Marc Chandler, managing director at Bannockburn Global Forex, said that gold’s correction could last through Feb. 14 when the next inflation data is released, which might give the Federal Reserve room to further slow its aggressive rate monetary policies.
“My target is a break of 1865 and head toward 1830-50,” he said.
Darin Newsom, senior technical analyst at Barchart.com, said that $1,850, could just be a first stop in this correction.
“This week’s bearish key reversal is leaving no doubt of a secondary (intermediate-term) top with a downside range of $1,850.10 and $1,811.50,” he said.
However, some analysts see a limited downside for gold in the near term.
“I’ve been expecting a pullback for a couple of weeks now. Gold had moved too far on expectations of a Federal Reserve pause and was vulnerable. Given today’s sell-off on the U.S. employment data, gold may not have much further to go on the downside,” said Adrian Day, president of Adrian Day Asset Management.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.