Gold might be looking at a sideways market before picking up pace again as U.S.-China optimism weighs on the precious metal, according to analysts.
The yellow metal was stuck in a narrow range this week, fighting off significant downside pressure from rallying U.S. equities and rising risk-on sentiment.
“The safe-haven gold and silver markets are seeing buying interest squelched by a generally upbeat trader and investor risk appetite the past several weeks. This is evidenced by the rally in the U.S. stock market that has seen the major indexes this week hit record highs,” explained Kitco’s senior technical analyst Jim Wyckoff.
This week showed that gold has a strong floor at $1,450 an ounce, which is protecting the metal from a bigger selloff. Gold was holding its ground solidly above the $1,460 an ounce on Friday despite rallying stock market.
Let’s talk technicals
Many analysts were neutral when speaking about gold next week, highlighting a fairly narrow range between $1,445 and $1,480.
“Gold could move up ever so slightly. But, I wouldn’t exactly say it is anything but neutral at this stage,” TD Securities head of global strategy Bart Melek said.
Resistance level around $1,480 will give way eventually but not in the short-term, Blue Line Futures president Bill Baruch pointed out.
“There is strong override resistance. The upbeat narrative on trade is going to be acting as a headwind,” Baruch said. “Strong resistance at $1,480. We’ll get above there in the more intermediate and longer-term but in the near-term, I am very neutral.”
“The near-term technical postures for both gold and silver markets have also deteriorated in recent weeks, which is inviting the chart-based sellers into the futures markets. It’s going to take a significant geopolitical jolt that would rattle world markets, in order to jumpstart serious rallies in gold and silver markets. Until that occurs, look for more sideways and choppy trading,” he said.
Gold will be stuck around $1,445-85 range if there are no surprises next week, said MKS (Switzerland) SA head of trading Afshin Nabavi. Investors should keep a close eye on “Brexit, the Hong Kong instability, the China-U.S. trade talk, which hasn’t been decided yet, and all the political problems,” he said.
Key data
One of the most important events next week will be the FOMC October meeting minutes, which are scheduled to be released on Wednesday.
“FOMC minutes would be the biggest thing I’d look at. I would expect the Fed to indicate that they are done cutting interest rates and they will continue to monitor the economy, which is doing quite well,” Streible said.
Other important data sets next week include U.S. building permits and housing starts on Tuesday, existing home sales and Philly Fed business conditions on Thursday, and Markit PMI data on Friday.
Reference: Kitco
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