Gold prices have risen, buoyed by weak US equity markets and chart-based strength, as it shrugged off a higher US dollar and strong US economic data suggesting a brightening outlook for the economy.
The metal briefly gave back some gains after US retail sales were reported to have increased 1.3 per cent in April, the most since March 2015 and more than the 0.8 per cent expected by economists.
Spot gold was up 0.8 per cent at $US1,273.53 an ounce at 2:46 pm EDT (0446 Saturday AEST). That left gold down 1.1 per cent this week, the biggest weekly decline since the week ended March 25.
Goldman Sachs has consistently predicted the price of gold is going lower.
Last week, the broker raised its price target on the precious metal to trade at an average of US$1,200 per ounce in three months, up fr om its previous forecast of US$1,100 an ounce.
Looking further ahead, the broker now forecasts US$1,180 an ounce in six months (from US$1,050 an ounce), and then US$1,150 an ounce in 12 months’ time (from US$1,000 an ounce).
Retail investors and market professionals have diverging views on wh ere the gold market is headed next week, according to results of Kitco News’ Wall Street vs. Main Street weekly gold survey.
Main Street investors look for gold to bounce, while the largest chunk of votes in the Wall Street survey was for further weakness.
This week, Kitco’s online and Twitter surveys received a combined 663 votes. Of these, 458 participants, or 69%, looked for higher prices next week, while 124 people, or 19%, were bearish. Eighty-one respondents, or 12%, were neutral.
Meanwhile, 26 analysts and traders took part in a survey for market professionals. Thirteen, or half, said they looked for gold to weaken next week. Nine, or 35%, were bullish. The remaining four, or 15%, looked for prices to be sideways.
Technical indicators point to a negative bias on gold with a near term target at $1,250,” said Ken Morrison, editor of the newsletter Morrison on the Markets. “The inability to (convincingly) take out resistance at $1,300, nearly 90% of the managed-money funds' position on the long side, and continued strength in the dollar all remain headwinds for gold.”
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, suggested “some pullback is certainly in order” since the market is entering a period of seasonal weakness. Still, he said gold has shown “remarkable resistance."
Jessica Fung, market analyst at BMO Capital Markets, is also watching the U.S. dollar; however, doesn’t think it will have much impact on gold prices as she expects the metal to continue to hang around the $1,270 area in the near-term.
“Gold is battling some headwinds like a stronger U.S. dollar and seasonal factors but there are also strong supportive factors like low interest rate expectations,” she said. “There is potential for the U.S. dollar strength but those gains will be limited as markets are not expecting the Federal Reserve to raise interest rates in June.”
Ronald-Peter Stoeferle, fund manager at Incrementum AG and author of the In Gold We Trust Report, is also neutral on gold prices, despite his bearish outlook on the U.S. dollar and the U.S. economy.
Reference: Proactiveinvestor, Kitco, Business News
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