Tug Of War: Gold Price To Keep Fighting As Investors Eye Buying Opportunities

New York (May 18)  After the biggest weekly drop in five months, gold bulls are not ready to give up their tug of war against the bears just yet, according to analysts.

As gold gets ready to close the week below $1,300 an ounce for the first time this year, analysts are scrambling to project where the yellow metal might head next when the dust finally settles.

After posting the largest decline since December 2017, June Comex gold futures were last at $1,291.40, up 0.16% on the day.

Analysts are optimistic that gold is not going to fall below $1,280-$1,260, with some pointing to a good buying opportunity.

“From a pure trading perspective, I would be a buyer at $1,280,” Todd ‘Bubba’ Horwitz, chief market strategist of BubbaTrading.com, told Kitco News on Friday.

Gold looks “quite well sustained” around the current levels, stated Capital Economics analyst Simona Gambarini, who also sees gold ending the year at $1,300 an ounce.

“We don’t expect prices to fall much further over the next few months. Below $1,300 we can see some bargain hunting.”

Biggest Drivers

Next week, gold will remain vulnerable to further U.S. dollar strength as well as additional increases in the 10-year yield, said Colin Cieszynski, chief market strategist at SIA Wealth Management.

“The biggest thing I am watching is the U.S. dollar,” Cieszynski noted. “The break below $1,300 coincided with 10-year going over 3%. As we are seeing the 10-year hold above 3%, gold will remain below $1,300.”

Markets will need to see the U.S. dollar cool off before gold can rise above $1,300 again, TD Securities commodity strategist Ryan McKay pointed out. “The big driver will continue to be the U.S dollar. It is approaching 94 on the DXY here and that adds some downward pressure,” he said.

Gold will improve its standing as it enters the second half of the year, added McKay, noting that the Federal Reserve will play a major role in this.

“We see gold heading towards $1,330 or maybe higher in the second half of the year. The Fed might not be as aggressive as the market is pricing in right now. The yield curve is still fairly flat and the Fed has signaled that they are willing to let inflation overshoot for some time,” he said. “The Fed [will stick] to a go-slow approach and we will see the dollar weaken from where it is now, which will be positive for gold prices.”

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