Gold's slide below $4,000 an ounce has left Wall Street analysts leaning bearish for the week of 26-30 October. In Kitco News' weekly survey, as reported by VnExpress, seven of 17 analysts (41%) expect prices to fall further, four (24%) expect a rise and six (35%) see a flat market or no clear direction. Retail investors are more upbeat: of the 161 who took part in the online poll, 67 expect gains, 41 expect losses and 53 expect prices to move sideways.
Oil, rates and forced selling
VnExpress says rising oil prices, inflation worries and expectations that the US Federal Reserve keeps policy tight have outweighed safe-haven demand for gold. A sell-off in technology shares also set off a wider wave of liquidation that dragged the metal below the $4,000 mark.
VietnamPlus adds the view from the big banks. Commerzbank analyst Carsten Fritsch says one reason is that investors have had to sell gold to cover stock-market losses or meet margin calls, as technology and artificial intelligence stocks are dumped.
Bank of America (BoA) sees rising oil as one of the biggest short-term risks for gold. Brent crude has climbed about 10% since the start of October. In BoA's view, expensive oil can push inflation higher, make it harder for central banks to cut rates and so reduce the appeal of a metal that pays no interest. The bank warns that if Middle East tensions drag on and oil hits $150 a barrel, gold could average $3,500 an ounce next year, although that is not its base case.
What the analysts say
| Analyst | View for 26-30 October |
|---|---|
| Marc Chandler, Bannockburn Global Forex | Technical signals still weak, with the 5-day and 20-day moving averages both falling; nearest resistance between $4,065 and $4,075 an ounce |
| Adrian Day, Adrian Day Asset Management | Neutral; expects two-way trading but sees $4,000 holding or only a slight dip |
| James Stanley, Forex.com | Bullish; $4,000 has a case to become key support, and he still favours accumulating gold over the long term |
| Kevin Grady, Phoenix Futures and Options | Thin liquidity is amplifying swings; uncertainty is too high to bet on a direction |
Source: VnExpress, citing Kitco News.
Central banks pull in different directions
According to VietnamPlus, central banks' gold reserve policies are diverging, but not by enough to move the global market much:
| Country | Move |
|---|---|
| Russia | Cut gold reserves by about 6.2 tonnes in September, taking sales so far this year to about 62 tonnes |
| Kazakhstan | Plans to lower gold's share of total reserves from about 78% to 75% by the end of the year |
| Poland | Still buying, close to its reserve target of 700 tonnes |
| China | Reportedly the main buyer of the Russian gold sold through Hong Kong |
Adam Stroniawski of precious metals dealer Mennica Skarbowa argues that the size and structure of these deals limit their effect on world prices. Over the longer term, buying by central banks and investors could still support gold.
The week of 26-30 October: rate decisions in focus
VnExpress notes that monetary policy meetings dominate global markets for 26-30 October, with the Fed, the European Central Bank, the Bank of Canada and the Bank of Japan all expected to announce rate decisions. Grady says the upcoming Fed meeting, together with geopolitical instability in the Middle East and the Russia-Ukraine conflict, is keeping traders cautious and on the sidelines. VietnamPlus expects oil prices, rate expectations and geopolitical tension to remain the main drivers for gold.
For last week's moves in world and domestic gold prices, see Gold falls below $4,000 after steepest weekly drop since June; SJC bars at 141.7 million dong.