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Sentiment shifting in gold market as price unable to break above $1,800… for now

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(Kitco News) - Uncertainty is starting to creep into the gold market as the price has been unable to break above $1,800 an ounce, according to the latest Kitco News Weekly Gold Survey.

The shift in sentiment is the most significant among Wall Street analysts. In the previous survey, all analysts were bullish on gold in the near term. However, with prices unable to break $1,800 an ounce, many are expecting to see some consolidation before another run higher.

"Gold is taking a break just below $1800 after springing from the double bottom at $1675," said Adam Button, chief market strategist at Forexlive.com.

This week, 17 analysts participated in Kitco News' gold survey. Both neutral and bullish sentiments were tied, garnering seven votes each or 41%. At the same time, three analysts, or 18%, were bearish on gold next week.

Meanwhile, a total of 850 votes were cast in online Main Street polls. Of these, 575 respondents, or 68%, looked for gold to rise next week. Another 154, or 28%, said lower, while 121 voters, or 14%, were neutral.

Kitco Gold Survey

Wall Street

Bullish
Bearish
Neutral

VS

Main Street

Bullish
Bearish
Neutral

The gold market spent most of the week within striking distance of the $1,800 target; however, the precious metal hit a brick wall Friday following the release of strong-than-expected economic data. The U.S. Commerce Department said that March's new home sales rose to their highest level since 2006. Just before the new home sale data, IHS Markit said its flash estimates showed record levels of optimism in both the service and manufacturing sectors.

"U.S. private sector businesses registered a survey record expansion of output during April, as looser COVID-19 restrictions and strong client demand boosted business activity," the report said.

According to some analysts, this data could weigh on gold in the near term as investors focus on a robust U.S. economic recovery. However, the precious metal remains an attractive long-term inflation hedge.

"With the economy building steam, it a tough sell for gold right now," said Kevin Grady, president of Phoenix Futures and Options LLC. "But when we really start to see economic growth pick up, we will start to see inflation rise, and that is going to be a powerful tailwind for gold."

Grady said that he is neutral on gold in the near term.

Some analysts are not ready to give up on gold just yet. Despite gold's selloff Friday, Jim Wyckoff, senior analyst for Kitco, said that gold is still in an uptrend.

"Both gold and silver markets are in near-term price uptrends on the daily charts, suggesting the path of least resistance for prices remains sideways to higher," he said.

Adrian Day, president of Adrian Day Asset Management, said that although gold prices are expected to move in a straight line, he still expects gold prices to move higher in the near term.

"Gold has broken above the top end of its recent range, around $1750, based on a lower dollar, lower long interest rates, and more spending plans from Washington," he said.

The most significant event risk next week will the Federal Reserve's monetary policy meeting. Marc Chandler, Managing Director Bannockburn Global Forex, said that a dovish Federal Reserve could push gold prices above $1,800 an ounce.

However, not all analysts are convianced that gold is ready to break out into a new uptrend above $1,800 an ounce.

Darin Newsom, president of Darin Newsom Analysis, said that he could see gold prices testing support around $1,750 an ounce in the near term.

"June gold's short-term trend looks to have turned down following a bearish 2-day reversal posted Wednesday and Thursday," 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.