The gold market just experienced a highly volatile trading week as initial recovery efforts were stifled by surging US Treasury yields and a hawkish policy stance from the Federal Reserve (Fed). Although the precious metal faced downward pressure, retail investor sentiment remains steadfastly optimistic about a long-term uptrend.

The Week in Review

• Opening and Peak: Spot gold began the week at $4,383.44/ounce and reached a peak of $4,387.51, driven by concerns over geopolitical risks around the Strait of Hormuz.

• Selling Pressure: The rapid recovery soon stalled. Capital flows shifting to equities, combined with a stronger US dollar and Treasury yields surpassing the 5% mark, pushed gold down to a weekly low of $4,244.63.

• Weekly Close: Thanks to bottom-fishing buying and cooling oil prices, gold recovered slightly to close around $4,284.97/ounce (recording a 2.17% drop compared to the previous week).

Headwinds from Bond Yields

The primary factor weighing on gold prices right now is the heat of the bond market. Strategists like Adam Button and James Stanley pointed out that when bond yields cross 5%, gold struggles significantly to compete for low-risk capital. Additionally, market expectations that the Fed might implement further rate hikes to curb inflation continue to bolster the greenback's strength.

However, the foundational support factors remain intact. Ballooning US public debt, large budget deficits, and continuous buying from central banks are considered by analysts like Rich Checkan as the driving forces helping gold maintain solid support levels around the $4,000 mark.

Divergent Investor Sentiment

Kitco News' weekly survey reveals a clear split in perspectives between professional experts and retail investors:

• Wall Street (14 experts): Sentiment is divided, with 36% forecasting an increase, 29% predicting a decline, and 36% maintaining a neutral (sideways) view.

• Main Street (152 online retail investors): The majority are still betting on gold, with 57% expecting prices to rise, 23% forecasting a drop, and 20% remaining neutral.

Key Data to Watch Next Week

Gold's short-term upward momentum is currently being restrained, and its next move will depend heavily on the US economic picture released in the coming days:

• Tuesday: US Consumer Confidence and JOLTS job openings.

• Wednesday: ADP employment data, Q2 GDP, and notably the August PCE inflation index (the Fed's preferred inflation gauge).

• Thursday: ISM Manufacturing PMI and weekly initial jobless claims.

• Friday: September Non-Farm Payrolls (NFP) report.

The gold market is currently in a consolidation phase following a hot rally that broke the $5,000 mark earlier this year. Any signs of weakness from the labor market or a cooling down of the PCE inflation next week could serve as a launching pad for the precious metal to find its way back into the green.

Source: Kitco