'No sense fighting' the bullish gold price trend - Kitco's gold price survey
And there is reason to be optimistic — gold rose more than $220 in the last two months, capping the gains with a move above $1,900 an ounce this week. At the time of writing, August Comex gold futures were last trading at $1,898.60.
As momentum continues to build, analysts are eyeing the $1,950 an ounce level and gold's eventual return to record highs.
"There's no sense in fighting a trend like the one that's ongoing in gold," Forexlive.com chief market strategist Adam Button told Kitco News.
Kitco's gold price survey results showed that out of 14 participating analysts on the Wall Street side, 57% were bullish on prices next week, 21.5% were bearish, and the other 21.5% were neutral.
A similar trend is seen on Main Street. Out of the 1,236 participating retail investors, 67% were bullish on prices next week, 17% were bearish, and 16% were neutral.
In last week's survey, both Wall Street and Main Street were watching the $1,900, which was reached as gold hit 4.5-month highs on Wednesday.
Analysts cited a weaker U.S. dollar, higher inflation, crypto volatility, and a seasonal uptrend as the reasons behind their optimism.
Gold is an excellent safe-haven play in this environment, said Walsh Trading co-director John Weyer.
"Gold will slowly drift higher. If there are inflationary fears out there, gold will be a welcome spot for people to go. One thing we have to keep an eye on is the U.S. dollar. If the dollar starts flirting with 93-94 areas, it will be tough for gold to continue. Around 90 on the U.S. dollar index is good for gold and good for exports," Weyer said.
A lot of people disagree with the Federal Reserve that inflation is transitory, said Phoenix Futures and Options LLC president Kevin Grady.
"Inflation will be here for a while. That is the underlying driver for gold right now. Just look at the prices. Plus, the passing of Biden's infrastructure bill will boost demand from the public sector, causing prices to explode. Lumber, copper, steel are already so high," Grady said.
Crypto flattening out is also helping gold, he added. "There's definitely a correlation there," Grady noted.
Some analysts, however, did note that gold might have gone a bit too far and is due for a move lower. "Gold is overdue for a pullback, having moved over $200 over the past three months without a meaningful pullback. When such a consolidation comes depends largely on who is buying. If it is banks getting ahead of Basel III, then they are not price-sensitive but time-sensitive, so gold could well move up for the next couple of weeks," said Adrian Day Asset Management president Adrian Day.
Stronger U.S. dollar and rising U.S. Treasury yields could be the main obstacles in gold's move higher. "The rise in U.S. yields seemed to steal its thunder after $1,900 was briefly taken out. The dollar may also find some better traction," said Bannockburn Global Forex managing director Marc Chandler.
Some see gold as simply overbought at the $1,900 level, which could lead to some profit-taking. "I'm going to stubbornly stick with the idea the August contract is overbought short-term and in position for a move to a new downtrend on its daily chart. Heading into next week, initial support is at the previous 4-day low of $1,875.40, then Friday's low (so far) of $1,884.30. A break below one of these marks could trigger renewed short-term selling interest," said Darin Newsom Analysis Inc. president Darin Newsom.