Gold market is going to look messy next week, can $1,800 break?
(Kitco News) - The gold market looks a little messy as prices have been unable to break resistance at $1,800. At the same time, sentiment among retail investors and Wall Street analysts shows no clear direction in the near term.
While sentiment has been relatively volatile in the last few months, the results from this week's Kitco News Weekly Gold Survey show a souring mood among retail investors. Sentiment fell to its lowest level in more than five months.
Analysts note that the gold market is being battered by a variety of forces as the global economy faces rising inflation and a slowing recovery from the COVID-19 pandemic. At the same time, investors are trying to gauge the Federal Reserve's next step and its impact on bond yields and the U.S. dollar.
"From a technical point of view, Dec gold is a mess," said Darin Newsom, president of Darin Newsom Analytics. "This week has seen Dec caught between the bearishness of a stronger U.S. dollar and bullishness of geopolitical upheaval."
This week 15 Wall Street analysts participated in Kitco News' gold survey. Among the participants, 7, or 47%, called for gold prices to rise. There was a tie among bearish and neutral analysts, with both scenarios garnering four votes or 27% each.
Meanwhile, A total of 930 votes were cast in online Main Street polls. Of these, 428 respondents, or 46%, looked for gold to rise next week. Another 334, or 36%, said lower, while 168 voters, or 18%, were neutral.
Sentiment among retail investors is at its lowest point since March 5.
The growing negative mood in the gold market comes as the precious metal sees a solid recovery from last week's flash crash. However, the yellow metal has been unable to break through resistance at $1,800 an ounce. December gold futures last traded at $1,784.50 an ounce, up 0.35% from last Friday.
Phillip Streible, chief market strategist at Blue Line Futures, said that while gold has room to break through $1,800 an ounce, rising deflationary threats in a weaker growth environment could limit potential gains in the near term.
"Gold does well in an inflationary or stagflationary environment. But it is more of a placeholder in a deflationary environment and will compete against the U.S. dollar and equity markets," he said.
Adrian Day, president of Adrian Day Asset Management, said that given the bounce off the recent lows, gold could be due for some consolidation. However, he added that fundamentally the long-term picture remains bullish.
"Whether next week or next month, gold is set to move dramatically higher as more and more investors recognize that inflation is not merely transitory; that the central banks' wild abandon with printing too much money for far too long must have consequences," he said. "and on a broader horizon than the U.S.'s loss of status after the Afghan withdrawal debacle means less faith in all things the U.S., including the dollar."
However, some analysts are not giving up on gold just yet. Ole Hansen, head of commodity strategy at Saxo Bank, said that gold has a chance to rally if, during the annual Jackson Hole Summit, Federal Reserve Chair Jerome Powell is a lot more cautious about the central bank's plan to reduce its monthly asset-purchase program than economists are expecting.
Mark Leibovit, publisher of VR Metals/Resource Letter, said that he remains cautious on gold in the near term; however, he also noted that it is due to bounce further from its current oversold levels.
"When I see silver at $19, that may be a clue we're near a low," he said.