Gold bulls and bears fighting for gold's next $50 move
(Kitco News) - There is no clear short-term advantage in the gold market as bullish and bearish investors fight for the next $50 move, according to the latest results of the Kitco News Weekly Gold Survey.
Although there is no majority among Wall Street analysts and retail investors, the bullish investors have a slight advantage when it comes to sentiment next week. However, the battle in gold is being fought over resistance at $1,900 an ounce and support at $1,850 an ounce.
Gold’s sideways trading appears to be weighing on retail investors the most; bullish sentiment is at its lowest level since May 2019. Although analysts are looking for a breakout, some don’t expect it will happen anytime soon.
“I think gold is stuck in this range, and we will remain here until we get some new information,” said Kevin Grady, president of Phoenix Futures and Options. “For gold to break above $1,900, we need to see some news on new stimulus measures, but that doesn’t seem like a priority right now.”
“If key chart support at $1,848.00 in December futures breached, bears would gain power to suggest a fresh leg down in prices in the near term,” said Jim Wyckoff, senior technical analyst at Kitco.com.
This week 17 analysts participated in the survey. A total of eight voters each, or 47%, called for gold prices to rise next week; meanwhile, five analysts, or 29%, called for lower prices; four analysts or 24% were neutral on gold.
Meanwhile, a total of 1,539 votes were cast this past week in online surveys. Among those, 642 voters, or 42%, said they were bullish on gold next week. Another 594 participants, or 39%, said they were bearish, while 303 voters, or 20%, were neutral on the precious metal.
The gold market is looking to send its the week with its second consecutive loss. December gold futures last traded at $1,871.20 an ounce, down 0.79% on the week.
Although gold is ending the week in negative territory, some analysts note that the market is showing some resilient strength given the ongoing vaccine news that has dominated investor sentiment.
“The gold story hasn’t gone away; it has just been put on pause as investors and markets search for some normalcy in the economy,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Hansen said that there is a risk that gold prices could continue to push lower as more vaccine news boost investor optimism; however, he added that there is still too much uncertainty and stimulus in the marketplace for gold prices to go significantly lower.
“I’m bullish on gold, but I’m not in a hurry to buy,” he said. “I would see a drop below $1,850 and a test of the 200-day moving average as a buying opportunity.”
Marc Chandler, chief market strategist at Bannockburn Global Forex, said that he is also watching support around $1,850.
“I worry that the support in the 1848-1850 area has to be retested and possibly violated before a solid base can be made,” he said.
Grady said that although he is neutral on gold in the near-term, he does continue to see potential for higher prices in the long-term.
“Gold did not get to these levels because of the pandemic,” he said. “Gold got to these levels because currencies have been devalued and they will continue to be devalued after we have dealt with the pandemic.”
Darin Newsom, president of Darin Newsom Analysis, said that although gold is stuck in a range, the market appears to be creating some upside momentum to retest resistance at $1,900.
Longer-term, he said that he would expect gold prices to retest the August highs before the end of the year and see more significant selling pressure.
“Gold has room to move higher, but volatility is coming down and a huge amount of chaos will be leaving the market and we could see some selling after Jan. 20,” he said. “If you look at copper. We have seen a big move in copper because the market is feeling good about the global economy and that won’t be good for gold.”