Wall Street, Main Street: only a matter of time before gold prices see a sustained break above $1,750
(Kitco News) - Near-term sentiment in the gold market is once again bullish across the board as the precious metal prepares to end Friday near a two-week high, according to the latest results from the Kitco News Weekly Gold Survey.
There has been a strong boost in optimism in the gold market as prices have managed to hold critical initial support and appear ready to reclaim the critical physiological level above $1,750 an ounce. However, although sentiment and the price action have improved from a dismal first quarter, some analysts warn that it might be a little too early to sound the "all clear."
Adam Button, chief currency strategist at Forexlive.com said that the market in a precarious position.
"A close above $1755 would confirm the March double bottom and point to $1840. If it fails, then it's right back to $1676 or below," he said.
This week, 15 Wall Street analysts participated in Kitco News' gold survey. Among the participants, nine, or 60%, called for gold prices to rise; at the same time, bearish and neutral analysts were tied for another week, with each viewpoint garnering three votes, or 20%.
Meanwhile, a total of 1,201 votes were cast in online Main Street polls. Of these, 778 respondents, or 65%, looked for gold to rise next week. Another 236, or 20%, said lower, while 187 voters, or 16%, were neutral.
Sentiment has slowly been improving among Wall Street analysts and retail investors after prices recently attracted some technical bullish momentum after bouncing off critical support below $1,700 an ounce. June gold futures last traded at $1,746.10 an ounce and are looking to end the week with a modest 1% gain.
The gold market was hit with some selling pressure Friday after bond yields and the U.S. dollar spiked following stronger than expected producer price inflation data. The report said that annual headline inflation rose 4.2%, the strongest rise since September. 2011.
Charlie Nedoss, senior market strategist with LaSalle Futures Group, said that he is looking past the bond market selloff as he does not expect the Federal Reserve to raise rates anytime soon.
"The Fed said that it wants to see 'real' numbers and that they aren't paying attention to this anecdotal data," he said. "I think that is going to cap the U.S. dollar and support gold. We can already see that the U.S. dollar is unable to hold above its 200-day moving average.
Nedoss said that he is also bullish on gold as the price has been able to hold above its 200-day moving average.
"We have tested the low end of the range and now it's time we test the highs. I can see gold testing resistance above $1,760 an ounce."
Darin Newsom, president of Darin Newsom Analysis, said that he also sees signs that the U.S. dollar, at least in the near term, is losing its bullish momentum. He added that he sees potential for higher gold prices next week.
However, not all analysts are bullish on gold, especially as the price dropped below $1,750 Friday.
"Stronger dollar and higher rates may depress gold next week. Data should show the U.S. economy and prices are surging," said Marc Chandler, chief market strategist at Bannockburn Global Forex. "A break of the $1,728-$1,730 could see a test of the $1,700-$1,710 level."
Adrian Day, president of Adrian Day Asset Management, said that he is neutral on gold as there appear to be some downside risks as the market enters a consolidation period.
"I suspect the next few weeks could see gold trade within a band, perhaps $1680 on low and $1745 on high, before breaking out on the upside," he said.