Wall Street’s gold sentiment balanced between bullish and neutral, Main Street maintains bullish bets ahead of final Fed meeting

NEW YORK (December 5) After weeks of defined and directional price action, gold prices bounced around in their elevated range as traders looked past much of the data to next week's Fed rate decision. 

Spot gold kicked off the week trading at $4,217.34 per ounce, and the yellow metal wasted little time moving into the upper edge of its recent range. By 8:45 p.m. on Sunday evening, spot gold was already trading at $4,255 per ounce, and by 8:30 a.m. Monday morning, gold topped out at what proved to be the weekly high of $4,262 per ounce.

But there was plenty of drama left in store for market participants, as gold was trading right back down at $4,225 per ounce by the North American open. This level proved solid support, until the Asian open drove gold all the way down to $4,205 per ounce. The yellow metal then saw another sharp decline during the European session, bottoming out at $4,185 per ounce just before 6:00 a.m. Eastern.

What followed was the first of gold's dramatic spikes, as 15 minutes before the North American open, spot had gained nearly $250 to trade at $4,228 per ounce. And just as quickly, traders dropped the yellow metal, with the price falling all the way to the weekly low just below $4,170 per ounce by 10:45 a.m. Eastern. 

With the weekly range now carved out, gold spent the next few days oscillating between $4,225 and $4,185 with brief periods above and below the channel. 

Thursday night saw gold embark on its last real move of the week, as Asian traders took the spot price from just below $4,200 on a steady climb to $4,230 per ounce, and after a brief pullback to retest $4,220, the yellow metal was back on a sharp upswing, with the North American open providing the final push to $4,254 per ounce by 10:30 a.m. 

What followed, however, was a reversal even sharper than Tuesday’s, with gold dropping over $50 in a matter of minutes just after 11:00 a.m. Eastern. And after three failed attempts to retake $4,220 per ounce, spot gold spent the remainder of the session sliding lower, and entered the weekend trading just below key support at $4,200 per ounce. 

The latest Kitco News Weekly Gold Survey showed Wall Street sentiment evenly divided between bullish and neutral perspectives, while Main Street investors remained virtually unchanged in their bullish majority.

“I’m cautious until the Federal Reserve meeting next week,” said Adrian Day, president of Adrian Day Asset Management. “Though a rate cut is likely, the odds are so high, and a cut is already discounted in the gold price. The risk is of disappointment and a short-term pullback. So UNCHANGED.”

“Up,” said Rich Checkan, president and COO of Asset Strategies International. “The surge in gold and silver prices last Thursday and Friday were telling. We tend to see big moves in price – either up or down – on thin holiday trading days. The direction of the move is usually a good indicator of whether investors wish to be in or out of this market long-term.”

Checkan said it’s clear from the price action that investors want to be in this market. “The only reservation is if the FOMC surprises the markets by either keeping interest rates unchanged or raising rates next Wednesday,” he said. “If the FOMC surprises, we could see a sell-off in equities and precious metals in the short-term.”

Adam Button, head of currency strategy at Forexlive.com, told Kitco News that Friday morning’s data was clearly bullish for gold.

“UofM, it's got that inflation expectations portion; there was a pretty dramatic fall in inflation expectations,” he said. “And then the PCE report also showed lower inflation.

Button said the data helps bring market expectations more in line with a responsible Fed rate policy. “I think there's this concern in the market, we've priced in a Fed cut for December, and we priced in two or three more next year, four total. That's what the market's pricing the Fed will do. But there's also what the Fed should do. And in this politicized Fed, those might be two different things.

“The Fed usually does what it should do, but we're pricing in this chance that the Fed eases too much and then you stoke inflation or chaos,” he said. “I think that the latest data is a good enough reason for the Fed to cut, or I think it maybe just eases the nerves. It shows that the Fed can cut more.”

Button said silver’s performance indicates to him that we’ve passed the midpoint of the precious metals rally.

“I'd say there's two things happening in silver,” he said. “There's this industrial demand story, which looks real, but two, it shows more retail participation. Retail can move silver a lot more than gold. And that shows that we're in the latter half of the baseball game in terms of the precious metals rally. Retail tends to pile in towards the end.”

“It doesn't mean we're in the ninth inning, but closer to the seventh than the third.”

Button said that’s about where we should be. “I don't think anyone thinks this is early innings of the precious metals rally,” he said. “Retail's clearly hammering the bid on silver. That's good. I think these things can go a long way once it gets going. There are a lot of the elements in place for a real silver squeeze, and people have been talking about that for 20 years, so they're having their day. It's been the year of precious metals.”

This week, 13 analysts participated in the Kitco News Gold Survey, with Wall Street experts evenly divided between bullish and neutral biases. Six experts, or 46%, expect to see gold prices rise during the week ahead, while six others predicted the yellow metal would trade sideways next week. The remaining analyst, representing 8% of the total, predicted a price decline.

Meanwhile, 163 votes were cast in Kitco’s online poll, with Main Street investors’ bullish sentiment holding steady. 113 retail traders, or 69%, looked for gold prices to rise higher next week, while another 24, or 15%, predicted the yellow metal would lose ground. The remaining 26 investors, representing 16% of the total, expected prices to consolidate during the week ahead.

Next week's economic news calendar is dominated by central banks, with Australia, Canada, the United States, and Switzerland all delivering rate decisions, though only the United States is expected to adjust its key interest rate.

Monday will see the Reserve Bank of Australia deliver its monetary policy decision, and Tuesday morning will feature the release of U.S. JOLTS jobs openings for November.

Wednesday morning, markets will watch for the Bank of Canada’s monetary policy decision, before all eyes turn to Washington for the Federal Reserve’s expected 25 basis point rate cut, and perhaps more significantly, its updated dot plot and economic projections.

 The week’s economic news wraps up on Thursday with the Swiss National Bank’s monetary policy decision and U.S. weekly jobless claims.

“I think the consolidative phase in the gold is constructive,” said Marc Chandler, managing director at Bannockburn Global Forex. “A move above $4265 basis spot could signal a retest on the record high near $4380.”

Chandler noted that gold rallied after the Sep. 17 Fed cut, but consolidated after the late October cut. “Little doubt now but that that Fed will cut on Dec 10,” he said. “Other central banks—SNB, RBA, and Bank of Canada to hold. China will report reserve figures in the next couple of days, and the central bank is believed to be continuing to accumulate the yellow metal.”

Kevin Grady, president of Phoenix Futures and Options, told Kitco News that 2026 looks like another banner year for the yellow metal.

“For next year, I think we're going to see $5,000 gold,” he said. “I think it's imminent. They're going to keep pushing this thing. Especially if Hassett becomes the new Fed chair, I think they're going to definitely be cutting rates. I think from right now it'll probably be about a full [percentage] point lower. And I think the markets are factoring that in over the course of the beginning of this year. And I think that it's, [00:01:00] I just think it's bullish for gold. But again, it's who's buying it. I think the central banks are buying it, they're not going to be selling it, and people can keep leaning into this.”

Grady said the metals bull market is clearly affecting ordinary people at this point. “As the market keeps rallying, you're seeing even retail jewelry being sold around the world,” he said. “People are saying, ‘Wow, I bought this gold necklace at $250 in 1985, and it's $4,000 now. And I'm going to go, see if I can sell this. As the prices keep picking up, you're starting to see that retail selling that's coming out.”

Grady also doesn’t expect markets to ‘sell the news’ following the expected rate cut next week. Instead, he sees the potential for further gains for gold.

“You can say, ‘Okay, we got the quarter point cut, now let's sell it,’” he said. “But there's going to be another cut coming. And when this new Fed chair is coming in, you know where rates are going. So you can sell it, but it's going to go back up.”

That said, Grady acknowledged that the holiday period is a risky one for traders. “December can be very dicey,” he said. “You can see a lot of volatility in December, especially with a lot of people taking off, and you have junior traders there as the market's moving, people that do not want to necessarily take a lot of risk. I think the banks are in a risk-off mode right now, but you can't let December's noise stop the picture of gold.”

“If gold sells off down to $4,000 again, that's okay,” he said. “But I think it'll be right back up there. I think you'll see some higher valuations once everybody starts coming in and you start seeing this softer environment and the verbiage that's coming out from the new Fed chair.”

Alex Kuptsikevich, senior market analyst at FxPro, expects gold prices to slide lower next week, as the U.S. dollar could rebound after the Fed decision.

“Silver has hit record highs three times in the last seven days, while gold is trading at $4,240, a level it only exceeded for three days in October,” he noted. “November was the fifth consecutive month that the precious metal closed in positive territory. Geopolitical risk has not disappeared. Russia and Ukraine have yet to find common ground. The looming Supreme Court verdict on tariff cancellation and a potential new shutdown are prompting investors to hold onto gold.”

“The White House is pressuring the Fed to lower rates as much as possible. However, if Kevin Hassett becomes the head of the central bank and the number of FOMC doves increases, there will be risks of accelerating inflation,” Kuptsikevich added. “In such an environment, gold will also be in demand.”

“Next week will be crucial, as the main driver in the markets recently has been the reassessment of expectations for the FOMC decision on 10 December,” he warned. “Will we see a ‘sell the facts’ reaction? The Fed's comments may be so dovish that they will breathe new life into the gold price. However, we see a high probability that the Fed's third key rate cut will be followed by an impulse for the dollar to rise, and this time the market will react with a sell-off of gold.”

Michael Moor, founder of Moor Analytics, believes gold will make further gains next week.

“In a Higher time frame:  I cautioned on 8/16/18 the break above $1,179.7-$1,183. warned of renewed strength,” he wrote. “We have seen   $3,214.3. This is OFF HOLD. On a Medium time frame: The break above 31482 warned of strength for days—we rallied $1,249.8. The trade above 32214 projects this upward $100 (+)—we rallied $1,176.6. The trade above 32236 warned of renewed strength—we rallied $1,174.4. The trade above 32392 projected this up 115 (+)—we attained $1,158.8. The trade above 33411 has brought in $1,056.9 of strength. The trade above 33850 has brought in $1,013.0 of strength. The trade above 34186 has brought in $979.4 of strength. The break back above 35640 has brought in $834.0 of strength. The trade above 36658 has brought in $732.2 of strength. The trade above 37143 has brought in $683.7 of strength. The break above 37725 has brought in $625.5 of strength. The trade back above 38828 brought in $515.2 of strength. These are OFF HOLD.”

“On a Lower time frame: The trade above 39732 has brought in $326.4 of strength,” Moor said. “The trade back above 40701 has brought in $229.5. The trade above 41738 has brought in $125.8. On 11/5 we also left a medium bullish reversal. These are ON HOLD. The trade below 42398(+11 tics per/hour) warns of renewed pressure—we have seen $36.5 before short covering off the low. Decent trade above 42442 (-6 tics per/hour starting at 6:00am) will project this upward $58.00 (+). Today warns of range expansion.”

And Kitco senior analyst Jim Wyckoff said firmly bullish charts are keeping the technical-based speculators playing the long sides in futures.

“Technically, February gold futures bulls’ next upside price objective is to produce a close above solid resistance at the contract/record high of $4,433.00,” he said. “Bears' next near-term downside price objective is pushing futures prices below solid technical support at $4,100.00. First resistance is seen at $4,273.30 and then at $4,300.00. First support is seen at the overnight low of $4,224.60 and then at $4,200.00.”

At the time of writing, spot gold last traded at $4,194.48 per ounce for a gain of 0.84% on the week but a loss of 0.34% on the day.

KitcoNews