With so much uncertainty dominating financial markets,Most analysts expect it’s only a matter of time before gold hits new record highs above $2,000 an ounce。
However, with the market looking a bit overstretched,Gold hitting new targets next week could be challenging。
The gold market was expected to end the week up nearly 2%, as the June contract last traded at $2,023.70 an ounce. Meanwhile, silver continued to outperform, with the May contract trading at $25.04 an ounce, up more than 3% by the end of the shortened trading week.
Gold and silver have benefited substantially from a sharp drop in bond yields over the past week, which in turn has put pressure on the dollar.
According to some analysts,If the dollar finds some upward momentum, it could prompt investors to take profits on bullish gold bets。
Darin Newsom, senior market analyst at Barchart.com said: “The dollar seems to be trying to establish a short-term uptrend on its daily chart again, while gold looks a little head-heavy in June. We’ve seen this before, though, It usually ends with a lower dollar and stronger gold.”
Starting with the March non-farm payrolls report on Friday, several reports next week could determine the future of the dollar and gold. Markets will be closed on Friday for the Easter long weekend, however, the U.S. government will keep an open mind and will publish the report.
Investors and traders will have to wait until after markets open on Sunday to react to the data, analysts said.Economists expect the U.S. economy to have created 288,000 jobs last month, according to consensus forecasts. Analysts pointed out that any better-than-expected situation would be positive for the dollar and negative for gold.
“With gold kicking off, sending bullish signals across all momentum indicators,Upcoming jobs report could be of remarkable importance。On the one hand, weak data could be a catalystto see if macro investors will add to their long positions, which so far have held significantly dry powder in the recent rally.On the other hand, a strong report could boost Fed expectations, if the gold price is not higher than 2026 US dollars / ounce, CTA may slightly reduce the position. “
Although since early 2022,The U.S. labor market has been surprisingly resilient, but economists point to signs that the tide is starting to turn, underscoring weakness and raising recession fears。
Ricardo Evangelista, senior analyst at ActivTrades, said: “If the U.S. non-farm payrolls in March follow the steps of recent data releases,If the U.S. labor market shows signs of weakness, then I would expect further dollar weakness and corresponding gains in the precious metals.I thinkGold set to break previous high of $2,069 hit in summer of 2020。”
Craig Erlam, senior market analyst at OANDA, said that due to current market conditions and sentiment, Friday’s employment data will have to surprise significantly to the upside. He said:”Any disappointing data, or even numbers in line with expectations, and we’ll see gold hit record highs。”
In addition to the jobs report, analysts noted that next week’s inflation data could also provide some support for the dollar.A strong job market and persistently high inflation could force the Fed to keep raising rates, economists say。
Expectations are growing that the Fed’s tightening cycle is over. Markets see about a 50% chance the Fed will keep rates unchanged between 4.75% and 5.00%, according to the CME Group FedWatch tool.
AlthoughAnother 25 basis point rate hike in May will bring headwinds to gold, but many analysts don’t see it as a game-changer for the precious metal. In this environment, investors will just have to wait a little longer before seeing record highs again, many analysts noted.
Even if gold is overbought at current technical levels, there is solid support in the market, said Sean Lusk, co-director of commercial hedging at Walsh Trading.He said: “There are good reasons for us to trade at these levels. With major uncertainties in the world, weAre seeing significant diversification into precious metals。”
If gold does test support around $2,000, investors may want to buy micro gold futures to test the waters, Lusk added.
Looking beyond U.S. rates, Lusk said,Ongoing banking crisis will continue to support gold as a safe-haven asset。