NGD - Gold Settles Lower Amid Market Rally; What's Next?
Gold Prices Finished Lower Again This Week; Is There A Rebound Ahead?
In the longest run of weekly losses since the 3rd quarter of 2020, gold posted yet another losing week. Friday the precious metal reached lows of $1,671.70 in its worst, 1-day performance in weeks. By the end of the day, gold prices weren’t able to make it back to the $1,700 mark.
This has been a significant support and resistance pivot since late-March. What’s more is that the price of gold broke below its 50 day moving average for the first time since the start of the second quarter. Something important to note is that gold tested the 50MA on the way up to 52-week highs on April 1. This week gold is testing and breaking below the 50MA on a downtrend.
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A lift in oil prices has also bolstered any type of gains at the end of the week. Ahead of the big OPEC+ meeting on Saturday, oil prices and oil stocks soared. U.S. government bond yields climbed higher and gold prices tumbled after Friday’s better-than-expected jobs report.
Investor Confidence Seeing Flight From Safe Havens (For Now)
This is yet another sign of investor confidence growing stronger ahead of proposed “reopenings” across the U.S. “I’m seeing a big move toward risk,” said George Gero , managing director at RBC Wealth Management. Global investors “don’t want to be left behind in the rally,” lifting stocks and hurting havens.”
Meanwhile, this falls on the backdrop of previous bullish sentiment for gold and gold stocks. The likes of Citi, JPMorgan, and Bank of America all gave very bullish forecasts on the precious metal. Credit Suisse also increased its price expectations recently expecting an average as high as $1,800/ounce by next year.
“The U.S. unemployment rate has shocked everyone because the number was much lower than the market expectation,” Naeem Aslam, chief market analyst at Ava Trade, said in an emailed message, according to Bloomberg. “This is a mind-blowing number and shows that the economy is improving.”
What’s Next For Gold?
Gold prices are down nearly 4% for the week. Jobs data certainly took its toll on safe havens. But something to note is that gold bulls are looking at these “big achievements” with a bit of skepticism. “When all of the major economic data and indices have been knocked down so low, even the slightest improvements are magnified,” said Brien Lundin, editor of Gold Newsletter.
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We could see a return to more of the “norm” when things start going back online and optimism settles a bit. Essentially, this entails what happens after we don’t have “the economy reopening” to “look forward to”. Keep in mind that there is still a U.S. / China trade war, there are still concerns over Middle East tensions, and another major event is coming with the U.S. elections in November. These geopolitical and economic headwinds could be the next wave to influence gold stocks & prices this year.
Are Gold Stocks Still In Play?
In light of the recent flop in gold prices, it’s interesting to see what happened at the end of the day on Friday. Barrick Gold (GOLD Stock Report), for example closed green for the day. While shares slumped from its previous close, Barrick Gold stock was up 3.5% from the opening bell.
Newmont Corp (NEM Stock Report), Franco-Nevada (FNV Stock Report), and Yamana Gold stock (AUY Stock Report) also mimicked this trend. Furthermore, despite these larger gold stocks and the price of gold dropping below the 50-Day Moving Average, there were gold stocks that either remain or maintained above that key technical level. If you look at New Gold (NGD Stock Report) and Gold Fields (GFI Stock Report), both have held gains in the second quarter.
On Friday, New Gold stock essentially maintained its recent 2-week trend above $1.10. Gold Fields stock tested its 50MA but managed to close the week out above the key technical level. What will this mean as far as next week is concerned? The weekend could be a telling time as oil will be in a direct spotlight. Whether or not gold stocks are “in play” we’ll have to keep in mind the longer-term potential catalysts previously mentioned while taking into account the short term headwinds like oil’s next move.