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Main Street, Wall Street watching $1,850 as inflation threat rises

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(Kitco News) - Wall Street and retail investors expect gold prices to continue to move higher next week even as the market faces strong resistance at the 50-day moving average.

The Kitco News Weekly Gold survey shows that sentiment remains robust both among Main Street Investors and Wall Street analysts as gold pushed to a one-month high mid-week.

Many analysts continue to see further support for gold as inflation pressures rise to unprecedented levels. Despite the looming threat, the Federal Reserve continues to see higher inflation as transitory and expects to maintain its ultra-accommodative monetary policy stance for the foreseeable future.

Adrian Day, president of Adrian Day Asset Management, said he remains bullish on gold as the precious metal remains an attractive asset as central banks worldwide start to lose credibility in financial markets.

"More and more investors have no confidence in the Federal Reserve and other central banks, and they realize that inflation is "stronger and more persistent" than the Fed initially proclaimed," he said.

The bullish outlook on gold comes after Federal Reserve Chair Jerome Powell testified before Congress and said that while inflation can continue to move higher in the next few months, they continue to see the rise as transitory. He added that the economic conditions to trigger a shift in monetary policy are "still a ways off."

"We continue to expect that it will be appropriate to maintain the current target range for the federal funds rate until labor market conditions have reached levels consistent with the Committee's assessment of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time," he said in a prepared statement.

This week 16 Wall Street analysts participated in Kitco News' gold survey. Among the participants, nine or 56%, called for gold prices to rise; simultaneously, three voters, or 19%, expect to see lower prices next week and four analysts, or 25% expected to see sideways trading in the near term.

Meanwhile, 836 votes were cast in online Main Street polls. Of these, 556 respondents, or 67%, looked for gold to rise next week. Another 144, or 17%, said lower, while 136 voters, or 16%, were neutral on the price.

Kitco Gold Survey

Wall Street

Bullish
Bearish
Neutral

VS

Main Street

Bullish
Bearish
Neutral

The bullish sentiment comes as gold prices eke out a modest gain for the week. August gold futures last traded at $1,813.80 an ounce, up 0.17% from last Friday. Some analysts have noted that the real resistance level to watch in the near term is $1,850 an ounce.

Marc Chandler, managing director at Bannockburn Global Forex, said that although he thinks the gold price has peaked, he expects there is enough momentum for the precious metal to retest resistance at $1,850 an ounce in the near term.

Adam Button, chief currency strategist at Forexlive.com, said that despite the diverging Fed talk, looming economic risks will continue to support higher gold prices

"Gold's fundamental picture is confused by differing signals from the Fed, inflation and the delta variant but the technicals are increasingly pointing to lower rates for longer. In gold, that's positive and I think the next stop is $1900 or very close to it," he said.

Kevin Grady, president of Phoenix Futures and Options LLC, noted that after rising to a one-month high this week, the precious metal was hit with some technical selling pressure after the price was unable to break above the 50-day moving average at $1,837 an ounce.

He added that he is neutral on gold as he sees prices holding support above the 200-day moving average, which comes in just below $1,800 an ounce.

"A lot of investors are trying to figure out where the fair value of gold is, and the market seems to be saying that for now, it is around $1,800 an ounce," he said.

Grady added that he wouldn't be actively shorting gold because there is still strong fundamental support for the precious metal.

"The reality is with all the inflation out there, all the stimulus and the currency devaluation, the gold price should be a lot higher," he said.

Looking at the bearish side, Darin Newsom, president of Darin Newsom Analytics, said that gold's bounce of resistance could create some technical selling pressure next week. He added that the critical level to watch is around $1,752 an ounce. If that level breaks, then gold could end up retesting the March lows below $1,700 an ounce.

Michael Moor, founder of Moor Analytics, said that he is also bearish on gold in the near term and is watching the $1,750 level.

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.