By Paul Ploumis 27 Jul 2015 Last updated at 05:36:18 GMT
(Kitco News) - All eyes will be on the Federal Reserve, the U.S. dollar and economic data next week; and, according to analysts, any weakness could be positive for the gold market.
The gold market has some pretty big hurdles to cross as prices hit fresh five-year lows early Friday. Although a late-day rally helped push prices back to around $1,100 an ounce and cut gold’s loss to only around 3% from Monday, Comex August gold futures still ended their fifth consecutive week in negative territory.
Silver is also ending its fifth consecutive week in the red, but has managed to outperform the yellow metal. September Comex silver futures traded late Friday at around $14.60 an ounce, down 1.5% since Monday.
Although there is improving market sentiment among some analysts who say gold is oversold and are expecting to see a modest technical rally, there is still a strong bearish undertone among retail investors, according to the latest Kitco News Wall Street vs. Main Street Weekly Gold Survey.
This week, Kitco News saw the highest participation in its online weekly gold survey since it launched in April, with 555 participants. According to the results, 416 participants, or 75%, are bearish on gold next week. At the same time, 99 people, or 18%, are bullish. Seven voters, or 40%, are neutral on the yellow metal.
Kitco’s market professional survey was a lot closer, hitting a statistical tie once again, with a slight edge into the bearish camp. Out of 34 market experts contacted, 20 responded, of which eight, or 40%, said they expect to see higher prices next week. At the same time, nine professionals, or 45%, said they see lower prices, and three, or 15%, are neutral on gold for the week ahead. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.
Many analysts noted that the stronger U.S. dollar remains the dominant theme in the marketplace, and a hawkish monetary policy statement from the Fed on Wednesday following the Federal Open Market Committee (FOMC) meeting could lead to lower gold prices.
"Right now gold is a commodity and a currency that nobody wants,” said Matthew Turner, commodity analyst at Macquarie. “Everyone is continues to turn to the U.S. dollar.”
Turner added that although he is bearish on gold in the short-term, the yellow metal does have more potential after the Fed pulls the trigger on rate hikes.
However, many analysts are not expecting the Fed to reveal anything new on its monetary policy stance as it has ended its forward guidance, previously warning market participants that monetary policy will now be decided on a meeting-by-meeting basis.
Bart Melek, head of commodity strategy at TD Securities, said that positive economic data will set the tone for the Fed’s meeting. In a recent research report, he warned investors that there is the possibility for gold prices to fall below $1,000 an ounce.
As for economic data to watch, Nick Exarhos, senior economist at CIBC, said that he will be watching the advance gross domestic product (GDP) report for the second quarter. He added that positive economic growth in the second quarter, or higher revisions for the first quarter, would support a rate hike in September.
"Near-term, I just don’t see a lot of support for gold,” he said. “I think we are going to see a stronger U.S. dollar next week.”
Even in the bullish camp, analysts are not expecting to see anything more than a short-term rally in an overall bearish downtrend.
Ken Morrison, editor of the newsletter Morrison on the Markets, said that he would expect gold prices to bounce back to around $1,120 next week.
"Any 'bounce' will be shallow and brief, but tradable. The intermediate trend will remain to the downside,” he said.
Ted Sloup, senior market strategist at iiTrader.com, said the risk/reward in the gold market favors a technical bounce as the gold market is the most oversold in two years.
However, he added after some short-covering, he would expect gold bears to re-enter their short bets around $1,130.
Along with the FOMC meeting and U.S. second quarter GDP, economic data to be released next week includes June durable goods data, July consumer goods, pending home sales, and regional manufacturing data.
Courtesy: Kitco News