Wall Street holds out hope for gold despite fall to $4,445/oz, Main Street pares bullish majority with payrolls now in focus

Gold prices saw another dramatic week, as early momentum from dollar weakness and lingering fiscal concerns reversed after Fed Chair Kevin Warsh used his Jackson Hole speech to reinforce the central bank’s inflation-fighting stance and revive expectations for a September rate hike. Spot gold kicked off the week trading at $4,618.79 per ounce on Sunday evening, and the yellow metal pushed higher through Monday as traders continued to digest the prior week’s Treasury buyback announcement and its implications for long-term yields, U.S. debt sustainability, and hard-asset demand. The rally extended Tuesday, when softer consumer confidence and trader positioning ahead of Wednesday’s inflation and growth data helped gold set its weekly high of $4,697.66 per ounce. Gold’s advance began to falter on Wednesday morning, even after core PCE inflation and second-quarter GDP data did little to change the broader view that the U.S. economy remains resilient while inflation remains elevated. Gold slipped back below $4,600 as yields firmed and traders became more cautious ahead of Warsh’s Jackson Hole remarks. Selling accelerated Thursday as stronger Fed rate-hike expectations, a firmer U.S. dollar, and higher short-term Treasury yields pressured non-yielding assets. Spot gold fell to its then-low of $4,566.17 per ounce on Thursday, before momentum shifted once again, with traders bidding the precious metal all the way up to $4,631.98 early Friday morning. But Warsh’s hawkish tone from Jackson Hole turned sentiment sharply bearish, and gold prices fell well over 1% in the hours that followed. Spot gold ultimately set the weekly low of $ 4,445.45 just before 3 pm ET, before the metal managed a modest uptick to close the week at $4,455 per ounce.

The latest Kitco News Weekly Gold Survey showed half of Wall Street still bullish even after gold’s dramatic Friday slide, while Main Street sentiment pulled back from last week’s high-water mark. “Lower,” said Adam Button, head of currency strategy at investingLive. “He can pretend it's not forward guidance, but Warsh signaled that he's going to hike in September. Pricing has risen to 50/50, but it needs to get to +80% for a hike.” Marc Chandler, managing director at Bannockburn Global Forex, said gold was already struggling to maintain upside momentum after peaking near $4697 earlier this week. “The momentum indicators are rolling over, and I look for a stronger dollar ahead of the US jobs data at the end of the next week,” he said. “I anticipate a break of $4555, with losses extending toward $4500-$4527.” “That was quick,” Chandler added after Warsh’s speech provoked gold’s steep slide. “I am thinking now $4440, and maybe $4360.” “Up,” said James Stanley, senior market strategist at Forex.com. “I think we’re seeing a healthy pullback after the Warsh speech, and I think that longer-term the path is still the same as there’s no mention or thought of austerity, or of the US government borrowing less. I think the speech was designed to try to keep Treasury yields in check, but at the end of the day, I do not expect Warsh to err on the side of hawkishness, so I’m still bullish gold on that basis.” “42,” said Darin Newsom, senior market analyst at Barchart.com. “You may be wondering about my answer. Some will recognize it from The Hitchhiker's Guide to the Galaxy as the ‘Answer to the Ultimate Question of Life, the Universe, and Everything.’ What does it tell you about my thoughts on Gold next week? I have no idea.” “Last week, I was with everyone else in saying the market should go up, based on continued bullish fundamental factors,” Newsom said. “When I found out Kitco’s poll last week was “bereft of bears”, my ‘Blink’ reaction was that the market would go lower. And it has, after initially closing higher Monday. While I have no idea what next week might bring, fundamentally speaking I’d rather be long than short long-term.” “Unchanged,” said Adrian Day, president of Adrian...