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Will gold land hard or go at full speed? These events may bring surprises next week.
After a healthy consolidation, the price of gold may be ready to go higher next week, as all attention is turned to avoiding the US government’s halting and US macroeconomic data.
Analysts told Kitco News that gold prices have performed well after the rebound at the end of January. In April, Comex gold futures were consolidated on Friday (February 8) and then closed at around $1318.80 per ounce. It rose 0.35% on the day and fell 0.29% this week.
"Gold is in a good upward trend. It seems that we have completed a fairly natural callback. An important warning is that in this rally, the market has been overbought. However, the upward trend remains unchanged. The current focus seems to be global growth prospects,” said Jasper Lawler, head of research at London Capital Group.
Next week may be a week full of surprises for gold. There are many undecided factors, including the upcoming February 15 deadline, and Congress must pass a border security agreement on this day to prevent the government from closing again.
RJO Futures senior market strategist Phillip Streible said that if there is no agreement and another shutdown, the price of gold may rebound sharply.
“When the US government closed the door last time, gold futures prices soared to new highs on December 24. I expect gold to rise again after the news of the US government closing,” Streible said.
However, Ross Strachan, a senior senior commodities analyst at Kaitou, added that it is important to remember that the potential gains will be temporary, as the government’s closure has historically had a very limited impact on gold prices.
Strachan said: "The possibility of government closing is very interesting, but as we saw in the last government closure incident, it did not directly translate into changes in the price of gold."
Bart Melek, global strategy director for TD Securities, said the US government is unlikely to close again.
"The Republican Party does not support this. The Democrats are not interested in this. You never know what Trump will do, but I doubt the market has not responded to it. We don't think this will shake the financial in any way. System," he said.
Melek explained that it is more important here to pay attention to the long-term credibility of the US government.
"Ultimately, it is not the government that closes the door. As long as the credibility of the US government is not a long-term problem, there will be no interest rate response, so gold should not respond," he said.
The Fed’s speech is crucial
Analysts said the signal sent by the Fed next week is another potential major driver of gold prices.
“An important driving force for monitoring now is the Fed’s communication around the policy. In recent weeks, we have seen a major shift in the Fed’s tone, and there are major questions about whether they will raise interest rates. In fact, we expect interest rates next year. Will be greatly reduced," Strachan said.
The market is uncertain how the Fed will coordinate the relationship between its new dovish argument and the strong macroeconomic data released by the US.
“The short-term risk is how the Fed will digest the news that the US economy remains fairly resilient and the unemployment rate is quite low, and there are still challenges in the context of the global economic context and the stock market turbulence last year,” Strachan added.
Melek pointed out that traders should not take it for granted that the Fed has ended the rate hike this year.
“I don’t think gold prices will soon break through recent highs, mainly because there are still many uncertainties in the actions the Fed may take,” he said.
Melek pointed out that solid US data is the center of the Fed's confusion. "If the data continues to rise unexpectedly, then the possibility of the Fed raising interest rates again cannot be ruled out," he said.
Several important Fed spokespersons will make headlines next week. Kansas City Federal Reserve Chairman George and Cleveland Fed Chairman Mestre will speak on Tuesday, and Atlanta Fed President Bostik will deliver a speech on Friday.
Next week's trade negotiations may bring more risks
Lawler said that the US-China trade talks may become more negative next week. He pointed out that the US trade delegation will travel to China.
“March 1 is the deadline for completing the task, and the time is tight. In general, the trade situation this year is positive. However, as we get closer and closer to the deadline, this situation may start to change, most It may be next week. If there is no specific report, we may face the risk of not being able to reach an agreement."
However, the research director of the London Capital Group added that the increase in risk does not necessarily mean that the price of gold has risen. "If there is a flood of safe-haven funds, the dollar will outperform gold," Lawler said.
Melek said that if gold wants to really rebound, the dollar price needs to weaken. "The dollar is now weakening, but for the gold to really take off, the dollar needs to be further weakened."
Level of concern
Many analysts pointed out that a new trading range is taking shape, and gold prices may fall into a sideways trend next week.
"Next week, gold futures will be more inclined to sideways. If we have a new defined range between $1306-1330, I wouldn't be surprised. This is the next stage of integration," Streible said.
Melek highlighted a similar trend: "The price of gold may be at the low end of the $1280-$1,320 range."
Streible added that the key psychological barrier of $1,300 is an important indicator and cannot be broken down.
"The $1306.40 is the key support for the gold price. If it falls below, it is likely to threaten $1,300. If we close below $1,300, it will cause a devastating blow to the bulls. On the other hand, the price of gold does need to return to 1325-1330. Above the dollar, and close in the range. Only then will the price of gold begin to rebound."
From a longer-term perspective, most analysts are optimistic about the price of gold, confirming that the upward trend of gold prices will continue.
"We are still optimistic about this year's forecast. We expect gold prices to rise to $1,350, as we believe that hedge funds and investor interest will support gold prices after the stock market adjustment," Strachan said.
“The gold is likely to appreciate steadily in the coming months. The stock market is also likely to weaken, which will be an attractive time for investors to increase their ETF positions and buy gold bars and coins. Although Asian demand is relatively low, it will be a price increase. Drivers," he pointed out.
US economic data
Some key data, including retail sales and inflation, are scheduled to be released next week. Analysts hope that the newly released data will further explain the state of the US economy.
The first is the US Consumer Price Index (CPI), which was released on Wednesday, followed by Thursday's PPI and retail sales data.
“Retail sales may show continued economic weakness, which may provide some support for gold prices,” Streible said. “In terms of CPI and PPI, this is inflation data, and we have recently seen inflation weaken.”
Editor in charge: Li Limeng RF13188
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