Gold To Remain Range-Bound Next Week – Analysts

11 May 2015 Last updated at 05:44:52 GMT

 

(Kitco News) - The gold market has managed to cap a four-week losing streak, ending stuck within its well established range, which analysts are not expecting to see break anytime soon.

 

Friday, Comex June gold futures, settled the session at $1,188.90 an ounce, ending the week up 1%. At the same time Comex May silver future also ended the week in positive territory, settling Friday at $16.44 an ounce, up 1.8% since Monday.

 

Looking ahead, with no new insight into eventual Federal Reserve interest rate hikes, analysts say gold’s outlook appears muddy. Even among some of the most bullish analysts, gold prices are not expected to break above the top end of the range at $1,221 an ounce, next week.

 

The Kitco News Main Street vs. Wall Street gold survey shows mixed expectations for next week. For the online survey, 208 people voted; of those, 93 participants, or 45%, expect to see higher gold prices next week while 75 people, or 36%, see lower prices and 40, or 19%, are neutral.

 

Out of 33 market experts contacted, 21 responded; of those, four participants, or 19%, see higher prices, seven experts, or 33%, see lower prices and 10, or 48%, are neutral on the gold market. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.

 

Ole Hansen, head of commodity strategy at Saxo Bank described the gold market as a “coin toss,” as it remains directionless in the face of mixed economic data.

 

Friday’s mixed nonfarms payroll report for April, is not expected to provide any direction as traders spend a quiet week digesting the numbers. The data showed that 223,000 jobs were created last month, relatively in line with consensus; however, February and March numbers were revised down by a total of 39,000 jobs. The data also did not have any major inflation growth as wages grew by only 0.1% last month.

 

Bart Melek, head of commodity strategy at TD Securities, said the report removed a June rate hike from the table, but gold is still stuck in its range because it also didn’t push back the timing of the first rate increase either.

 

The two major U.S. economic reports that will garner market attention next week will be April’s retail sales, to be released Wednesday, and regional manufacturing data from the New York Federal Reserve for May, to be released Friday.

 

Consensus forecasts are calling for retail sales to have risen 0.3% in April, following March’s massive rise of 0.9%.

 

Forecasts for the Empire State survey, show economists expect the index to rise to 5.2 this month, after falling to negative 1.2 in April,

 

However, Melek added that neither of these reports, if they come in weaker than expected, will have a major impact on Fed rate hike expectations.

 

“A weak retail sales number for April still isn’t going to stop the Fed from hiking in September,” he said.

 

Jessica Fung, commodity analyst from BMO Capital Markets, said these current market conditions could last until the next Federal Open Market Committee meeting mid-June. She added that the only thing that could break gold out of its current range is a “black swan” geopolitical event.

 

“Gold has fallen below people’s radar and it will take something significant to get it back up there,” she said. “Until something unexpected happens, eventual rate hikes will continue to overhang the gold market.”

 

Although gold is expected to remain range-bound next week, some analysts do see some positives that could help prices hover above the $1,200 an ounce level.

 

With little economic data to provide any solid direction for gold, some analysts are looking at outside markets for some guidance. George Gero, vice president and precious-metals strategist with RBC Capital Markets Global Futures said that continued fund allocation into equity markets next week could hurt gold prices.

 

However, Julian Jessop, head of commodity research at Capital Economics, said that most financial markets are looking a little stretched, which could create volatility, ultimately supporting gold prices as investors seek safe-haven assets.

 

Courtesy: Kitco News