Wall Street advises caution on gold prices next week

Inflation data significantly influenced last week’s movements in the gold market, but as the week progressed, the focus shifted to the Federal Reserve and the anticipated adjustments in interest rates. Following Wednesday’s Federal Open Market Committee (FOMC) meeting, the Fed’s indication of maintaining three projected rate cuts in 2024 sparked a surge in gold prices. This outlook weakened the dollar and propelled gold to reach new all-time highs in futures and spot markets by Thursday.

However, the latter part of the week saw a resurgence of the U.S. dollar, which led to a notable decline in gold prices, a trend that persisted into Friday. According to the News Weekly Gold Survey, a trusted source of market insights, opinions among seasoned market experts were mixed and leaned towards caution regarding the direction of gold prices for the upcoming week. On the other hand, retail traders appeared to be overwhelmingly optimistic, rallying behind a bullish outlook for gold.

Colin Cieszynski from SIA Wealth Management encapsulated the prevailing sentiment among market participants at the end of the Fed week, expressing a neutral stance on gold for the upcoming week. He noted that gold might see some consolidation in the days ahead, considering the strengthening of the US dollar and the approaching month-end, coupled with a shorter trading week.

Darin Newsom from Barchart.com shared his intention to maintain a bearish perspective for the following week, marking his third consecutive week with this outlook. He pointed out that despite initial doubts on Thursday, the April gold contract experienced a significant drop, reinforcing his view. Newsom highlighted the potential for further declines in gold prices, supported by technical indicators and the strengthening US dollar index.

Lukman Otunuga, a senior market analyst at FXTM, observed that despite reaching fresh all-time highs, gold bulls appeared to be losing momentum towards the week’s end, burdened by a strengthening dollar.

Everett Millman from Gainesville Coins suggested that the optimism following the FOMC meeting was driven by the unchanged rate cut forecast. He argued that the main reason for gold’s positive reaction was the Fed’s rate projections, despite some skepticism about the accuracy of these forecasts. Millman emphasized the ongoing momentum trade in gold and the potential impact of trend-following traders and tactical investors on gold prices.

Analysts provided a range of views on gold’s future direction. Marc Chandler from Bannockburn Global Forex and Mark Leibovit from VR Metals/Resource Letter predicted a pullback influenced by a strengthening dollar. James Stanley from Forex.com also anticipated a retreat in gold prices, noting the market’s reaction to the Fed’s dovish stance.

The News Gold Survey showed a split among Wall Street analysts, with a wide range of views evenly distributed across higher, lower, and sideways price expectations for gold in the coming week. This diversity of opinions underscores the market’s complexity and the various factors influencing gold prices, from central bank policies to geopolitical risks and currency dynamics.

The gold market is at a crossroads, with expert opinions divided on its immediate future. While some anticipate further highs driven by geopolitical concerns and monetary policy, others foresee a potential correction after the recent surge. As always, gold traders and investors must stay vigilant, closely monitoring global economic indicators and central bank moves.

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