Gold bulls want to see follow-through buying next week
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(Kitco News) - Gold's flash crash Sunday has put the spotlight back on the precious metal, and with inflation expected to remain high, some analysts and retail investors think this could be its time to shine.
The latest Kitco News Weekly Gold Survey shows near-term sentiment in the gold market has once again turned bullish; however, it remains a volatile market as the price continues to recover from its recent drop.
Ole Hansen, head of commodity strategy at Saxo Bank, said that gold's bounce off Sunday's lows had created the perfect technical long-term double bottom.
"You couldn't recreate a more bullish technical picture for the gold market right now," he said. "Investors will be anxious to see if how much follow-through buying we will see next week."
This week 15 Wall Street analysts participated in Kitco News' gold survey. Among the participants, 8, or 62%, called for gold prices to rise next week; meanwhile, three analysts, or 23%, expect to see lower prices, and two analysts, or 15%, were neutral on gold in the near term.
Meanwhile, 914 votes were cast in online Main Street polls. Of these, 517 respondents, or 57%, looked for gold to rise next week. Another 233, or 25%, said lower, while 164 voters, or 18%, were neutral on the price.
Retail investors have been consistently bullish on gold through the summer; however, sentiment among market analysts has seen some wild swings. Last week no bullish votes were cast in the survey. While the precious metal saw a significant drop Sunday evening, the price has been an impressive recovery heading into the weekend.
December gold futures last traded at $1,779.30 an ounce, up nearly 1% from last week.
Jim Wykoff, senior technical analyst at Kitco.com, said that gold's bounce off Sunday's lows had stabilized the market.
"That suggests a near-term market bottom is in place and that prices can trade at least sideways in the near term," he said.
Adrian Day, president of Adrian Day Asset Management, said that the flash crash had bought new investor attention to gold and its role as an inflation hedge.
"Investors are finally getting the message that inflation is more than transitory; that the Fed won't be doing much about it; and that this is positive for gold," he said.
However, not all analysts are convinced that gold is ready to take off to new all-time highs. David Madden, market analyst at Equiti Capital, said that he is neutral on gold as the precious metal faces some new critical resistance levels, and it has a bad track record this year of failing at resistance.
He added that gold is still fighting a trend of lower highs for the year.
"Right now, $1,770 is the resistance to watch. If gold can hold above, then it has a chance, but if it fails, then we could go back to test the lows below $1,700 again," he said.
Christopher Vecchio, senior market strategist at DailyFX, said that although gold is seeing an impressive recovery, he is not convinced it can go much higher. He added that before gold's selloff, it was in the perfect environment with real interest rates falling to record lows; however, gold couldn't catch a bid.
"I don' think Sunday's drop has washed all the naysayers out of the market just yet," he said.
Vecchio added that gold would continue to struggle as the Federal Reserve lays the groundwork to reduce its monthly bond purchase.