Gold price has a chance to break out next week, here’s why – analysts

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(Kitco News) Gold could see a significant rally above the $ 1,800 an ounce mark next week after the minutes of the Federal Reserve’s June monetary policy meeting were released, analysts told Kitco News.

One of the biggest events to watch next week will be the minutes of the Federal Reserve’s monetary policy meeting. The meeting, which took place in mid-June, triggered a significant sell-off in gold.

“The markets are expecting a hawkish tilt, and anything that tells us there is no hawkish tilt is a little less than what people have been pricing in. You can see a big rally in gold, ”Bart Melek, head of global strategy at TD Securities, told Kitco News.

Market participants will closely monitor whether the restrictive statements made by some Fed members over the past few weeks match the notes in the minutes of the meeting.

“The FOMC meeting minutes are interesting if they contradict anything we’ve heard from the Fed, especially some of the more restrictive Fed members,” said Everett Millman, precious metals expert at Gainesville Coins.

Gold ends the week on a strong note as prices attempt to break the $ 1,800 an ounce mark again, according to a mixed US labor market report.

“We created 850,000 new jobs in the economy in June, but the unemployment rate has risen to 5.9%. The employment rate was also still very weak, which means that the Fed will not give any particular impetus to tighten monetary policy in the foreseeable future. And that’s good for gold, “Melek said.” We’re also seeing wage growth slowing, and that means inflation is likely to be temporary and there is no big reason for the Fed to raise rates. “

It’s still not clear if there’s enough momentum to drive gold much higher next week, but Melek sees prices return to $ 1,900 an ounce over the next six months.

Another driver to be observed is the development of the oil price, added Millman, noting that any further price increase will ultimately work in gold’s favor.

“I’m interested in what happens at the OPEC + meeting. Uncertainty about oil could have a big impact on inflation and that is still one of the main drivers for gold, ”he said. “If they agree to limit production, it should drive oil prices up.”

Higher oil prices lead to higher inflation, and that’s good for gold, Millman said. “It is also interesting in the case of Russia, which is such a large OPEC + player. Russia is dependent on the energy markets for its economy and has not bought gold recently. If the price of oil goes up, the country could have additional funding and possibly … start buying gold again, “he said.

Some analysts noted that it was a frustrating time for the gold bulls.

“It was a step forward and two steps back,” said Sean Lusk, co-director of Walsh Trading. “Gold failed to hold $ 1,800 and fell to a mid-April low of around $ 1,760. Now we’re back on the unemployment rate. Everything is crying out for inflation, but the problem was the US dollar rally.”

Lusk is bullish for July as gold seasonality returns. “We’re going back to the traditional gold buying pattern in mid-July. The wedding season is coming. There is a buying propensity. Cyclical trading is re-entering the market,” he said.

A breakout above $ 1,820 next week would open the door to another gold rally, said RJO Futures senior commodity broker Daniel Pavilonis. “If we close above that, gold could go much higher and even hit new highs.”

Data to look at

It’s going to be a pretty easy week of data as the United States celebrates Independence Day. Aside from the Fed’s minutes of the meeting on Wednesday, markets will be paying close attention to the ISM-PMI for non-manufacturing on Tuesday and jobless claims on Thursday.

“The ISM services index is probably the most important number and should show that the sector is growing very strongly thanks to the reopening with increased business opportunities,” said ING chief economist James Knightley.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. It is not an invitation to exchange goods, securities or other financial instruments. Kitco Metals Inc. and the author of this article assume no responsibility for any loss and / or damage that might arise from the use of this publication.

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