The gold market closed the week with modest gains. However, it remains stuck in its weeks-long channel as resistance at $2,050 persists. Analysts are evaluating what his next move will be.
Is the stock market hindering the gold market?
cryptokoin.comAs you follow from , the Federal Reserve has signaled that it will ease monetary policy this year. However, recent interest rate cuts are off the table for now. Despite this, the gold market continues to attract the attention of investors. Many analysts and economists expect the central bank to begin its new easing cycle in June.
Analysts remain bullish on gold as interest rates will inevitably fall. But some say gold may continue to struggle as many investors look for excitement in stock markets. Other analysts believe the S&P 500’s continued move into blue-sky territory also provides an opportunity for the precious metal.
“Shiny metal has a ‘commodity-off’ sentiment!”
While gold is hovering above $2,000, the S&P 500 is moving from record low to record high. The S&P rose after Nvidia’s solid earnings in the fourth quarter. The chipmaker has overtaken Google’s parent group Alphabet due to the growing artificial intelligence trend. Thus, this week it became the third most valuable company in the USA. With a market cap of nearly $2 trillion, Nvidia is currently surpassed only by Microsoft and Apple.
Nicky Shiels, head of metals strategy at MKS PAMP, expressed Nvidia’s value in mining terms, stating that the technology company is 77 times more valuable than Barrick Gold. Shiels also states that gold is affected by the artificial intelligence craze. However, he notes that he continues to see value in the precious metal in the current enthusiastic environment. In this context, the analyst makes the following statement:
Gold is caught in a ‘commodity-off’ sentiment despite being just below all-time highs. The AI/technology hype is also moving far enough away from gold ETFs to lead to massive western investor exoduses. You can’t have bottom sentiment in an asset class when you’re near ATHs… Something is wrong, but it’s generally a good time to swim against sentiment in gold, especially as underlying physical demand becomes insatiable, steady and increasingly price insensitive.
“Gold is ripe for a move above $2,000!”
But some analysts say stock markets could be fragile and frothy, with just a handful of stocks driving the momentum. They note that the gold market will benefit from safe-haven demand as equities potentially recover. Bloomberg Intelligence senior market analyst Mike McGlone makes the following assessment:
I think gold is ripe for a move above $2,000 once the US equity market sees some pullback and filling. The Fed won’t relax amid speculative frenzies in risk assets.
““This disappointment will likely put pressure on gold.”
It’s not just the gold market that’s noted for its lackluster performance as investors are dazzled by the glitz of the tech sector. The mining sector continues to underperform even as gold prices remain high. Trade Nation Senior Market Analyst David Morrison says the disappointing performance in the mining sector could put pressure on gold. However, he also states that this negative atmosphere will be a bottom signal for miners and raw commodities. The analyst comments:
In terms of short-term price movements, the current stock market rally is certainly attracting the spotlight. At the same time, gold and silver are struggling to convince investors that they are worth owning significant amounts. However, after its rise in early December, gold is consolidating quite comfortably above $2,000. Precious metals can do nothing for years and then suddenly a strong rally emerges. Could we see this happen in 2024? Probably.
Economic data of the week
With the Federal Reserve in “wait-and-see” mode at least through June, some market analysts say investors’ attention will be focused on stock market sentiment and economic data will have little impact, even with reports due next week.
Markets will get a look at key inflation data next week with the release of the core Personal Consumption Expenditures Index (PCE), the US central bank’s preferred inflation gauge. Markets will also receive more home sales data and important information on activity in the manufacturing sector. Economists say it would take reasonably disappointing economic news to shake the bullish trend in stock markets.
- Monday: US new home sales.
- Tuesday: Durable goods orders. US consumer confidence.
- Wednesday: US 4th Quarter GDP forecasts.
- Thursday: US Core PCE. Personal income and expenses. Weekly unemployment claims. Pending home sales.
- Friday: ISM manufacturing PMI.
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