Make Kitco Your Homepage

Outlook for gold price improves as analysts see near-term bottom

Kitco News

Editor's Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today's must-read news and expert opinions. Sign up here!

(Kitco News) - Bearish sentiment in the gold market appears to be shifting with prices heading into the weekend holding above $1,700 an ounce as analysts see signs of at least a short-term bottom in the market, according to the latest results from the Kitco News Gold Survey.

A week of growing negative sentiment among retail investors has been turned on its head as prices bounced off a 10-week low. Meanwhile, analysts' short-term gold outlook is balancing on a knife's edge, with only one vote separating the bulls from the bears and the neutral camp.

The mixed sentiment comes after an interesting week for the precious metal as investors try to digest the impact of rising oil prices and that Americans will start receiving $1,400 checks before the end of the month after Congress and President Joe Biden approved a $1.9 trillion stimulus package.

Many analysts have said that the latest fiscal stimulus spending continues to provide long-term support for the precious metal. However, others note that the latest spending bill will boost growth expectations, driving equity markets and bond yields higher.

"It's disappointing that gold is not higher after the $1.9 trillion stimulus package was passed. If gold can't go up on that, I don't know what will push it higher," said Kevin Grady President of Phoenix Futures and Options LLC. "Gold doesn't look great, but I am neutral on gold next week. Right now, you don't want to be long, but you also don't want to short this market with all this liquidity coming in."

This week, 16 analysts participated in the survey. A total of 6 voters, or 38%, called for gold prices to rise next week. Meanwhile, there was a tie among the bears and neutral voters, with five analysts, or 31%, seeing lower price action next week and the same percentage projecting sideways movement.

Looking at Main Street investors, 1611 votes were cast in online surveys. Among those, 1003, or 62%, said they were bullish on gold next week. Another 364 participants, or 23%, said they were bearish, while 244 voters, or 15%, were neutral on the precious metal.

Kitco Gold Survey

Wall Street

Bullish
Bearish
Neutral

VS

Main Street

Bullish
Bearish
Neutral

Not only are a significant majority of retail investors are bullish on gold in the near-term, but participation in the survey hit a one-month higher after falling to a multi-year low.

The shifting sentiment in gold comes as prices end the week with a modest gain. April gold futures last traded at $1,716.80 an ounce, up 1% from last Friday.

Although gold's selloff might not be completely over, many analysts say that there is a light at the end of the tunnel.

Adrian Day, president of Adrian Day Asset Management, said he is bearish on gold next week as the market could see one more washout; however, he added that he thinks the price is close it a cyclical low.

"From where we are right now, we could see lower prices before we see higher prices," he said. "But even with gold looking to go down, I am not selling."

Day added that it is difficult to be bearish on gold when there is so much liquidity being pumped into financial markets.

Adam Button, head of currency strategy at Forexlive.com, said that he is bullish on gold as he liked the fact gold was able to hold support around $1,680.

"The market is learning to live with higher rates and the Fed message next week will be that they're going to be very patient," he said.

However, other analysts are not convinced that gold is ready to move higher. Colin Cieszynski, chief market strategist at SIA Wealth Management, said that it will be difficult for gold to find its footing when expectations continue to rise that the U.S. economy will see a faster-than-expected recovery from the COVID-19 pandemic.

"Although I suspect that the Fed may try to talk down inflation and may try to jawbone a lid on rising rates/dollar, I don't think they are prepared to actively intervene as the ECB announced yesterday," he said.

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.