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Expect more volatility in gold price as sentiment shows no clear bias

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(Kitco News) - Investors should not expect the rise in volatility in the gold space to end anytime soon as near-term sentiment shows no clear bias in the marketplace, according to the latest Kitco News Weekly Gold Survey.

There is so much uncertainty and volatility that markets are going to be messy for a while,” said Afshin Nabavi, head of trading with MKS (Switzerland) SA. He added that he is not just neutral on gold but sitting on the sidelines waiting for a cleaner trend to emerge.

Among Wall Street analysts it was nearly a three-way tie for where prices could go next week with the bullish votes taking a narrow lead. Among 16 participants, six voters, or 38%, called for gold prices to rise; the call for lower prices next week or sideways movement each received five votes or 31%.

Sentiment is only slightly clearer among retail investors. At total of 2391 votes were cast in online Main Street polls. 1,207 voters or 50% said they were bullish on gold next week. Another 822, or 34%, said they were bearish, while 362 voters, or 15%, were neutral.

Kitco Gold Survey

Wall Street

Bullish
Bearish
Neutral

VS

Main Street

Bullish
Bearish
Neutral

Participation in Kitco News Main Street poll reached its highest level since July. Meanwhile, bullish sentiment has reached its lowest level since the start of the year.

The shifting sentiment comes after the gold price saw a significant breakdown this week, dropping below $1,900 an ounce and other important short-term support levels. The gold market is ending the week nearly $100 lower, down 5% from the previous Friday.

Despite the breakdown, there is still some bullish sentiment in the marketplace. Carsten Fritsch, precious metals analyst at Commerzbank said that the shakeout in the gold market does not come as a major surprise and added that it s a little over done.

The environment for gold and silver remains bullish,” he said. Nothing has changed in the last few months.”

For many analysts the U.S. dollar will be the key market to watch to gauge how much further gold has to fall.

Colin Cieszynski, chief market strategist at SIA Wealth Management, said that he is bearish on gold in the near-term as it looks like the U.S. dollar has room to run a little higher.

This is less about gold and more about the U.S. dollar,” he said. The U.S. dollar has dominated all markets and gold is no exception. I think we need to see another shakeout in gold before investors come back to the market.”

Ole Hansen, head of commodity strategy at Saxo Bank said that he is also paying close attention to the U.S. dollar.

It looks like we have more gas left in the dollar tank so the weakness in gold is potentially not yet over,” he said.

However, Hansen said that gold s correction could be limited as growing uncertainty ahead of the U.S. elections could create a safe-haven bid for the precious metal.

Although there is some uncertainty as where gold prices will go next week, some analysts are watching to see if $1,850 will hold as a new critical support level.

We now seem to have found a level which is bringing in new buying, so next week will see gold up, if only modestly,” said Adrian Day, president and CEO of Adrian Day Asset Management. The market needed a break and what we have seen could be all the pullback we will get.”

Peter Hug, global head of trading at Kitco Metals, said that he will be watching equity markets closely to determine where gold prices go.

He added that growing market turmoil and fear that a second wave in the pandemic are forcing investors out of gold and equities and into cash for safety.

Richard Baker, editor of the Eureka Miner s Report, said that he expects fears over the spreading coronavirus will continue to support gold prices.

Domestic infections are on the rise and, unfortunately, the U.S. will likely be in the throes of a second wave in the October-December time frame,” he said. I expect a repeat of the post-March behavior: weakening dollar, rising gold. If this comes true, there is an opportunity ahead to buy gold and silver at discounted prices.”

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 accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.