Sentiment in gold market remains mixed; competition with bitcoin heating up - analysts
Wall Street analysts and Main Street retail investors switched roles in the latest Kitco News Weekly Gold Survey. A strong majority of analysts expect to see weaker gold prices next week after the precious metal failed to hold critical gains above initial resistance at $1,850 an ounce.
Meanwhile, a majority of retail investors have turned bullish on the metal one week after sentiment fell to a three-month low.
Many analysts expect gold to remain under pressure in the near-term as investors focus on surging momentum in equity markets. At the same time, analysts say that a lot of investors are turning to bitcoin, which is trading at record highs as a potentially new hedge against inflation in an environment of low interest rates.
"With investor confidence running high at the moment, there isn't much demand for defensive havens," said Colin Cieszynski, chief market strategist at SIA Wealth Management. "On top of this, traders seeking an alternative to the U.S. Dollar appear to be more focused on Bitcoin and other cryptocurrencies rather than precious metals."
This week, 14 analysts participated in the survey. A total of 10 voters, or 71%, called for gold prices to fall next week; meanwhile, there was a tie among bullish and neutral analysts, with both forecasts getting two votes, or 14% each.
Looking at Main Street investors, 1,257 votes were cast in the online survey. Among those, 644, or 51%, said they were bullish on gold next week. Another 350 participants, or 28%, said they were bearish, while 263 voters, or 21%, were neutral on the precious metal.
While retail investors are bullish on gold, the market is struggling to attract new attention. Participation in Kitco News' weekly online surveys was muted, falling to its lowest level since late-October.
Last week, 48% of retail investors were bearish on gold, while 64% of market analysts were bullish. The gold market has struggled to attract consistent bullish momentum this past week as prices were unable to hold gains above $1,850 an ounce. April gold futures are ending the week in relatively neutral territory with a 0.6% gain from last Friday.
Looking ahead, gold's inability to hold above initial resistance has many analysts now looking at support around $1,800 an ounce.
Ole Hansen, head of commodity strategy at Saxo Bank said that gold has disconnected from important fundamentals like falling real yields and a relatively neutral U.S. dollar this past week.
"I think right now gold is in a wait-and-see mode as it looks for fresh inputs," he said. "In this environment, we could see prices drift lower and test support."
While some analysts are expecting to see lower gold prices in the near-term, they also expect that this will present investors with buying opportunities.
"Any drop below $1,800 should be bought, but you don't want to have a full position, start small and scale in," said Phillip Streible, chief market strategist at Blue Line Futures.
Bob Haberkorn, senior commodities broker with RJO Futures, said that he is slightly bullish on gold as he sees prices remain caught in their current trading range. He added that he also sees any drop below $1,800 as a buying opportunity.
"The price action in gold is a bit of a mystery because the market has strong bullish fundamentals. The technical picture points to lower prices, but at this point, investors need to have some gold and some iron in the fire because the metal can take in a quick move higher."