Bullish sentiment is back as gold prices hold above $1,800
(Kitco News) - With gold prices looking to end the week back above $1,800 an ounce, the precious metals market is seeing some strong bullish sentiment, with a strong majority of Wall Street analysts and retail investors looking for higher prices next week.
According to the latest comments in this week's Kitco News Weekly Gold survey, most analysts say that it appears gold's consolidation period after June's sharp selloff is coming to an end.
However, some analysts note that investors should use caution because the gold market is struggling to find positive price action in the face of several tailwinds, including the European Central Bank changing its inflation target to average 2% over the medium term, a rate cut from the Bank of China, sharply lower bond yields, and weaker equity markets.
"Yes, gold is holding above $1,800 an ounce, but there is no decisive action in the gold market right now," said Eugen Weinberg, head of commodity research at Commerzbank.
Weinberg added that gold might have to consolidate at current levels before it attracts more sustainable bullish attention.
"I think it's just a matter of time before gold prices start to move higher. I think we could see gold move when investors realize that both the Federal Reserve and the European Central Bank will be behind the inflation curve. I just don't know when that will happen," he said.
This week 16 Wall Street analysts participated in Kitco News' gold survey. Among the participants, 12, or 75%, called for gold prices to rise; simultaneously, bearish and neutral analysts were tied this week, with each viewpoint garnering two votes or 12.5%.
Meanwhile, 902 votes were cast in online Main Street polls. Of these, 550 respondents, or 61%, looked for gold to rise next week. Another 178, or 20%, said lower, while 174 voters, or 19%, were neutral.
Ole Hansen, head of commodity strategy at Saxo Bank, said that he remains bullish on gold in the near-term; however, he added that gold investors face a lot of noise in the marketplace as traders start to take summer vacations.
"Despite all gold's lackluster performance, I still think prices can go higher. There are enough reasons to believe that risks are skewed to the upside for gold," he said.
Hansen said that while he is bullish on gold, he is not aggressively buying.
Nicholas Frappell, global general manager at ABC Bullion, said that he is bullish on gold, looking for a push to $1,820 an ounce as long as prices remain above support at $1,790 an ounce.
"Gold is still in a rangebound consolidation phase after the recent drop. But it is beginning to trade constructively, suggestive of recovery," he said. "US CPI/PPI and Retail sales will help shape the next phase, perhaps?"
Adrian Day, president of Adrian Day Asset Management, said that he is neutral on gold as he expects to see some consolidation after this past week's recovery.
"I remain very bullish for the medium and longer-term given easy money policy and rising inflation," he said.
Marc Chandler, managing director at Bannockburn Global Forex, said that he is bearish on gold in the near term as bond yields appear to be overextended on the downside.
"The six-day rally may have exhausted the bulls, and I look for U.S. yields to rise next week after the huge drop this week," he said.